Green Belts increase business rents too

If you’ve picked up a newspaper or turned on a radio or TV today then the chances are you’ve read or heard about the Adam Smith Institute's latest research paper – The Green Noose: An analysis of Green Belts and proposals for reform. A section of the paper considers the impact of Green Belts upon businesses. As author Tom Papworth explains, increasing the cost of business premises increases the costs of running businesses, which pushes up prices. This reduces the real disposable incomes of households, while putting UK businesses at a competitive disadvantage by shifting production overseas.

A few years ago, I interviewed the inventor of the iconic Brompton bicycle. While visiting their factory in Wandsworth a couple of television crews from the BBC and ITV turned up to record the conveyor belts and workers in action. It turned out this was a common occurrence, principally because it's the only manufacturing taking place on that scale in London (and the television crews didn't want to travel any further). According to Papworth, London’s Green Belt could be the reason Brompton is that last factory standing:

Evans and Hartwich suggest that land-intensive industries, such as manufacturing, have declined rapidly, because many have fled the country to locate themselves in a country with lower land prices. If correct, this would be a major challenge to the conventional view that deindustrialisation was the result of supply-side reforms and monetarist policies in the 1980s, instead suggesting that our land use planning laws bore a substantial amount of responsibility for the decline of UK manufacturing in the past half century.

This makes sense. LSE Geography Professor Henry Overman cites some concerning research in an useful blog looking at the case for building on Green Belts:

“Green Belts increase office rents. Cheshire and Hilber (2008) carefully document how planning restrictions in England impose a 'tax' on office developments that varies from around 250 per cent (of development costs) in Birmingham, to 400-800 per cent in London. In contrast, New York imposes a 'tax' of around 0-50 per cent, Amsterdam around 200 per cent and central Paris around 300 per cent.”

If enacted, the paper’s suggested reforms would provide affordable housing to Generation Rent, more competitive business rents, and the possibility for more manufacturing entrepreneurs to run their businesses out of this country. What’s not to like?

Philip Salter is director of The Entrepreneurs Network.