If the promise is good growth in every postcode, London can’t be an afterthought

As ministers look beyond the capital, they shouldn’t lose sight of a simple fact: London’s success remains critical to the UK economy, writes Richard Smart As another Budget approaches, attention will likely focus on tackling the cost of living and rebalancing investment across the UK’s regions. Both issues matter, but as ministers look beyond the capital, they shouldn’t lose sight of a simple fact: London’s success remains critical to the UK economy.

If the promise is “ good growth in every postcode “, London can’t be an afterthought. London’s long-term fundamentals remain exceptionally strong. The capital is home to five universities ranked among the world’s top 200, ranks first globally for human capital, and continues to attract talent, businesses and investment from around the world. It is a base for more than 8,600 startups and 42 unicorn businesses and is one of only two Alpha++ cities globally.

But the capital’s businesses, universities and public services all rely on their ability to attract and retain talent. If housing delivery continues to lag behind demand, it becomes harder for employers to recruit, for young people to remain in the capital, and for London to maintain the competitive advantages that have underpinned its success for decades. There has been no shortage of action from policymakers over the past year. In March, the Mayor of London announced emergency measures to support housebuilding, alongside a £324m commitment to the City Hall Developer Investment Fund.

The draft London Plan 2026 followed in the summer, while August saw the first allocations via the Social and Affordable Homes Programme. These are positive steps and reflect a growing recognition that London needs more homes and new approaches to delivering them. But if policy is to translate into delivery, public investment must be targeted where it can have the greatest impact. The scale of the city’s housing challenge was brought into focus in recent weeks when Jennie Daly, chief executive of Taylor Wimpey, said the housebuilder has no plans to pursue new developments in the capital.

This followed earlier warnings from Berkeley Homes that developers can “no longer invest” in London. Together, these comments highlight a growing reality, delivering new homes in the capital has become increasingly difficult. Rising construction costs, higher borrowing rates and squeezed viability have all combined to make it harder for schemes to get off the ground. Across the country, there are growing examples of innovative funding models helping to bridge viability gaps and unlock stalled projects.

The precedent set by the Greater Manchester Good Growth Fund has shown how targeted public investment can crowd in private capital and bring forward schemes that may otherwise have remained on hold. Direct investment through the fund has the potential to support more than 4,600 homes, with recent allocations expected to unlock a further 789. Our joint report with Mandala Partners, Accelerating Housing Supply through Risk Capital Approaches , suggests that similar approaches could help unlock up to 200,000 additional homes and support more than 70,000 jobs across England.

In London alone, our analysis indicates that targeted intervention could help unlock up to 38,000 build-to-rent homes by bridging viability gaps and attracting institutional investment. There are signs this approach is gaining traction in the capital. London’s City Hall Developer Investment Fund has similar ambitions, while Newham has demonstrated how public and private capital can unlock development in Stratford and the Royal Docks. However, London is not a homogenous market, and nuanced solutions are required to unlock development viability across the board, whether that is in the lower-density outer boroughs, London’s higher-density regeneration projects or simply enabling the various council-owned housing companies to do much more.

Yes, London’s governance structure is complex, with evident challenges in ensuring that existing public funding is deployed quickly and effectively. At the same time, the scale of the capital’s growth and housing challenges means continued support from the government remains important. Private forms of capital are there to support, if the right conditions are created. That collaboration between sectors is what good growth should mean for London.

Richard Smart is head of London of CBRE