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The fate of the capital city – the economic powerhouse of the nation – has a direct effect on the rest of the UK. A conference last week heard how London's infrastructure and economy will cope in the next two decades. Michael Burton reports on the highlights. If London sneezes, then the rest of the UK catches a cold. The capital remains the engine of the economy, even in the financial downturn, and if it falters, the rest of the country suffers. London's future financial health is, therefore, of direct interest not only to its own residents, and the private, public and voluntary sectors which operate within the capital, but also to those in the rest of the UK. This, and the challenges the capital faces in regeneration, rising population, transport and housing demand were debated during a highly-topical one-day conference last week – the Future of London – addressed by top experts in their fields. The overall conclusion from the presentations was positive, although with caveats. London will emerge from the recession, the housing market will recover, the big infrastructure projects will go ahead, the City will maintain its global reputation, sharing top world billing with Wall Street, and overseas investors will continue to be attracted. London will continue to be a younger and more ethnically diverse city than any other area of the UK. Most new housing development will take place in the east, in the Thames Gateway boroughs, with one-third of new homes built in just five postcodes and 25% being in the Olympic area and its surroundings. But housing affordability will remain a problem, with house prices resuming their ever-upwards trajectory. And with a population set to grow, there will be pressures not just on housing but on London's transport. If the public sector squeeze causes delays to the new underground line Crossrail or Tube upgrading, the capital will be severely handicapped. This week, the mayor, Boris Johnson, outlined his strategy for economic development, transport and the London Plan. Keynote speaker, deputy mayor, Sir Simon Milton, told the conference it envisaged an extra 1.4m inhabitants in the capital by 2031, leading to an extra 4m trips on the capitals' already-overloaded transport system. London would account for 40% of population growth, although it had only 14% of the nation's people. It was likely, he said, to remain younger and more ethnically diverse. By 2031, in eight London boroughs, ethnic groups will form the majority of residents compared with the current two. He added: ‘The current downturn is cyclical, not structural, and London's growth path will resume. The challenge for the mayor is not the choice of whether to grow but how to grow.' He also pointed out that while Mr Johnson wanted to encourage cross-borough working, ‘he knows its is counter-productive to shoe-horn London into pre-determined sub-regions, and will support other groupings as well'. In a question-and-answer session, he emphasised that both Crossrail, the new underground line envisaged from Maidenhead in the west to Abbey Wood in the east, and the upgrade of underground lines were essential to the capital's future economy. Hopefully, his comments will be registered in his party's higher echelons as there have been rumours a Cameron Government might shelve or at least reduce Crossrail. An upbeat note tempered with realism was delivered by Homes and Communities Agency chief, Sir Bob Kerslake. He explained: ‘The market has undoubtedly recovered. House-builders' shares are up, and there is a recovery in sales activity and prices. ‘But the market is extraordinarily fragile. The rate of activity is dramatically lower than in 2007. And while housing is fragile, regeneration is particularly challenged.' Sir Bob said anxieties about the market were being replaced by anxiety over public spending and political uncertainty. The HCA, which marks its first anniversary in December, has been particularly in the eye of the storm, baling out stalled housing projects and acting as the only game in town when it comes to funding. As Sir Bob said: ‘We had to keep the show on the road. Now we have to focus on the next five years, and recognise that we won't come out of the downturn looking the same as we came in.' More detailed HCA figures were later given by its London director, David Lunts, a former adviser to [former deputy prime minister] John Prescott, who said that of the mayor's target of 50,000 affordable homes until 2011, the HCA would have to deliver 44,000. He also pointed out that the HCA's investment would dip next year, partly because some of the spending had been brought forward to meet the downturn. But Sir Bob also pointed out new carbon-emission targets, adding: ‘The sustainability challenge is big for new housing, but enormous on existing stock.' But the likelihood of existing home-owners spending money to ensure their homes met new emission standards was dismissed by another speaker, Roger Madelin, chief executive of the Argent Group, who said the Government should ‘get realistic'. Veteran London local government commentator and director of the LSE's Greater London Group, Tony Travers, warned that the Government ‘will halve capital investment in the next three years', and that the public sector, ‘as leader of big regeneration projects, will have to look at new ways of finding the money'. A later version of Flash Player is required to view this content Download flash player // A broader picture of the economy was delivered by the BBC's economics editor, Stephanie Flanders, who noted that the ‘good news story' about the recession ending had caveats. She also warned that capital spending would have to be cut by 50% by 2013, and that transport and housing would bear the brunt. The dilemma is that too much slashing by a government from 2010 onwards could tip the economy back into recession, while not cutting enough would convince the markets the Government was not serious and the cost of borrowing would, therefore, rise even further. So, would a Conservative Government want to get the pain out the way quickly, so that it was still not struggling with deficits four years later? ‘They will want to send a signal to the markets that they will get tough,' she said. ‘But it could be risky if they

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WHITEHALL

Mapping out the future for London

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