The West End Powerhouse · London’s West End is a major player in the UK’s economic growth1 1.1 The 6.34 hectares of the West End generates more GVA per year than any other part

The West End Powerhouse Investing to drive Britain’s growth

01 THE WEST END POWERHOUSE INVESTING TO DRIVE BRITAIN’S GROWTH

The West End is one of the biggest drivers of the UK economy, bigger than The City of London and equivalent to the whole of Wales. But to retain its world-beating position it needs constant investment both to accommodate forecast growth and to maximise its growth potential, especially in face of global competition.

During this time of economic uncertainty following the vote to leave the EU, it is important to support those parts of the economy, like the West End, with potential to grow to allow them to produce jobs and income to the Exchequer. This does not require government funding, but policies that enable and encourage West End businesses to reach their full potential.

The West End needs to invest in its public realm and infrastructure and it needs to create an environment that encourages the maximum private sector investment from property owners, retailers, and all types of critical industries based in the district.

This paper asks government to work in partnership with local authorities, the GLA, and the private sector to create that vital investment which will produce an additional £23.6 billion of Gross Value Added and contribute a further £5.6 billion annually to Exchequer tax.

How the Government can support London’s West End:

• Enable West End businesses and authorities to fund essential public realm and infrastructure improvements by approving a TIF scheme.

• Enable West End businesses to generate investment funding by reducing costs (specifically to mitigate an 80% rise in business rates following revaluation) and generate additional income through changes to Sunday trading regulations in the designated International Shopping Centres (West End and Knightsbridge) and remove barriers to valuable international tourists.

The West End Powerhouse: Investing to drive Britain’s growth

Sir Peter Rogers, Chairman

Jace Tyrrell, Chief Executive

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éSir Peter RogersChairman

Jace TyrrellChief Executive


London’s West End is a major player in the UK’s economic growth1

1.1 The 6.34 hectares of the West End generates more GVA per year than any other part of the UK (£51 billion), more than the City of London (£43.9 billion) and almost the same as the whole of Wales (£52 billion). It contains world beating retail, entertainment, medical-tech, cultural and media industries.

1.2 It generates the largest proportion of tax collected by the Exchequer, £17 billion per annum, including 8% of all National Non Domestic Rates.

1.3 It employs 650,000 people, 3% of the total UK working population.

1.4 It is one of the most productive areas of the UK (output per employee in Westminster was £71,152 in 2014 compared with the UK average of £55,659) and can contribute even more to the government’s productivity challenge (because Westminster has a higher that average proportion working in the lowest GVA sectors, food and accommodation services).

1.5 The West End is primarily responsible for London’s status as the world’s most popular international visitor destination, attracting 18.7 million visitors in 2014, spending £11.8 billion and supporting 300,000 jobs.

1.6 It is a major factor for foreign investors’ decision to invest in London and the UK.

1. The importance of the West End to the UK’s economy

1. All figures are drawn from West End Partnership’s “Transforming the Competitiveness of the West End: The Business Case for Investment” March 2016 unless otherwise referenced

2. New West End Company data3. House of commons Library “UK steel industry: statistics and policy” May 2016


West End retailers play a major part in this success

1.7 The West End is the world’s top shopping destination, with over 200 million visits each year.

1.8 West End retailers make £11 billion in sales and produce a £2 billion tax take annually.

1.9 The core West End shopping district (Oxford Street, Regent Street and Bond Street) generates £8.4 billion sales annually and directly employs 60,000 people.2 In contrast, Britain’s steel industry generates £2.2 billion in sales and employs 34,500 people.3

1.10 600,000 people visit Oxford Street every day (equivalent to the entire population of Glasgow or Leeds).

1.11 West End shopping is a major draw to international tourists who form 25% of its 200 million visits each year, so producing £3.3 billion of foreign income.

1.12 London’s Luxury Quarter is the world’s top luxury retail district, generating £3 billion in sales annually.


2.1 The West End is not just for London – uniquely it belongs to and benefits everyone in Britain. It’s Britain’s global high street.

2.2 The West End is a vital partner to promote economic growth across the whole of the UK. Too often, London is seen as a rival to the rest of the UK. In reality the West End is part of team UK, working together with the regions to grow the whole British economy.

2.3 The West End:• Is Britain’s high street – over 50 million

non-London British people visit the West End every year, virtually the entire UK population outside London

• Attracts tourists to the UK and then acts as a gateway to other UK tourist destinations

• Trains retail and leisure staff to a world standards so that they can take these standards to postings throughout the UK

• Generates profits which are invested into more marginal stores throughout the UK

• Generates massive amounts of business rate income which fund local government throughout the UK. Westminster City Council raises £1.8 billion in business rates annually, 8% of the total raised in England and Wales, and retains just 4% of the tax take

• Has supply chains throughout the UK providing jobs and generating income across the whole of the country

2. The West End is Britain’s global high street, working in partnership with the rest of the UK to grow the economy



The West End needs continual investment to accommodate its forecasted growth

3.1 Investment is needed just to accommodate the forecast growth of visitors and workers in the West End.

• London’s population is forecast to increase from 8.2 million today to 11.3-13.4 million over the next 15 years

• The London plan forecasts an additional 74,200 jobs in the West End over the next 20 years. But if it matches its historic growth, this could reach 281,000 jobs

• The Elizabeth line (Crossrail 1) will open in 2018 and will bring an additional 1.5 million people to within 45 minutes of central London. Heathrow will be just 29 minutes from Bond Street station

• TfL estimate that a further 60 million visits will be made to the West End every year when the Elizabeth line opens in 2018. Passenger numbers are expected to increase by between 155,000 and 220,000 EVERY DAY at Bond Street Station (60% increase) and between 150,000 and 200,000 at Tottenham Court Road Station (89% increase). This will produce greater pedestrian discomfort and increase safety concerns in an area which in 2014 saw 109 major accidents, 9 of them fatal

3. The need for continual investment in London’s West End


The West End needs continual investment to maximise potential growth against international competition

3.2 But investment is also needed to maximise potential growth by ensuring that the West End remains a world beating district. This is being damaged by:

• Infrastructure and public realm that is not world class (apart from the Elizabeth line), particularly when other global cities are investing heavily in infrastructure

• Increasing air pollution which undermines London’s status as a world class city. NO2 on Oxford Street is three times the EU health maximum

• A congested road network, with TfL forecasting a 20% increase by 2025

• Lack of commercial floorspace pushing rents higher than most world cities.

• Developers becoming increasingly reluctant to invest in an area with declining public realm and rising congestion

3.3 The West End competes globally for investors, customers and talent with international destinations such as Paris, New York, Dubai, Tokyo and Hong Kong. Global competitors are not standing still. Paris, for example, is investing 500 million Euros in the Champs Elysees. The West End needs to invest if it is to retain its world leading position.

3.4 The West End needs public and private investment in public realm and infrastructure improvements and private investment in property and retail developments.


Retailers and property owners support the West End Partnership’s programme for the West End

4.1 West End Partnership 4 is proposing a 14 year, £814 million investment programme comprising 19 priority projects. These will not just meet the needs of expected growth but provide additional economic growth.

4.2 The projects include:

• Oxford Street East and West – substantial public realm improvements including reduction of surface transport and revitalised open spaces

• Bond Street – improved retail public realm and connections to neighbouring oasis spaces

• Bond Street (TfL) – public realm improvements and commercial developments associated with the two new station entrances

• Tottenham Court Road Station – public realm improvements to improve pedestrian access and traffic flow

• Marble Arch – public realm project to improve pedestrian and cycling facilities

• Air quality – cross-cutting measures and planning policies to improve air quality

• Broadband and CCTV – improvements

• Cycling – to make cycling easier, safer and more accessible

• Employment and skills – programme of cross-cutting projects to reduce long term unemployment

• Energy – to ensure a secure power supply

• Freight and waste consolidation – a programme of reduction, re-timing, consolidation and low emission project

4.3 This investment will show dramatic returns in terms of GVA growth, employment and tax to the Exchequer, as this table shows.

Economic improvement

Without WEP improvements

With WEP improvements

GVA growth £11.3 billion £23.6 billion

Gross additional jobs 35,600 102,000

Increase in Exchequer tax £2.7 billion £5.6 billion

Tourism expenditure Flat Major increase

4.4 The West End Partnership projects have secured funding of £405 million with £154 million (38%) drawn from the private sector. The Partnership has proposed an investment model to raise the additional £409 million through a Tax Increment Funding (TIF) scheme. This would produce the £37.5 million required each year of the 14 year programme to fund the improvements.

4. Investing in public realm and infrastructure


West End Partnership’s “ask” of the Government

4.5 To deliver the TIF, West End Partnership needs the Government to:

• Define Westminster as a “special council” (similar to the City of London) to allow it to retain the £37.5 million from its business rate before the Business Rate Retention scheme calculation

• Expand the definition of growth beyond floor space to include revaluation growth. There is limited scope for floor space growth in densely developed areas such as the West End, but major growth is produced by public realm and infrastructure improvements. There is currently no incentive for Westminster to invest which result in revaluation increases. Westminster City Council should be a pilot to test how retention of revaluation growth can be incorporated into the 2020 100% retention scheme

4.6 Meeting these asks would result in Westminster City Council retaining just 2% extra (up from 4% to 6%) of its total £1.8 billion business rate income. Currently a huge 96% of Westminster City Council’s business rate is retained by central government for redistribution.

4.7 To deliver the investments required to ensure that the West End remains a global destination West End Partnership is seeking to retain just £37.5 million per year (for 14 years) from the £1.8 billion raised in local business rates which will result in a net increase in tax for the Exchequer of £2.9 billion annually.

4. West End Partnership is the body providing strategic direction to the transformation and long term development of the West End. Its board includes private sector landowners, businesses, local authorities, the GLA, the cultural sector, BIDs and TfL


5.1 Retailers and property owners are major investors in the West End. Selfridges, for example, is planning to invest £300 million in their Oxford Street store over the next 10 years. West End Partnership estimate an additional1.27 million square meters of commercial space will be built by the private sector as a result of the infrastructure and public realm improvements.

5.2 But retailers need strong trading performances to create the money to invest in the West End.

5.3 The district’s retailers face rising costs and diminishing income growth which is reducing the money available for investment and job creation.

5.4 New costs include:

• The National Living Wage – estimated to cost West End retailers between £6 – £12 million annually 5

• The Apprenticeship Levy – estimated to cost £3.4 million annually 6

• Rent rises – rents have risen by an average of 80% since 2008, based on high demand for space with limited supply, rather than on sales performance 7

• Business rate revaluation – The Business Rate revaluation will hit central London hard with Business Rates in the West End estimated to rise by 80%. The rise in Oxford Street is estimated to be 58%, Bond Street 61%, Bond Street 122% and Old Bond Street £169%.8 The additional cost of this will be around £125 million annually, around 25% of West End retailer’s profits

5.5 Diminishing income growth is due to:

• Growth of international competitors

• Decline in international tourism spend due to terrorism fears. The attacks in Paris and Brussels have already had an impact on international tourism spend in the West End. In 2007, West End retailers lost an estimated £1 billion in the 12 months following the London attacks.9 The recent fall in the value of the pound has provided a boost in international tourism spend but we do not know how long this will last

• Schegen visa changes which have reduced Chinese visitor spend by 25% in December 2015 and 29% in Jan 2016 compared with the previous year 10

• Growth of regional competition

• Growth of internet shopping, which now accounts for 15% of all retail sales in the UK

5. Encouraging more investment from West End retailers

5. Voletrra, “Cost to Retailers” report for New West End Company, February 20166. Voletrra, “Cost to Retailers” report for New West End Company, February 20167. Gerald Eve “West End Shops face 80% surge in Business Rate Bills”, March 2015 8. Gerard Eve estimates produced for NWEC9. NWEC economic data10. Global Blue figures on Tax Free Shopping sales 2016



6.1 West End retailers ask the government to allow them to reach their full potential by:

Minimising the impact of an average 80% business rate rise following revaluation

• Freeze the proposed revaluation during this period of uncertainty. Failing that, introduce a Transitional Relief Scheme so that retailers do not receive an 80% increase in the biggest tax they pay

• In the longer term, remove the unfair competitive advantage of online retailers who avoid the government’s main instrument for taxing retail businesses

Looking again at Sunday trading but just for London’s designated International Shopping Centres

• Generate an additional £260 million income per year by adding the areas designated in the Mayor’s London plan as international Shopping Centres (West End and Knightsbridge) to the list of exemptions in the 1994 Sunday Trading Act

• Even opponents to the recent attempt to liberalise Sunday trading laws accepted that it was appropriate for the West end and Knightsbridge

Promoting and enabling greater international tourism

• Respond to the current downturn as a result of the attacks in Paris and Brussels and prepare for further incidents

• Explore ways of raising money from tourists, who currently make no contribution to local taxes, to spend on additional marketing

• Respond practically and imaginatively to the decline in high spending Chinese visitors as a result of Schengen introducing biometric visas in October 2015, particularly in relation to the visitor visa application process

• Invest more in marketing to emerging markets with great potential, particularly in the Far East

6. How the Government can support the West End

Documents

The West End Powerhouse · London’s West End is a major player in the UK’s economic growth1 1.1 The 6.34 hectares of the West End generates more GVA per year than any other part