Investing in London’s infrastructure could boost the capital’s economy by £1.9tn, according to analysis by KPMG.
KPMG’s calculations suggest that if infrastructure investment enabled an increase in London’s GVA growth rate from the historic trend of 2.5% to 3.5%, this would yield an additional £1.9tn to the economy in present value terms.
Consequently, the firm states London needs to secure a comprehensive infrastructure plan and long-term funding allocation. Failing to do so, the report argues, is effectively preparing for the decline of the city and will jeopardise London’s position as the number one destination for real estate investment in the world.
London’s rising population, which will hit 10m by 2036, is the main impetus for investment, with housing and transport representing the greatest bulk of the required expenditure.
However, KPMG argues that population growth is an opportunity rather than a challenge and that investment in London will pay for itself.
The report uses analysis by the IMF that shows increasing the percentage of GDP invested in spending by 1% can boost the level of output by as much as 0.4% in the same year, and 1.5% four years later.
It also quotes recent research carried out by the Centre for Economic and Business Research, which shows for each £1bn increase in infrastructure investment, UK-wide GDP increases by a total of nearly £1.3bn.
Chris Grigg, chief executive of British Land, who chaired the group in charge of developing the report, said: “London is in a great place right now but what is important is that we continue to invest. We need to go beyond the current situation, which is short-term, and develop a plan that is broad and deep but also flexible enough to accommodate what could happen in the next 30 years.”
Baroness Jo Valentine, chief executive of London First, who commissioned the research, said: “Low interest rates mean the capital has a once-in-a-generation opportunity to invest in infrastructure.”
