5. Quantifying Agglomeration Impacts: The Position in London
5.1 Introduction
In addition to the broader research described above, a more detailed analysis of agglomeration impacts was undertaken in London, particularly in relation to the issues surrounding the evaluation of large transport projects and the impacts that these may have on levels of economic activity. The Thames Gateway Bridge, which provides a very substantial increment in accessibility in the Thames Gateway regeneration area to the east of London, and CrossRail, which provides a substantial improvement in capacity and accessibility for central London and also for the regeneration areas to the east, are transport projects that have been subject to considerable analysis. While the two projects presented different issues to be addressed, a common approach was developed to determine the extent of each project's land-use impacts. This was based on an analysis of the current relationships between accessibility and land use, as well as an assessment of the impacts of changes in accessibility that would result from the construction of the projects. For the CrossRail project, a further analysis of the linkages between employment density and average incomes was undertaken, allowing a quantitative link to be developed between changes in accessibility and changes in economic output.
5.2 Thames Gateway Bridge
The Thames Gateway Bridge provides a major increase in accessibility in East London with the construction of a new river crossing in a 19 km gap between the closest upstream and downstream crossings. It serves an area of substantial urban deprivation where the demise or relocation of heavy industry has resulted in considerable unemployment and vacant land, and the catchment area contains some of the areas with the highest levels of social deprivation in the country. The bridge and the improved accessibility it provides were seen as a potential catalyst for the economic and social regeneration of the area to attempt to address the problems of social deprivation.56
To assist in the assessment of the potential impacts of the bridge on levels of economic activity in the area, a detailed study was undertaken which explored the relationships between accessibility and employment, and also accessibility and residential densities. This was based on an analysis of the position for the whole of London, and so was based on actual observations. This identified a strong relationship between accessibility and employment density (and is set out in Appendix B, Figure B.1).
By clustering the results, the relationship was subsequently simplified into the curve set out in Appendix B, Figure B.2. The curve was then used to predict the potential changes in employment density which resulted from changes in accessibility. This indicates that at lower accessibility levels, the relationship between accessibility and density is relatively limited although strengthening gradually up to an accessibility index of 150 (i.e. 50 per cent higher than the mean values for London as a whole). At accessibility levels above this point, which corresponds to an average employment density of 5000 jobs per square km or 50 jobs per hectare, the linkage becomes much stronger.
The relationship between accessibility and residential density was also derived. Up to a similar point (with an accessibility index of 150) this showed a positive relationship, but with higher levels of accessibility, employment appeared to crowd out residential development and increasing accessibility was associated with some decline in residential densities.
These forecasts represented the potential increases that would come about as the result of the accessibility changes. For these increases to be achieved it was recognised that a range of complementary measures would need to be put into place, in particular to ensure that sites were available to accommodate the new opportunities and that the local workforce would have the skills available to take advantage of the new opportunities offered.
5.3 CrossRail
The approach used for the Thames Gateway Bridge was extended in the analysis of CrossRail, a major public transport project involving the construction of a new through London heavy rail route, in part serving the same areas of East London as the Thames Gateway Bridge. For this there was a need to quantify the economic benefits which would arise from improving accessibility into the heart of London, and in particular, the agglomeration benefits which would result. The relationship between accessibility and employment density was therefore extended to include the analysis of the relationships between employment density and average earnings (expressed as the differential in relation to average earnings). This is set out in Appendix B, Figure B.3.
Although it covers the whole of Great Britain, the points in the right of the graph primarily represent London boroughs. This again demonstrates a strong linkage between employment density and average earnings taken to be a proxy for productivity, and suggests that, at high levels of employment density, there are very strong productivity benefits.
Combining these two approaches it was possible to forecast both the changes in potential employment density and in productivity that would arise from the construction of CrossRail, so allowing the agglomeration benefits to be calculated. These are summarised in Appendix B, Figure B.4. Using this approach, substantial agglomeration benefits were estimated (about 50 percent of the conventionally calculated transport benefits of £22 billion). The UK Treasury accepted the approach as part of the economic case for the scheme. The approach was also used to justify the use of public funds for the construction of new rail links.
5.4 Achieving the Potential Increases
While the approach allows estimates to be made of the potential increases in employment and in output, other complementary measures may need to be in place if these increases are to be achieved in practice. The position is summarised in the closing statement by Transport for London to the Thames Gateway Bridge Public Inquiry.
"While the strong correlation between improved accessibility and increases in potential employment and potential population densities underpins the role of the bridge as a vital component of regeneration in this part of London, the delivery of regeneration plainly requires more than the construction of the bridge. Favourable planning policies must be in place and the business community must be willing to become engaged in the process. In this part of east London the potential gains in employment and population densities would be generated in circumstances where the bridge is brought forward in a national, regional and local policy context which gives express support to the development and regeneration of East London, and would serve an area where development sites are available and where developers are wanting to become engaged in the redevelopment of the area. While there must be an element of uncertainty attached to the output of the statistical analysis the strongly positive empirical link between greater accessibility and increased potential employment and population densities coupled with a favourable land use planning policy framework and interest from the development industry, provide a substantial foundation for confidence that the bridge would achieve regeneration".57
As discussed above, the London Development Agency has been charged with ensuring that the appropriate complementary measures are put into place. This includes a suitable planning framework, the provision of suitable sites and the training of workers from the local communities so that they are able to take advantage of the opportunities offered.
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