London Overground Barking Riverside Extension

Economic and Business Case

July 2016

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Contents 1 Economic and Business Case Overview ....................................................................... 1

2 The Strategic Case ........................................................................................................... 9

How East London and Barking Riverside can address London’s housing need .................... 9

The role of the BRE in making development at Barking Riverside viable ............................ 20

3 Economic Case ............................................................................................................... 25

Introduction ..................................................................................................................... 25

Project Costs ................................................................................................................... 25

BRE Demand and Revenue Forecasts ............................................................................... 27

BRE Economic Appraisal .................................................................................................. 29

4 Financial, Commercial and Management Cases ........................................................ 39

5 Conclusion ...................................................................................................................... 44

Appendix A – Economic Appraisal Assumptions .............................................................. 45

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List of Tables

Table 1: Summary of Regional, sub-regional and Local Strategies and Policy Documents and how BRE contributes to delivering policy objectives ............................................................ 16

Table 2: Average public transport Journey time comparison from Barking Riverside ............. 19

Table 3: Capital Cost Estimates ........................................................................................... 26

Table 4: Model Time Periods ............................................................................................... 28

Table 5: Modelled Ridership Forecasts (Passengers in Modelled Period) ............................... 28

Table 6: Change in Public Transport and Highway Demand (per Annum) .............................. 28

Table 7: Transport Modelling Demand and Network Assumptions – Core Case .................. 30

Table 8: Economic Appraisal Results – Core Case (£m PV, 2015 prices & values) ................. 31

Table 9: Fixed Demand Scenario Tests ................................................................................. 37

Table 10: Economic Appraisal Results – Sensitivity Tests .................................................... 38

Table 11: Breakdown of funding sources for the BRE ........................................................... 39

Table 12: Capital Cost Inflation Assumptions ...................................................................... 45

Table 13: Operating and Maintenance Cost Assumptions (2015 prices) ............................... 45

Table 14: GDP Deflator and RPI Growth Assumptions ......................................................... 46

Table 15: Annualisation Factors ........................................................................................... 46

Table 16: Key Economic Appraisal Assumptions ................................................................. 47

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List of Figures

Figure 1: Barking Riverside Extension Scheme map ................................................................ 1

Figure 2: Location map of Barking Riverside within the LROA ................................................. 3

Figure 3: Detailed map showing key areas within the LROA ................................................... 3

Figure 4: Current Public Transport Accessibility Levels within Barking Riverside area .............. 4

Figure 5: The masterplan for the Barking Riverside development area (and adjacent potential development at Creekmouth) ................................................................................................ 4

Figure 6: London’s growing housing problem ....................................................................... 10

Figure 7: Locations and development capacities* of Opportunity Areas in east London ....... 12

Figure 8: Current Public Transport Accessibility Levels (PTAL) in the Barking Riverside Area . 13

Figure 9: Wider Development Opportunities within the London Riverside Opportunity Area 18

Figure 10: Summary of Improved transport connectivity from Barking Riverside enabled by BRE ...................................................................................................................................... 20

Figure 11: Interchange opportunities available for Overground service users at Barking (District/ Hammersmith and City/ c2c) and Wanstead Park/ Forest Gate (Elizabeth Line) ...... 22

Figure 12: BRE Internal Governance Structure ...................................................................... 42

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1 Economic and Business Case Overview

About this document 1. In March 2016, Transport for London (TfL) applied for an order under the Transport and

Works Act 1992 (a “TWAO”) to authorise an extension of the Gospel Oak-BarkingLondon Overground line from its current terminus at Barking Station to a new station inBarking Riverside. The scheme is known as “the Barking Riverside Extension” or BRE.

2. To support the TWAO application, TfL submitted a number of supplementarydocuments in March 2016, presenting an overview of the proposed scheme, includingscheme designs, cost and funding information, and a detailed Environmental Statement1.

3. This document presents the economic and business case for the BRE, setting out the need for the project, and the strategic and economic impacts and benefits of its provision. It should be read in conjunction with the Supporting Statement (BRE/A6), the Estimate of Costs (BRE/A8), the Funding Statement (BRE/A9), the Statement of Case(BRE/E1), the BRE Transport Options Summary Report (BRE/C10), the Transport Options Back-check Report (BRE/C11), and the Route Option Assessment Report (BRE/C12).

The Scheme 4. The Barking Riverside Extension (BRE) is a scheme to extend London Overground (LO)

Gospel Oak to Barking line services to Barking Riverside, a major housing andregeneration project in the London Borough of Barking and Dagenham (LBBD). The BREscheme is located wholly within LBBD. A plan of the route is shown in Figure 1.

Figure 1: Barking Riverside Extension Scheme map

1BRE/A1-A13 - TfL BRE TWAO Application submission documents (March 2016). Available from: https://tfl.gov.uk/corporate/publications-and-reports/barking-riverside-extension?cid=barking-riverside

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5. The primary aim of the BRE is to enable the full build out of the Barking Riversidedevelopment area comprising 10,800 housing units, that it is anticipated would house27,000 residents, as well as new commercial development, schools and health facilities.

6. The extended services would operate eastwards from Barking, initially along the existingEssex Thameside (Tilbury Loop) line, currently used by c2c services, before branchingonto separate tracks which would turn southwards after the Renwick Road Bridge toreach a new terminus station at Barking Riverside using a new raised viaduct. In total theBRE would see provision of 1.6km of new track. The station at Barking Riverside wouldbe at the heart of a new district centre. Passive provision would also be made for a futureintermediate station on the route just to the west of Renwick Road.

7. LO services are expected to commence on the BRE in 2021, with up to four trains perhour in each direction, providing a direct link to Barking and the other stations on theBarking to Gospel Oak route. A Network Rail scheme to electrify the existing route iscurrently being implemented and TfL has procured a new fleet of four car electric trainsto operate the route. The extension would also be electrified, enabling its operation bythe same new train fleet.

8. The BRE scheme has an estimated cost of £229m in 2016 prices, and an out-turn costof £263m. This includes all construction costs, land costs and a risk allowance calculatedthrough a Quantified Risk Assessment (QRA) process. A full breakdown of the projectcosts is presented in the BRE Estimate of Costs (BRE/A8)2.

9. The scope of the project includes developing the design, securing powers, theconstruction of new infrastructure, including a railway viaduct, tracks and a new station,and the future operating costs of the extension. The costs associated with train serviceswould be paid on behalf of TfL through the London Overground franchise, which Arriva isdue to take over from LOROL in November 2016.

10. While other transport measures required as part of the Barking Riverside developmentarea have been planned in a complementary way, they are not within the scope of theBRE project. Neither does the scope include housing and other aspects of thedevelopment, which would be delivered by the developer, Barking Riverside Limited(BRL).

Policy and Economic Context11. A key objective of the London Plan, the strategic spatial plan for Greater London, is to

support London’s growth through the creation of new, high density and sustainableresidential communities in Opportunity Areas (OAs), which represent London’s mainpool of brownfield land. To date, 38 OAs across London have been designated aslocations for growth. It is recognised that in order to unlock sustainable development insuch locations, adequate transport capacity and connectivity is needed to enablesustainable travel patterns to be promoted and embedded.

12. The Barking Riverside site is one of the largest brownfield residential developmentschemes in the UK, and is the largest single development site within the LondonRiverside Opportunity Area (LROA) which is shown in Figure 2 and Figure 3.

2 BRE/A8 - Estimate of Costs - https://tfl.gov.uk/cdn/static/cms/documents/bre-a8-estimate-of-costs.pdf

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Figure 2: Location map of Barking Riverside within the LROA

Figure 3: Detailed map showing key areas within the LROA

13. To date however, low residential land values (which are broadly on a par with industrialvalues) have undermined the viability of bringing forward residential development on the

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scale envisaged by the London Plan. A key reason is that the area is isolated from existing rail-based public transport corridors and has very poor accessibility by public transport as measured by Public Transport Accessibility Levels (PTAL). This is illustrated in Figure 4 and shows that the Barking Riverside area is classed as either level 1 (very poor), or level 0 (no PTAL). This severely limits the volume and density of development that can be brought forward, as well as the vitality of the community that has been established to date.

Figure 4: Current Public Transport Accessibility Levels within Barking Riverside area

14. In contrast, a masterplan for the Barking Riverside development area including the BRE atits heart has been prepared by BRL. This is illustrated in Figure 5 and shows how thedevelopment of 10,800 homes can be delivered with the BRE in place.

Figure 5: The masterplan for the Barking Riverside development area (and adjacent potential development at Creekmouth)

Indicative future development at Creekmouth

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15. Owing to the exceptionally poor public transport accessibility of the Barking Riversidedevelopment area, under the 2007 planning permission for the site, the planning anddelivery of suitable rail infrastructure were made planning conditions for thedevelopment. In particular, until a Transport and Works Act Order (TWAO) has beensecured, a maximum of 1,500 homes may be built on the site; after this, up to 4,000homes may be built until the rail service is operational. At the time of the 2007 planningpermission, the planning conditions limiting the occupation of homes related specificallyto a proposed extension of the Docklands Light Railway (DLR), however this is proposedto be amended pursuant to an application for Section 73 variation in January 2016 torefer instead to the BRE. As such, the delivery of the BRE would be a direct enabler ofthe full build-out of the Barking Riverside development area over the next 10-15 years,allowing a total build out of 10,800 homes. There is also permission for 65,000 squaremetres of associated commercial development.

16. This development potential cannot be realised without the BRE. The BRE would providethe capacity and accessibility required to deliver the higher density development withinthe Barking Riverside part of the LROA.

17. Developing the LROA to its full potential is part of London’s wider spatial planningobjective of supporting regeneration and realising the growth potential of East London,an objective clearly set out in the City in the East strategy (2015)3. LBBD’s ten yearhousing target to 2025 is 12,335 additional homes4. The London Riverside OAPF (2015) 5states that the OA is estimated to have capacity to accommodate a minimum of 26,500new homes over the life of the London Plan.

18. The BRE also supports the sustainable delivery of London's wider growth and economicdevelopment objectives set out in the London Plan. This is achieved through enablingscarce brownfield land to accommodate population and employment growth. Othermajor rail infrastructure projects in London, including the Jubilee Line Extension, theintroduction of the London Overground, DLR extensions and the Northern LineExtension to Battersea6, demonstrate how development can be stimulated in thecorridors they serve (or are due to serve). These schemes have all had a demonstrablesignificant impact upon regeneration, viability and housing delivery rates.

19. In summary, the BRE is fundamental to delivering the desired scale of economic growthand regeneration within the Barking Riverside part of the LROA, and as such has becomeidentified as an infrastructure requirement within a range of policy documents, includingthe City in the East strategy (2015) and the London Riverside OAPF (2015).

Regeneration Benefits of the BRE 20. Like other boroughs in East London, LBBD is characterised by relatively poor access to

employment, below average skill levels, low income levels, poor living conditions, ill-health, high deprivation and unemployment rates relative to the rest of London as wellas a lack of access to housing and services. This is summarised within the Supporting

3 BRE/D12 - City in the East (2015)- https://www.london.gov.uk/file/291877/download?token=AvlfVTDc 4 BRE/D17 - London Strategic Housing Market Assessment (2013) - https://www.london.gov.uk/file/15571/download?token=q4aeX4gP 5 BRE/D21 - London Riverside Opportunity Area Framework (2015) - https://www.london.gov.uk/what-we-do/planning/implementing-london-plan/opportunity-areas/opportunity-areas/london-riverside 6 currently under construction and due to open in 2020

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Statement7. East London is identified as a “particular spatial priority” in the London Plan and housing targets reflect this. This status recognises the need for regeneration in the area along with its capacity to accommodate new homes and jobs.

21. The BRE would help to support regeneration in LBBD and in the wider LROA by enablingthe full delivery of the development area masterplan, providing much needed newhousing and improving access to employment opportunities and services for existing andnew residents.

22. The proposed new station would be located at the heart of a new District Centre andwould include high quality public realm and landscaping. As such, the BRE wouldcontribute to making Barking Riverside a sustainable and attractive place to live. Thiswould help increase residential values to levels that make development more viable,while the additional accessibility is also necessary to support the higher housingdensities that are vital if London Plan objectives are to be met.

23. The BRE is the core part of a wider package of transport measures that would supportthe sustainable development of Barking Riverside, including an enhanced local busnetwork, new cycle links and pedestrian routes. These connections would promotesustainable travel choices – helping to encourage walking, cycling and public transportuse, thereby reducing transport’s contribution to climate change and promoting thepublic health objective of increasing the role of active travel.

24. The new connection would improve the accessibility of existing communities in the areato employment and leisure opportunities in Central London, regional centres such asStratford and the Isle of Dogs via an interchange at Barking and further afield, byimproving connectivity and reducing travel times8. It would also improve localconnectivity, improving access to employment opportunities and social infrastructurelocated in Barking Town Centre, the local major centre (as defined in the London Planand a key part of the LROA), for both new and existing residents of the Barking Riversidearea.

25. Social infrastructure will be delivered through a combination of on-site delivery andCommunity Infrastructure Levy (CIL) funding to provide the necessary schools, nurseries,health centres, places of worship and community facilities. As much of this would befunded by development enabled by the BRE, these services depend to a high degree ondelivery of the scheme.

26. The BRE would help to address employment issues facing existing residents in LBBD andother factors that contribute to high levels of deprivation by supporting the growth of thelocal economy, including the delivery of new employment-generating floor space. Theplanning permission for Barking Riverside includes the provision of 65,600 square metresof non-residential floor space, including retail facilities, new office development, leisurefacilities and a range of social and community infrastructure. BRL has estimated that theoperational employment within this non-residential floor space would be up to 2,500full-time equivalent (FTE) jobs9. This includes indirect jobs that would be supportedthrough the new population of 27,000 residents.

7 BRE/A6 - Supporting Statement (March 2016) - http://content.tfl.gov.uk/bre-a6-supporting-statement.pdf 8 The journey time between the new station at Barking Riverside and Barking would be approx. 7 minutes. 9 This estimate of operational employment was calculated using employment densities drawn from the HCA Employment Densities Guide. Assumptions relating to leakage, displacement and multipliers have been based on HCA Additionality Guide. Fourth Edition. (2014)

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27. This development would also represent a new source of business rates. A proportion ofthese could be used to generate further local benefits as they would be additional at theBorough level10. This potential new revenue stream could potentially be invested inadditional infrastructure, training and skills development, all of which will further supportlocal economic growth.

28. There will also be an indirect local economic impact through additional spending ongoods and services by members of the new community of around 27,000 residents atBarking Riverside. Based on current household spending figures, the new homesunlocked by BRE would contribute in the region of £100 million annually, a significantproportion of which would be expected to be spent in Barking town centre and otherlocal areas.

29. Further to growth planned within the Barking Riverside development area, both theLondon Riverside OAPF and the emerging LBBD Local Plan Issues and Options report11

highlight further development opportunities at Castle Green, Creekmouth and ThamesRoad – these locations have capacity for over 10,000 additional homes. The residents ofthese proposed new housing-led regeneration projects could in turn support the creationof further indirect jobs.

30. The BRE would further support the wider regeneration of the London RiversideOpportunity Area by making passive provision for the later delivery of a new intermediatestation at Renwick Road, which would be located adjacent to the Castle Green area andc600 metres away from the Thames Road area and through opportunities for improvingconnectivity to the east from the new Barking Riverside station.

31. Unlocking these wider opportunities is not merely desirable, but is essential if theLondon Plan target of delivering 26,500 new homes in the LROA is to be achieved. TheBRE is a critical step in realising this potential. Bus services would connect developmentat the London Sustainable Industries Park and at Creekmouth to the new station atBarking Riverside, whilst a new intermediate station at Renwick Road would serve thenew Castle Green and Thames Road developments.

BRE Economic Appraisal

32. This document presents an assessment of the costs and benefits of the BRE. Thisanalysis has been undertaken using a variety of methodologies including Treasury12 andDfT13 appraisal guidance. As BRE has been developed primarily to support housingdelivery rather than deliver transport benefits, Benefit to Cost Ratios (BCRs) are not wellsuited to capturing such benefits.

33. The BRE ‘Core Case’ is forecast to deliver £444m of benefits including wider impacts.The BCR with London values of time, is 1.95 : 1 based on the costs to TfL. When takingthe whole cost of the scheme into account, the BCR is greater than 1:1, indicating a

10 This results from the Government’s announcement in the 2015 Autumn Statement that from 2020, business rate growth will be retained locally by boroughs and the GLA. 11 BRE/D45 - LBBD Local Plan Review - https://www.lbbd.gov.uk/residents/planning-and-building-control/planning-guidance-and-policies/local-plan-review/one-borough-one-community-one-plan/ 12 HM Treasury Green Book - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220541/green_book_complete.pdf 13 Department for Transport WebTag guidance - https://www.gov.uk/guidance/transport-analysis-guidance-webtag#guidance-for-the-appraisal-practitioner

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positive economic case for the BRE as it would deliver benefits greater than costs over the appraisal period.

Conclusion 34. This economic and business case sets out how the BRE would meet a set of

regeneration and wider economic development objectives that fully align with both theLondon Plan objectives of accommodating forecast London’s employment andpopulation growth sustainably and the more local objectives of the London RiversideOpportunity Area Planning Framework.

35. Through providing the transport infrastructure necessary to enable the sustainabledevelopment of the Barking Riverside development area, the BRE would unlock the fullresidential development potential of 10,800 homes within the development area andsupport the regeneration of the wider LROA. The new non-residential floor space anddemand for goods and services generated by the 27,000 new residents of the BarkingRiverside development area, according to BRL, would support the creation of up to anestimated 2,500 new full time equivalent (FTE) direct, indirect and induced jobs. Morewidely, the BRE would play a crucial role in supporting the sustainable growth andregeneration of this area of east London, which is considered a priority area foraccommodating growth in the London Plan.

36. The economic appraisal has valued the overall benefit of the BRE in terms of transportbenefits and its role in delivering enhanced productivity and additional jobs to London,and the UK as a whole. The economic appraisal demonstrates that the BRE schemewould deliver £444m in benefits, including wider impacts and has a Benefit to Cost Ratio(BCR) of 1.95 : 1 , based on the costs to TfL.

37. A full funding package has been agreed and robust procurement and project managementapproaches are in place to aide the delivery of the BRE and enable the realisation of thebenefits associated with the BRE and the Barking Riverside development area.

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2 The Strategic Case

Summary of the Strategic Case: • London is a growing World City and maintaining its success is critical to the UK as a

whole. A housing supply shortage is however making the city unaffordable to manypeople, reducing its attractiveness as a place to live. This makes it harder for businessesto recruit the workers they need, leading to higher costs and reduced competitiveness.If unaddressed this will reduce London’s ability to continue creating jobs and grow, withconsequences for the national economy as high productivity activities are lost tooverseas locations.

• East London and the LROA both have a key role to play in delivering growth and thedevelopment of Barking Riverside will contribute to this through the delivery of a new,sustainable community of 10,800 homes. However, the Barking Riverside developmentarea has poor levels of public transport accessibility and the development is dependenton significant transport improvements to enable better connections to employmentand other opportunities, and to support sustainable travel. For this reason, planningobligations are in place to ensure that sustainable public transport options are providedbefore significant levels of development can take place.

• The BRE represents the scheme that best meets the stated project objectives, whichhave been derived from both the London Plan and LROAPF, thereby unlocking the fullhousing development potential of the site. The BRE would unlock the full housingpotential of Barking Riverside, maximising its contribution towards housing targets forthe Borough, the OAPF and London. Without the BRE, it is very unlikely that the fullhousing development potential of the Barking Riverside site would be realised.

• Development at Barking Riverside and the BRE proposal fully comply with planning andtransport policy at the London and Borough levels. As well as unlocking significanthousing growth at Barking Riverside, the BRE could act as a catalyst for wider housing-led regeneration beyond the Barking Riverside site.

• The BRE would unlock a wide range of regeneration benefits, increasing access toemployment and social opportunities for residents across London and in the local area.It would also support new employment within the Barking Riverside area and promotelocal economic growth in the Borough more widely, boosting business rate receipts.

How East London and Barking Riverside can address London’s housing need London is a growing economically successful city. Maintaining this success is of vital importance to the UK, particularly following the referendum decision to leave the EU.

38. London is a global city and the UK’s main engine of economic growth. London iscurrently at the top of a number of international city competitiveness rankings14. This isresulting in strong employment growth, and a rapidly growing population.

39. Since the mid-1990s there has been sustained growth in the capital’s population andeconomy. Between 2005 and 2015 London’s population grew from 7.5 million to 8.6

14 For Example: PWC (2014) Cities of Opportunity ranking of 30 major cities - http://www.pwc.co.uk/industries/government-public-sector/insights/cities-of-opportunity-6-london-takes-the-top-spot.html

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million. The number of private sector jobs within London has risen by 650,000 and the number of businesses has risen by 115,000 over the same period.

40. London's population is set to grow to around 10m by 2036, a higher rate of growth thanall other UK regions. Productivity is increasing, with London’s economy, measured inGross Value Added (GVA), forecast to grow by over 2.5 per cent a year. The rate ofemployment growth is strongest in inner London, with the majority of the forecast newjobs being created within the Central Activities Zones (CAZ). This will result in morecommuting into the CAZ from Zones 2-6 and beyond.

Investment in transport infrastructure is a key factor in unlocking growth.41. Transport of people and goods is the lifeblood of cities and it plays a fundamental role in

supporting economic growth. Cities compete on the basis of their attractiveness asplaces to do business. A key aspect of London’s competitiveness as a world city is itsability to host a very strong ‘agglomeration’ of high value employment in and around itscentre. Central to this is the ability to attract and retain a vast range of highly specialisedworkers to live and work in it. The quality of transport infrastructure plays a vital role inthis.

42. Despite relatively high levels of investment in London’s transport system in recent years,the city’s success and growth pose some continuing challenges for the system. One ofthese is that over the past quarter of a century or so a chronic undersupply of housinghas emerged. Improving the connectivity of the system to unlock sustainable housingdelivery in areas of strong development potential is a critically important means ofaddressing this.

A housing supply shortage could reduce London’s ability to continue creatingjobs and growing, threatening its competitiveness.

43. Within London the number of homes being built has for a long period of time fallen shortof the level of need – as Figure 6 shows.

Figure 6: London’s growing housing problem

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44. In the decade from 2005 to 2015, when London’s population grew by more than amillion, its housing stock grew by less than 300,000. The average home now costs morethan 11 times the average earnings per full time worker across London as a whole and inLBBD, one of the most affordable Boroughs in London, the average house costs morethan 7 times average earnings per full time worker15. This shortage of supply has resultedin a number of issues that are associated with deteriorating housing affordability. Theseinclude the subdivision of housing into smaller units, reversing the long run trend awayfrom overcrowding, increasing rent levels and sizes of mortgages relative to wages. As aresult many Londoners on modest incomes have been priced out of large parts of thecity.

45. A continued shortage of housing, where supply does not increase to meet growingdemand would result in the affordability of housing continuing to worsen. If housingcosts in London continue to rise, households would have less disposable income tospend on goods and services or would move out of the city and face long commutesfrom places outside London. Others might be discouraged from taking up new jobs inLondon. This would result in higher recruitment costs to firms, firms that are trying toexpand facing difficulties finding the staff they need.

46. According to research by London First16, three-quarters of London businesses believethat the lack of new homes and rising housing costs are a significant risk to the capital’seconomic growth. The CBI report Housing Britain17, summarised results from aCBI/KPMG London Business Survey. In this survey, housing costs came out as thesecond biggest threat to competitiveness in the capital and a quarter of the firmssurveyed listed it as a risk to London’s ongoing competitiveness. Research by CEBR18

shows that there is a £5bn wage premium – £1,720 per employee – faced by Londonbusinesses due to high housing costs.

East London has a key role to play in delivering sustainable growth47. A key objective of the London Plan is to support London’s growth through the creation

of new, high density and sustainable residential communities in Opportunity Areas (OAs).These areas represent the brownfield locations which are the focus for accommodating asignificant proportion of London’s future housing needs. It is recognised that in order tounlock sustainable development in such locations, adequate transport capacity andconnectivity is needed to enable sustainable travel patterns to be promoted andembedded. In its absence these areas will not be able to support the scale and density ofhousing that is envisaged in the London Plan, constraining London’s ability to deliver themuch needed new housing that is essential to its sustainable growth.

48. Many of the best opportunities for new housing development are in the east of the city.The Minor Alterations to the London Plan (March 2016), states that 40% of the potentialhousing delivery is expected to come forward in just eight boroughs either side of theRiver Thames in East London. Of the 38 Opportunity Areas that have been designated,

15 DCLG (2015) data on average house prices to median earnings ratio - http://data.london.gov.uk/dataset/ratio-house-prices-earnings-borough 16 London First (2015) Carrots and Sticks http://londonfirst.co.uk/wp-content/uploads/2015/05/Carrots-and-Sticks-Report_Web.pdf 17 CBI (2014) Housing Britain – Building new homes for growth http://news.cbi.org.uk/news/homes-for-growth/ 18 CEBR (2015) London Housing: A Crisis for Businesses Too - http://londonfirst.co.uk/wp-content/uploads/2016/04/CEBR-report-Londons-housing-crisis.pdf

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fourteen are in East London. Thirteen of these are shown in Figure 7 (the Upper Lee Valley OA is located further to the north covering areas of the London Boroughs of Enfield, Haringey, Waltham Forest and Hackney).

Figure 7: Locations and development capacities* of Opportunity Areas in east London

*Potential to accommodate development based on Further Alterations to the London Plan targets

Barking Riverside has the capacity to deliver significant housing growth but poor levels of public transport accessibility will need to be addressed if this potential is to be fully realised

49. The Barking Riverside development area is one of the largest brownfield residentialdevelopment schemes in the UK, and is the largest single development site within theLondon Riverside Opportunity Area (LROA). Planning permission for 10,800 homes,alongside 65,500 square metres of commercial, retail and leisure development wassecured in 2007. In January 2016, Barking Riverside Limited submitted a Section 73application which seeks to vary the 2007 permission. As well as the BRE, thisdevelopment would be supported by new schools, health centres, places of worship andcommunity facilities. This represents over 40% of the total new housing (26,500) plannedfor the LROA19 and 87% of the housing capacity target for the London Borough ofBarking and Dagenham (12,355 over the ten year period from 2015 to 2025).

50. To date however, low residential land values (which are broadly on a par with industrialvalues) have undermined the viability of bringing forward residential development on thescale envisaged by the London Plan. A key reason is that the area is isolated fromexisting rail-based public transport corridors and has very poor accessibility by publictransport. This is illustrated in Figure 8. This severely limits the volume and density ofdevelopment that can be developed, even to the levels allowable under the planningpermission prior to the confirmation of the infrastructure to serve the area.

19 BRE/D21 - London Riverside Opportunity Area Planning Framework (2015) - https://www.london.gov.uk/what-we-do/planning/implementing-london-plan/opportunity-areas/opportunity-areas/london-riverside

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Figure 8: Current Public Transport Accessibility Levels (PTAL) in the Barking Riverside Area

51. The Barking Riverside development area is poorly connected to public transportnetworks. It currently has very limited highway, public transport, pedestrian and cycleaccess. There are currently a number of barriers to movement created by the A13(Alfred’s Way dual carriageway, rail lines and also waterways including the River Roding tothe west and industrial sites at Thames Road and River Road.

52. All road connections link directly to the A13, a route subject to peak hour congestion,particularly around the Renwick Road junction, and because of high traffic flows has aseverance effect. The public transport provision serving the development area comprisesbus links to local centres and interchange points, specifically Barking, Ilford, andDagenham Dock. There are no dedicated pedestrian and cycle routes apart from on theexisting road network. This is limited and extensively used by industrial traffic.

53. Whilst the developer BRL is investing in bus service improvements, new roads andpedestrian and cycle provision, this alone would not sufficiently improve levels ofaccessibility. To unlock the full development potential of 10,800 homes, here is a needfor a high-capacity public transport link which can accommodate the large number oftrips that would be generated by large scale development.

Planning conditions require that sustainable public transport options areprovided before significant levels of development can take place

54. In the wider context of London’s need to grow sustainability, there is a requirement forthe Barking Riverside development area to provide for sustainable travel including highquality public transport provision, in order to reduce reliance on the private motor carand to ensure the development contributes to wider economic regeneration. The currenttransport network is not sufficient to meet this aspiration and improvements andadditions to the existing transport network are needed.

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55. The original package of transport improvements for Barking Riverside envisaged in 2007included a proposed extension of the DLR from Gallions Reach to Dagenham Dock, withfour new intermediate stations, including one in the centre of the Barking Riversidedevelopment site. The planning permission for the Barking Riverside site built in triggerslimiting the number of homes that could be occupied until a TWAO came into force and,separately, until the DLR extension was operational. The planning permission allowedthe occupation of up to 1,500 residential units before powers for the DLR, or an agreedalternative were granted, and up to 4,000 residential units before such a public transportlink became operational.

56. Outline planning permission for the site was granted in August 2007 and hassubsequently been varied. Implementation of Phases 1 and 2 of the new housing hascommenced, however, progress has been slow.

57. A Transport and Works Order (TWAO) application was submitted for the DLR extensionin 2008 but withdrawn due to a lack of funding support from Government. The estimatedcost of the scheme at the time was £750m. The Government did not support thescheme because the cost was not considered to be affordable; the BRE was developedin order to provide similar level of accessibility improvements more affordably.

The role of the BRE in unlocking housing growth at Barking Riverside

The London Overground extension to Barking Riverside represents the option that best meets the scheme objectives, thereby unlocking the full housing development potential of the site

58. Following the withdrawal of the TWAO for a DLR extension, TfL has assessed a range ofdifferent options for improving transport connectivity to reduce the isolation of theBarking Riverside masterplan area from transport networks, thereby enabling the full10,800 residential units planned to come forward. Details of the option assessmentprocess followed are contained in the Transport Options Summary Report20.

59. The options assessment process concluded that the London Overground extension wasthe best performing scheme that would enable the full development of the BarkingRiverside site, meet the planning obligations and provide confidence to developers todirectly deliver 10,800 homes (of which 6,800 are wholly dependent on the BRE) andhelp stimulate further growth in the Barking Riverside area, as well as meet widerobjectives.

60. The BRE scheme would deliver a step change in public transport provision for the BarkingRiverside development, which would address the current poor level of accessibility ofthe site and would unlock the dependent development of 6,800 new homes. TheOverground Extension would deliver significant reductions in journey times by publictransport to a range of destinations, meaning that residents of the development canaccess wider opportunities and are likely to be less dependent on the private car.

61. As a result of these connectivity improvements, the BRE would help to make thedevelopment a significantly more attractive place to live, which will increase the demand

20 BRE/C10 – Barking Riverside Extension Transport Options Summary Report (May 2015) - https://consultations.tfl.gov.uk/rail/barking-riverside-extension/user_uploads/barking-riverside-extension_-transport-options-summary-report_final-version.pdf-2

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for housing in the Barking Riverside area, making it easier to sell new units. This would mean the 10,800 homes planned as part of the masterplan becomes realistic to achieve.

62. The Overground service, running every 15 minutes – representing a convenient ‘turn-up-and-go’ metro style frequency (as evidenced in the DfT/ TfL Rail Prospectus21), would putBarking Riverside on the TfL Tube and Overground map, raising the profile of the areaacross London.

63. The BRE would provide the capacity and accessibility required to deliver the full 10,800homes planned at Barking Riverside. The BRE would deliver additional capacity to carry2,500 – 3,000 people per hour, per direction. The BRE would enable high densitydevelopment to be built within the Barking Riverside part of the London Riverside OA, tomeet the growth objectives of the London Riverside OAPF.

64. In January 2016, Barking Riverside Limited submitted a Section 73 application (planningref: 16/00131/OUT) which seeks to vary the 2009 permission. The application seeks anumber of amendments to the approved Barking Riverside scheme, including replacingthe previously assumed DLR scheme with the BRE and the resultant changes that arenecessary in light of the proposed BRE route alignment and station that form part of thisTWAO application.

65. As the site is built out according to this phasing plan a package of transport measures inaddition to the BRE Overground extension would also need to be delivered to ensuregood connectivity to, from and through the site. This package includes:

• Provision of bus services to the site;• Provision of a high quality environment for pedestrians and cyclists;• Improvements to the A13/Renwick Road junction to improve access to the site in

particular for buses and cycles; and• Construction of the internal roads within the site including the provision of

priority measures for buses.

66. Until such a time as the BRE scheme receives TWAO consent, the development atBarking Riverside will be limited by the planning obligation to a maximum of 1,500residential units.

The BRE scheme has a strong strategic fit with regional, sub-regional and localland-use planning and transport strategies and policy documents

London policy 67. The London Plan (2016) and Mayor’s Transport Strategy (MTS), finalised in 2010, provide

the policy framework for land use and transport planning in Greater London through to2031. The London Strategic Housing Land Availability Assessment in 2013 suggestedthat Barking and Dagenham Borough has capacity to deliver 12,355 new homes from2015 to 2025. Other policy documents including City in the East and the LondonRiverside Opportunity Area Framework (OAPF) set out how growth will be delivered ineast London. LBBD planning documents set out how growth and development will bemanaged within the Borough. These strategies and policies and how BRE wouldcontribute towards their objectives are summarised in Table 1.

21 TfL/ DfT (January 2016): A new approach to rail passenger services in London and the South East

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Table 1: Summary of Regional, sub-regional and Local Strategies and Policy Documents and how BRE contributes to delivering policy objectives

Strategy or Policy Document

Core Policy Objectives How BRE supports these policy objectives

London Plan (2016) – [BRE/D12]

Need to plan for an additional 650,000 jobs and an increase in population of 1.5 million up to 2036 delivering 42,000 homes a year across London. Significant growth set to occur within East London particularly within 14 Opportunity Areas (OAs) including London Riverside. Some OAs will require public investment in infrastructure to bring development forward.

The BRE will enable delivery of 10,800 new homes within Barking Riverside, helping to meet needs of a growing population. Barking Riverside is a large development site located within the London Riverside OA.

Mayors Transport Strategy (2010) – [BRE/D16]

To develop the transport system to accommodate growth sustainably by encouraging a greater share of travel trips to be made by public transport and other sustainable modes. To enhance connectivity thereby improving access to employment. To support regeneration within OAs.

The BRE provides a public transport link to and from the Barking Riverside site, helping to reduce the number of car trips by residents. The BRE will offer journey time savings to employment centres including Barking Town Centre. The BRE will support wider regeneration within the OA.

The London Housing Strategy (2014) – [BRE/D19]

Emphasises the importance of bringing forward land for development, particularly in Opportunity Areas.

The BRE delivers improved connectivity and capacity by public transport, helping bring forward housing development within the London Riverside OA, enabling at least 6,800 new homes).

East and South East London Sub-Regional Transport Plan (2014) – [BRE/D31]

Emphasises the role of transport improvements in enabling growth and development.

The BRE delivers improved connectivity and capacity by public transport, helping bring forward housing development within the London Riverside OA.

City in the East (2015) – [BRE/D13]

The 14 OAs within east London have capacity to deliver higher volumes of new housing and employment than suggested in London Plan. Identifies Barking Riverside as one of a number of key development sites within East London where regeneration will take place, and housing growth accommodated to meet London’s needs. Proposes to relocate industrial land uses in the Castle Green, Thames Road and Creekmouth area further to the east at Beam Reach in the London Borough of Havering.

The BRE delivers improved connectivity and capacity by public transport, helping bring forward housing development within the London Riverside OA. The BRE will support wider regeneration within the OA

London Riverside Opportunity Area Planning Framework (2015) – [BRE/D22]

To deliver 26,500 homes and 16,000 new jobs and regeneration. To improve connectivity.

The BRE will enable delivery of 10,800 new homes within Barking Riverside, and improve connectivity by public transport. It will support wider regeneration,

LBBD Core Strategy (2010) – [BRE/D39]

Barking Riverside is a key regeneration area, with a new District Centre, new schools, health centre and a sports centre.

Although out of date, the Core Strategy supported the then proposed DLR extension to Dagenham Dock to unlock

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Strategy or Policy Document

Core Policy Objectives How BRE supports these policy objectives

It will be a high quality, public transport orientated community that minimises reliance of the car. Delivery of transport infrastructure improvements that facilitate the regeneration of the Borough and improve transport links to areas of low accessibility are supported.

the full development potential of the site. Given the DLR extension proposal is not being progressed, the proposed BRE scheme would perform the same role of unlocking the full development potential of 10,800 homes. The BRE will offer better public transport links to Barking Riverside – currently an area of low accessibility

LBBD Issues and Options Report (July 2015) – [BRE/D45]

LBBD can play a greater role in helping to meet London’s housing need. If vacant and underused industrial land is released for housing, 35,000 new homes could be built by 2030. Identifies Barking Riverside as one of seven growth hubs within the Borough, with capacity for 10,800 homes within a riverfront setting. Lists an extension of the London Overground to Barking Riverside as a priority transport project. Castle Green considered suitable as a growth hub of up to 5,000 homes, if a new station on the BRE route at Renwick Road is delivered. Proposes re-zoning of underused, low grade industrial land at Creekmouth and Thames Road for housing, with capacity for 6,000 dwellings by 2031.

The BRE would help enable delivery of 10,800 new homes, helping towards Barking Riverside Station is within a reasonable walking distance of Creekmouth and the proposed Renwick Road station would serve existing residential areas and new development at both Castle Green and Thames Road. The BRE would enable new housing within these three sites to be built to a higher density, reflecting the good connectivity that the new stations would offer.

The BRE would unlock the full housing potential of Barking Riverside, maximising its contribution towards housing targets for the Borough, the OAPF and London

68. The delivery of 10,800 homes at Barking Riverside will make a significant contributiontowards the Strategic Housing Market Assessment (SHMA) London Plan housing targetfor the London Borough of Barking and Dagenham of 12,335 additional new homes overthe ten year period to 2025 and the LROA target of 26,500 new homes set out in theOAPF.

69. The construction and opening of the BRE would help to stimulate and enhance greaterinvestor and developer confidence in the LROA, thereby helping to deliver the plannedwider regeneration of the OA as a whole.

70. The significant volume of new housing in the Barking Riverside development area that theBRE would help to unlock will help to better address the mismatch between the demandfor new housing and the supply within London as a whole, which will alleviate theproblem of declining affordability of housing. Increasing the supply of housing throughthe full delivery of the 10,800 homes at Barking Riverside will help enable employersbased in London to expand and recruit more easily, reducing the need to pay wagepremiums. This would help to improve the competitiveness of employers and of theeconomy as a whole.

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As well as unlocking significant housing growth within the Barking Riverside development area, the BRE could act as a catalyst for wider housing-led regeneration in other parts of the LROA

71. It is anticipated that this infrastructure investment will encourage further transformationand regeneration elsewhere within the wider LROA by enabling housing-led regenerationof three sites – Castle Green, Creekmouth and Thames Road (shown in Figure 9) in placeof vacant or underutilised industrial land which could deliver up to 11,000 homes.

Figure 9: Wider Development Opportunities within the London Riverside Opportunity Area

72. The viability of these sites would be enhanced by the BRE and the supporting transportmeasures associated with the BRL Masterplan (e.g. enhanced bus service levels) and thecommunity facilities delivered by the Masterplan.

The BRE would enable the creation of new employment within the BarkingRiverside area and benefit the wider Borough economy

73. The BRE would support the delivery of new employment-generating floor space. Theexisting planning permission for Barking Riverside includes the provision of 65,600 squaremetres of non-residential floor space, which was estimated by BRL as potentiallysupporting up to 2,500 new Full Time Equivalent (FTE) jobs including direct, indirect andinduced employment22.

22 This estimate of operational employment was calculated using employment densities drawn from the HCA Employment Densities Guide. Assumptions relating to leakage, displacement and multipliers have been based on HCA Additionality Guide. Fourth Edition. (2014) - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/378177/additionality_guide_2014_full.pdf

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74. The BRE itself is estimated to create 16 direct new jobs either at the station or in theoperation of the train service. The remainder would be indirect and induced jobsincluding employment within the new non-residential floor space. The additional 27,000residents living in the Barking Riverside development area would create demand forgoods and services, which in turn will create jobs in the locality.

75. While the delivery of this commercial floor space and associated jobs is not expresslytied to transport improvements by planning obligation, it is unlikely that this commercialspace would come forward without the development of the wider Barking Riversidescheme because it depends on the demand for services generated by new residents.Therefore, the BRE would indirectly support the delivery of significant additionalemployment in this area.

76. Access to labour markets, access to customers and affordability all influence wherebusinesses choose to locate. By supporting the delivery of new housing and commercialdevelopment, the BRE would assist with the creation of a new community, which willbolster and diversify the local labour market. Combined with better connectivity, the BREwould therefore enhance the area’s attractiveness to investment, supporting economicgrowth and regeneration within LBBD.

77. The delivery of BRE would also have an indirect benefit on the London SustainableIndustries Park (LSIP), which is located to the east of the proposed Barking Riversidestation. The LSIP has been identified by LBBD as being a key economic growth hub withinthe borough. Improved transport accessibility via the BRE to Barking Riverside andsupporting bus services will help to support further regeneration, growth and investment.

The BRE would improve access to employment and other opportunities in Barking and London’s main employment centres

78. The delivery of the BRE would improve access from the Barking Riverside developmentto employment opportunities and social infrastructure located in Barking Town Centre,the main retail centre and location for public services within the LBBD and the LROA.The journey time between the new station at Barking Riverside and Barking will be 7minutes. This new connection would also enhance onward connectivity to importantgrowing regional centres such as Stratford and major employment centres, such as theCity of London and the Isle of Dogs via an interchange at Barking.

79. The reductions in journey times that the BRE would support are set out in Table 2 andare illustrated spatially in Figure 10. It should be noted that although the service fromBarking Riverside to Barking station will take around 7 minutes, the journey timesreported also reflect the assumed walking and wait times of users.

Table 2: Average public transport Journey time comparison from Barking RiversideDestination Current journey time Future journey time

(with BRE) Barking 38 minutes 15 minutes Fenchurch Street 55 minutes 34 minutes Stratford 53 minutes 26 minutes Canary Wharf 57 minutes 31 minutes

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Figure 10: Summary of Improved transport connectivity from Barking Riverside enabled by BRE

80. This reduction in journey times compared to travel to Barking by bus then interchangingfor rail, and the anticipated regular service frequency of 4 trains per hour would help tomake Barking Riverside an attractive location for workers in these employment centres tolive, providing a significant addition to the housing options available to current and futureworkers in these centres23.

The role of the BRE in making development at Barking Riverside viable 81. There are a number of challenges to delivering housing at the Barking Riverside site that

to date have hindered the pace and scale of redevelopment of the site. Given the largesize of Barking Riverside, the up front land preparation and infrastructure costs for thesite are significant. As a result of these factors, a phased approach to development andbuild out has been taken, with new units being released for sale in limited numbers. Asstated earlier, a maximum of 1,500 homes can be occupied without powers in place todeliver a suitable public transport scheme.

82. The need for infrastructure investment, combined with the economic downturn, and theneed to undertake an assessment of a range of options for improving public transportconnectivity (following the withdrawal of the TWAO application for the DLR extension)has affected the financial viability of the site and the rate of build out of new housing.

83. The viability constraints and uncertainty around the DLR has meant the build out ofhomes at Barking Riverside has been slow. The delivery of Phase 1 of the housingcommenced in 2011. Within Phase 1 and 2 of the housing located in the north westernpart of the site, as at September 2015, a total of 686 units had been completed. Another660 units are expected to be delivered up to 2017.

23 BRE/D12 - City in the East (2015) - https://www.london.gov.uk/file/291877/download?token=AvlfVTDc

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Without investment in the BRE, there is a high risk of market failure with development at Barking Riverside at risk of stalling at 1,500 homes

84. For the Barking Riverside development area to achieve its’ full growth potential, itrequires a suitable and affordable public transport solution that will build confidence inthe Barking Riverside development area, stimulate housing construction, and supportnew residents that move to the area once the houses are built.

85. The planning permission for the site recognised a need for investment to improveconnectivity levels by public transport, in order to unlock growth and regeneration atBarking Riverside and within the wider London Riverside OA. This scale of redevelopmentwas predicated on the delivery of public transport improvements. To this end, a Section106 planning obligation relating to the 2007 planning permission, as varied, provided thatno more than 1,500 homes could be occupied until a TWAO had come into forceauthorising the then proposed extension of the Docklands Light Railway (DLR ) toDagenham Dock. Further, a planning obligation provided that no more than 4,000 homescould be occupied until that scheme was operational. In short, the full and sustainabledelivery of 10,800 homes at Barking Riverside depended on the delivery of the DLRextension to Dagenham Dock – or an agreed alternative.

86. The Section 73 application submitted in January 2016 is predicated on the retention ofthese triggers and their application to the BRE within any revised planning consent for thedevelopment area.

87. The poor accessibility of the site by public transport has meant that the value of the landhas remained low. This makes it more difficult for the developer to finance constructionand to sell properties. If no investment were made to improve public transportaccessibility, then irrespective of the planning obligations that have been put into place,development is likely to stall.

88. The impact of not improving public transport connectivity to the site would be a loss ofimpetus and lack of confidence in the Barking Riverside development site. The likelyoutcome would be that the developer BRL would stop preparing development parcels onthe site. The impact of a halt to housing construction would be significantly damaging tothe current momentum and jeopardise the ability to meeting strategic housing targets forLondon.

89. Furthermore, without improvements to the connectivity of the site by public transport,access to and from the site via highway links on the A13 corridor would become alimiting constraint on the scale of development achievable. It would become difficult tomarket properties to potential residents, as the increased congestion levels on the roadnetwork would deter buyers and renters from considering living within the BarkingRiverside development area. Others might move to the area and find they had to travelby car to access employment and other opportunities, increasing levels of highwaycongestion on and around the A13, the key link between central London and the Essexports. Alternatively those without access to a car would be isolated from suchopportunities.

Delivery of the BRE would address the poor levels of accessibility from Barking Riverside, overcoming this key barrier to development viability

90. The BRE would connect the development at Barking Riverside with other high frequencyrail and underground corridors as shown on Figure 11.

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91. At Barking station passengers would be able to interchange onto frequent westboundUnderground services towards West Ham (where interchange for the Jubilee Line toaccess Stratford, Canary Wharf or Westminster is possible), Whitechapel and stations inthe City of London. Barking is also served by c2c National Rail services to FenchurchStreet.

92. Alternatively, passengers can remain on the Overground and interchange at WansteadPark (via a short walk) for Forest Gate – where from late 2019 Elizabeth Line trains willconnect to Whitechapel, Liverpool Street, Farringdon, Tottenham Court Road, BondStreet Old Oak Common and Heathrow Airport. A further interchange is also possible atBlackhorse Road, where passengers could change onto the Victoria line for directservices to Kings Cross–St Pancras, Euston, Oxford Circus and Victoria.

Figure 11: Interchange opportunities available for Overground service users at Barking (District/ Hammersmith and City/ c2c) and Wanstead Park/ Forest Gate (Elizabeth Line)

93. Greater certainty regarding improved public transport provision to serve the BarkingRiverside masterplan area, following a TWAO approval would meet the planningobligations attached to the development and would help to stimulate further build out ofthe site. In recognition of this, the developers of the site, BRL has committed to makingan investment of £172m into the BRE in order to ensure its delivery and improvetransport accessibility.

94. A TWAO approval would mean that BRL would have the confidence to invest in upfrontinfrastructure and site preparation, in the knowledge that they would be able to recoverthese costs as land values rise, and that there would be strengthening demand forproperties.

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Summary: how BRE meets scheme objectives 95. The primary objective of the BRE and six further aims of the scheme are outlined in

detail in the BRE Concise Statement of aims24.

96. The primary objective of the Barking Riverside Extension (BRE) is to:

support economic development and population growth by unlocking the full residential development potential of the Barking Riverside area through the provision of new sustainable transport infrastructure. This will enable the sustainable delivery of 10,800 homes and will thereby support the wider regeneration of the London Riverside Opportunity Area.

97. The primary aim of the BRE is consistent with the National Planning Policy Framework(2012), the London Plan (2016), the London Riverside Opportunity Area PlanningFramework (2015), the Mayor’s Transport Strategy (MTS) (2010), the London HousingStrategy (2014) and the London Borough of Barking and Dagenham’s planning policies.

98. Barking Riverside is a key development area within the London Riverside OpportunityArea and BRE would act as a catalyst for its development in helping to deliver 26,500new homes and 16,000 new jobs.

99. The Barking Riverside development is London’s single largest housing developmentopportunity with outline planning permission for 10,800 homes and 65,600 sq. m ofcommercial, retail and community facilities. This level of development cannot happensustainably without the provision of appropriate transport infrastructure.

100. The BRE would provide a new station at the heart of the Barking Riverside development providing access to the rail network in an area which currently has limited access to public transport. The BRE would be the principal component of a transport strategy for the Barking Riverside area which includes bus network enhancements, road junction improvements and walking and cycling facilities.

101. The BRE would enable the sustainable delivery of the full 10,800 homes in Barking Riverside. It is the most deliverable and affordable option and provides a direct link to Barking town centre from the heart of the Barking Riverside development.

102. In addition, the BRE is also intended to meet other goals set out in the MTS and six further project aims were developed that align with these goals. The six goals are shown in bold below, together with a summary of how the BRE would help achieve them:

• Improve transport connectivity: The BRE would achieve this by directlyconnecting the Barking Riverside area to Barking Town Centre and throughinterchange at Barking station enabling onward journeys to destinations such ascentral London, the Isle of Dogs and Stratford.

• Enhance quality of life: The BRE would achieve this by providing a high qualityjourney experience by means of means of new trains and rail infrastructure and beingpart of London Overground which has high customer satisfaction standards. The BREwould be an electrified railway and offers a sustainable alternative to car travel. Itwould contribute to a high quality public realm station square at the heart of a newDistrict Centre. There will be good interchange with walking, cycling and bus routes.

24 BRE/A5 Concise statement of aims - http://content.tfl.gov.uk/bre-a5-concise-statement-of-aims.pdf

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• Improve safety and security: The BRE would achieve this by designing in safetyand security features such as lighting, CCTV and fencing. The new station would bestaffed at all times while services are operating.

• Improve transport opportunities: The BRE would achieve this by providing a newstation with step free access and a high quality and accessible interchange withbuses. It would improve existing and new communities’ access to services inlocations like Barking Town Centre and Stratford.

• Reduce transport's contribution to climate change and improve itsresilience: The BRE would achieve this by adopting the CEEQUAL sustainabilityrating scheme. The BRE would be an electrified railway and offers a sustainablealternative to car travel.

• Implement legacy from the 2012 Olympic & Paralympic Games: The BREwould achieve this by supporting the regeneration of Barking Riverside and the widerLondon Riverside Opportunity Area. It would encourage public transport use,walking and cycling through the provision of integrated walking and cycling routesand facilities to/from and at the new Barking Riverside station.

Conclusion 103. In conclusion, there is a strong case for delivering the BRE:

• The BRE would enable the delivery of at least 6,800 additional new homes,contributing towards the housing targets both for the London Borough of Barking andDagenham and the London Riverside OAPF, but would also help to make the overall10,800 home development in the Barking Riverside development area to work as asustainable, high density new community.

• The housing enabled by the BRE will have a resident population of 27,000 people.BRL has estimated that this population will support the creation of up to 2,500 fulltime equivalent jobs in the locality (direct, indirect and induced).

• The BRE would improve the accessibility of the Barking Riverside development area,increasing the viability of the housing development.

• The BRE would help to facilitate regeneration more widely within the LondonRiverside OA and would enable the subsequent delivery of a new station at RenwickRoad.

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3 Economic Case

Introduction 104. This chapter sets out the economic case for the scheme. The economic appraisal brings

together the scheme costs, revenue and benefits, and employs standard economic appraisal assumptions to discount these over the appraisal period. The key performance metric for the economic appraisal is the benefit to cost ratio (BCR), which takes all costs into account, irrespective of whether these are borne by the public or private sector, and the TfL BCR which shows the ratio of benefits per pound of TfL expenditure.

105. The approach to forecasting and economic appraisal has been developed to assess the combined impacts of the BRE and the housing development it unlocks. The assessment of demand and transport benefits has employed TfL’s established suite of strategic transport models (LTS, Railplan and ELHAM – each described below). The economic appraisal is informed by the Department for Transport’s (DfT) transport appraisal guidance (WebTAG) and TfL’s Business Case Development Manual (BCDM).

106. In line with WebTAG and BCDM guidance, the appraisal period assumed is 60 years from scheme opening. The process of securing powers and construction is assumed to start in 2017 and take approximately 4 years. Allowing for commissioning, the planned opening year is 2021. Construction costs are spread over the construction period. The economic appraisal is presented in 2015 prices and discounted to 2015 present values and prices.

Project Costs 107. The appraisal of the BRE captures the life-cycle costs (capital, operating, maintenance

and renewal costs) over the 60-year appraisal period.

Capital Costs

108. The capital cost for the scheme is £229m in 2015/16 prices. This is consistent with the BRE Estimate of Costs (BRE/A8)25. In out-turn costs, which includes inflation between 2015/16 and the period of construction, the cost is £263m26, as set out in Table 3.

25 BRE/A8 Estimate of Costs (March 2016) - https://tfl.gov.uk/cdn/static/cms/documents/bre-a8-estimate-of-costs.pdf 26Cost inflation is based on TfL’s tender price inflation guidance from March 2014, consistent with TfL’s budgetary assumptions.

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Table 3: Capital Cost Estimates

Cost Item Cost, Out-turn Prices (£m)

TfL project team 14.26

Design 11.30

Network Rail 9.20

TWAO 6.51

Land, Property, Legal, Insurance 7.28

Implementation 158.23

Risk @ P50 56.45

Total 263.23

109. The £263m outturn cost includes all construction elements, new station and ticket office, land costs, scheme development costs and inclusive of Quantitative Risk Assessment value of £56.5m at the p50 confidence level. The capital cost estimate of two additional 4-car Class 710 units required to operate the BRE is included within the rolling stock capital lease charges.

Optimism Bias 110. In line with BCDM guidance, the level of optimism bias applied within the appraisal is

44%. This is the upper bound of optimism bias for standard civil engineering projects. This level of optimism bias is considered to be prudent given the level of scheme development and risk assessment undertaken to date. A sensitivity test has been undertaken at a lower level optimism bias.

Funding Breakdown of Capital Cost 111. The BCR of the economic appraisal is presented in two ways. First, the BCR whereby

benefits are compared to the overall costs of the project (irrespective of who pays) and second, by comparing net benefits against the TfL costs of the project. The latter measure provides a metric showing the overall societal benefit per pound of TfL expenditure. To support this the overall cost has been presented by funding source, with the £263m split between TfL and private sector funding sources, as below:

• £172m of the total funding is from BRL; and• £91m of the total funding is from TfL.

Operating, Maintenance and Renewal Costs 112. Operating and maintenance costs have been estimated by London Overground at £3.0m

per annum in 2016 prices. The cost in 2015 prices is £2.92m, and the cost breakdown is provided in Appendix A.

113. The renewal cost is estimated to be £80,000 per annum in 2015 prices. This is based on an allowance of 1% per annum of the capital cost for Barking Riverside station at £8m. This gives a total operating, maintenance and renewal cost estimate of £3.1m per annum in 2016 prices.

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114. It should be noted that the rolling stock capital lease charge (within the operating costs) includes an allowance for refurbish and renewals required to meet minimum asset conditions. Track maintenance and renewal responsibility will be passed onto Network Rail, and these costs will be incurred through the capacity, variable usage and fixed charges payable to Network Rail, included within the operating costs.

115. Operating, maintenance and renewal cost inflation assumptions are set out in Appendix A. These costs are also detailed in the BRE Estimate of Costs27.

BRE Demand and Revenue Forecasts

The demand forecasting for the BRE is underpinned by TfL’s established strategic modelling framework.

116. A full overview of the forecasting approach and demand forecasts presented within this section of the document are presented within the BRE Environmental Statement Volume 1: Main Report (Chapter 15)28 and the BRE Transport Assessment (Chapters 4 and 6)29. TfL’s forecasting framework comprises:

• LTS – The London Transportation Studies (LTS) model, a strategic demand modelwhich includes population and employment data (for base and future years) andrepresents the strategic public transport and highway networks. The LTS model isused to forecast the overall level and pattern of movement. The outputs of LTS area public transport and highway demand matrix which, in turn, provide the inputs toRailplan (public transport) and ELHAM (highway) models;

• Railplan – TfL’s strategic London-wide public transport network model; and• ELHAM – East London Highway Assignment Model (ELHAM), TfL’s strategic

highway assignment model for east London.

117. The LTS, Railplan and ELHAM models have been used to forecast the demand and benefits/impacts (generalised journey time savings).

118. The forecast years used for the forecasting and appraisal are:

• 2021 which represents the assumed opening year of 2021, and includes 4,000homes in the Barking Riverside Development Area; and

• 2031 reflecting the London Plan and Mayor’s Transport Strategy horizon year andthe full build out of the Barking Riverside Development Area (with BRE) to 10,800homes.

119. The appraisal is based on average weekday AM peak and inter-peak period forecasts of demand, revenue and benefits. This is consistent with DfT guidance. The modelled periods in Railplan and ELHAM are set out in Table 4.

27 BRE/A8 Estimate of Costs - https://tfl.gov.uk/cdn/static/cms/documents/bre-a8-estimate-of-costs.pdf 28 BRE/A17/1 Environmental Statement Vol 1 - http://content.tfl.gov.uk/bre-es-volume1-main-report.pdf 29 BRE/A17/6 Transport Assessment - https://tfl.gov.uk/cdn/static/cms/documents/bre-es-volume6-transport-assessment.pdf

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Table 4: Model Time Periods

Model Time Period Public Transport - Railplan Highway - ELHAM

AM peak period 3 hours (07:00-10:00) 1 hour (average of 07:00-10:00)

Inter-peak period 6 hours (10:00-16:00) 1 hour (average of 10:00-16:00)

Key Forecasting Assumptions

120. The key forecasting assumptions include the following:

• Representation of Barking Riverside Development Area Bus Strategy o In 2021 this comprises 24 buses per hour (bph) through the Barking Riverside

Development Area area in each direction, across 3 routes (each of which would have 8 bph).

o In 2031 this increases to 30 bph, through an additional route (BR1) that would operate at 6 bph.

• The inclusion of a new station at Beam Park, served by c2c services. • Highway network changes to be delivered as part of the Barking Riverside

Development Area including Renwick Road junction enhancement.

BRE Ridership Forecasts

121. The BRE ridership forecasts are based on the number of passengers boarding and alighting at the new station at Barking Riverside. These are set out in Table 5. Note that the 2021 forecasts presented do not include demand ‘build-up’ in the early years of opening. Further details are set out in the Transport Assessment for the BRE.

Table 5: Modelled Ridership Forecasts (Passengers in Modelled Period)

4,000 Homes 10,8000 Homes 2021 AM 2021 IP 2031 AM 2031 IP Barking Riverside station boardings 1,000 200 2,400 350 Barking Riverside station alightings 100 200 300 800

Total 1,100 400 2,700 1150

122. The forecast change in public transport and highway demand per annum is set out in Table 6.

Table 6: Change in Public Transport and Highway Demand (per Annum)

4,000 Homes 10,800 Homes

2021 2031

Public transport – BRE demand (m pax p.a.) 0.75 1.91

Highway – Change in trips (m PCUs p.a.) -0.28 -0.91

Highway – Change in distance (m PCU km p.a.) -2.34 -7.64

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BRE Revenue Forecasts 123. The BRE would be likely to result in a shift between public transport modes, primarily

between bus and London Overground as a means of accessing Barking station. Although not part of the modelling framework, for the appraisal it is necessary to estimate the incremental revenue impacts of the BRE. TfL has estimated revenues based on the change in public transport trips due to the BRE, assuming an average BRE per trip fare of £1.64 in 2015 prices. This is based on average LUL fares and reflecting that Barking Riverside station is expected to be in Zone 4, as well as the typical use of travel cards and concessionary travel.

BRE Economic Appraisal

Introduction to BRE Economic Appraisal

Although the BRE is primarily about unlocking housing, the economic impacts of the BRE scheme have been assessed. The appraisal has been informed by DfT WebTAG guidance and TfL’s BCDM.

124. The primary objective for BRE is to support the delivery of 10,800 homes in the Barking Riverside development area, of which 6,800 are directly dependent on the delivery of the BRE. This dependence relates to the Section 106 agreement which places a number of restrictions on the occupation of homes in the masterplan area. Occupation of up to 1,500 residential units is permitted before a TWAO comes into force for a DLR extension or an agreed alternative (which the BRE represents). Occupation of up to 4,000 residential units is permitted before the DLR (or agreed alternative) is operational. The full build out of 10,800 homes requires the completion of BRE.

125. This means that, when forecasting the impact and benefits of the scheme, the analysis takes account of the differential level of development in the Barking Riverside development area that can be delivered with the scheme. That is the ‘with BRE’ case includes 10,800 homes whereas the ‘Reference Case’ includes only the 4,000 homes that can be delivered in the absence of the BRE.

126. Although the BRE and Barking Riverside development area would influence some prospective residents locational decisions, it is unreasonable to assume that these people would only choose to live in London with the BRE and Barking Riverside development area in place. Therefore an appraisal based on an assumption that all residents are ‘net additional’ and would not locate or work in London without the BRE is not considered as part of the core case.

127. As a result, in assessing the economic impacts, it was assumed that were the BRE not to be delivered, the residents of the 6,800 homes that would be enabled by the BRE would live elsewhere within London. The assumption is that this population would live in the remainder of the Borough of Barking and Dagenham (LBBD) and the Borough of Havering (LBH).

128. This assumption is based on two considerations. Firstly, LBBD alone does not have the development capacity to deliver its housing targets in the absence of the Barking Riverside development area, and as a result the additional population that would be generated by the Barking Riverside development area could not all live in LBBD in the absence of BRE. Secondly, analysis of the relationship between income and house prices illustrates that if prospective residents were not able to move to LBBD due to lack of

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housing stock, LBH would be the next most affordable place to live. The accommodation of the residents of the 6,800 would comprise a combination of increased household occupancy rates, intensification of existing sites as well as new as yet unidentified sites coming forward.

Economic Appraisal Assumptions – Core Case

The ‘Core Case’ has been constructed to fully capture the transport benefits of the planned development in the Barking Riverside development area.

129. The BRE ‘Core Case’ economic appraisal is based on the ‘Reference Case’ and ‘Do Something’ demand and network assumptions as set out in Table 7. The economic appraisal also employs a range of standard appraisal assumptions and parameters, which are set out in Appendix A.

Table 7: Transport Modelling Demand and Network Assumptions – Core Case

Assumptions Year Reference Case (without BRE) Do Something (with BRE)

Demand 2021 • 4,000 homes in the Barking Riverside development area

• 10,800 homes in the Barking Riverside development area

2031 • 4,000 homes in the Barking Riverside development area

• 6,800 homes ‘balanced’ across LBBD and LBH

• 10,800 homes in the Barking Riverside development area

Network 2021 • Committed/funded schemes up to 2021 e.g. the Elizabeth line

• Bus strategy in the Barking Riverside development area – 3 routes at 24 bph

• As Reference case with addition of BRE

• Journey time between Barking and Barking Riverside station: 7 minutes (eastbound), 7.5 minutes (westbound)

2031 • Committed/funded schemes up to 2031

• Bus strategy in the Barking Riverside development area – 4 routes at 32 bph

• As Reference Case with addition of BRE

• BRE journey time as in 2021

Economic Appraisal Results – Core Case

130. The 60-year economic appraisal of the BRE Core Case is presented in Table 8. The results are presented in £million discounted present values (PV) in 2015 prices.

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Table 8: Economic Appraisal Results – Core Case (£m PV, 2015 prices & values)

Core Case Notes

Financial Impacts (costs and revenues) Capital costs £318 Capex inclusive of 44% optimism bias

Operational and renewal costs £77

Incremental revenues -£24 Negative number indicates an increase in revenue

Present Value Costs (PVC) £371

Private sector contribution (to TfL Capex) £143 Developer contribution to BRE

Present Value TfL costs (PVC - TfL) £228

Transport Benefits Public transport user benefits £242

Highway user impacts £174

Wider Impacts £28

Present Value Benefits (PVB) £444

Economic Performance Transport BCR - total costs 1.20 :1 PVB/PBVC

Transport BCR - TfL costs 1.95 :1 PVB/(PVC-TfL)

Interpretation

The economic appraisal of the Core Case demonstrates a positive economic case, with transport benefits outweighing costs over the appraisal period. Financial Impacts

131. In the appraisal, the financial impacts of the scheme comprise the present value of the capital costs of the BRE (inclusive of optimism bias), and the present value of operating, maintenance and renewal costs over the 60-year appraisal period. The present value of revenues represents the net additional revenue (negative within the table as costs are expressed as positive number) from people using public transport.

132. The incremental revenues offset around one-third of the operating and maintenance costs. This reflects the fact that BRE will be introduced into a dense urban network where public transport usage and mode share is high and that a significant amount of demand for the BRE will be abstracted from other public transport modes.

133. The present value of overall costs is £371m PV, and the PV of costs that would be borne by TfL (i.e. net of developer contributions) is £228m.

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Transport Benefits 134. There are two main effects in terms of transport benefits/ impacts. First, the

introduction of the BRE provides public transport users with journey time savings30, and results in highway decongestion benefits through modal shift from car to BRE.

135. Second, the delivery of housing associated with and dependent upon BRE means that the pattern of trips is more sustainable than under the ‘without BRE’ Reference Case scenario in which people live elsewhere within the LBBD and LBH. The Barking Riverside Development Area is more sustainable in the ‘do something’ scenario, public transport usage is higher, car travel is correspondingly lower (so highway congestion benefits are greater) and people living in the Barking Riverside Development Area will, on average, have shorter journey times (e.g. trips to Central London) than if they lived across LBBD and LBH.

136. Public transport benefits have been calculated for 2021 and 2031 using TfL’s Railplan model, and profiled over 60-years based on the assumptions set out Appendix A. Benefits to public transport users total £242m PV.

137. The highway benefits are estimated based on DfT’s externality unit benefits for Greater London in WebTAG Table A 5.4.1. These include benefits from reduced congestion, accidents and carbon. The congestion ‘unit benefit’ measures the aggregate time saving impact on highway users remaining on the network, associated with the removal of one passenger car unit (PCU) kilometre travelled. An increase in car (PCU) kilometres imposed additional delay on existing highway users.

138. The present value of highway decongestion benefits is £174m PV.

Wider Impacts 139. Wider economic impacts are productivity benefits that are not captured within the

estimation of ‘conventional benefits’ based on generalised time savings and an assumption of perfect competition of markets. However, other markets affected by a transport scheme (e.g. labour market, output market) do not operate under conditions of perfect competition and there are therefore additional benefits to assess. These wider impacts are wholly additional to conventional transport user benefits.

140. Guidance from DfT on Wider Impacts31 is intended to quantify the potential economic impacts of transport improvements upon business and workers' productivity and the resulting increase in output. Three areas of wider impacts of applicability to BRE are:

• Agglomeration – greater productivity and lower costs arising from the concentration of economic activity when firms are located near one another and can access a wider pool of labour;

• Imperfect Competition – in imperfectly competitive markets, a reduction in transportation cost will allow firms to increase output that requires transportation inputs in the production process and make a profit, as consumers’ willingness to pay will exceed production costs; and

30 Journey time savings is measured in generalised journey time. Generalised journey time takes into account the relative preference of the various journey components. For example, an extra minute of walking is perceived the same way as two extra minutes of (uncrowded) in-vehicle time. 31 WebTAG Unit A2.1 Wider Impacts (January 2014)- https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/370532/webtag-tag-unit-a2-1-wider-impacts.pdf

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• Tax revenues from labour market impacts – as the cost of commuting decreases people will factor in this change when making decisions about whether to work or not. For some people currently not working, the ‘effective wage’ will be higher and they will join the labour force. Furthermore, changes in economic geography can also trigger a step-change in productivity, so that workers move to more productive jobs. Tax benefits will arise from both a labour supply effect and a move to more productive jobs effect.

141. The wider benefits for the BRE totals £28m PV, of which £21m PV is agglomeration.

Economic Performance 142. Under the Core Case, the BRE delivers £444m in benefits including wider impacts. The

BCR based on the BCDM approach, which considers benefits per pound of TfL expenditure, is 1.95 : 132. A BCR of greater than 1:1 indicates a positive economic case for the BRE as it would deliver benefits greater than costs over the appraisal period.

143. The DfT’s value for money assessment33 states that a BCR of between 1.5 : 1 and 2.0 :1 offers medium value for money, and above 2:1 is high value for money. The BCR for BRE therefore is at the upper end of the ‘medium’ value for money category34.

144. The guidance also asserts that the value for money statement should take account of benefits including reliability, regeneration and delivery of dependent development. As such, the overall value for money assessment for the BRE would be ‘high’ taking these benefits into account.

145. However, it should be reiterated that the BRE has been developed to primarily to support housing delivery rather than deliver transport benefits. The WebTAG and BCDM approach to cost benefit analysis is primarily focussed on benefits to existing transport users where there is no change to patterns of land-use development.

Scenario and Sensitivity Testing

146. Scenario and sensitivity tests have been prepared to help inform an understanding of the overall case of the BRE, and to demonstrate the robustness of the case under a range of potential outcomes.

147. Several scenarios based on alternative treatments of demand and benefits related to ‘dependent development’ have been prepared. The sensitivity tests presented show the economic performance of the scheme at a lower level of ‘optimism bias’, and using national (rather than London) values of time.

32 The BCR based on the total scheme costs, irrespective of who pays (i.e. including the developer contribution as a scheme cost) is 1.20 : 1. 33 WebTag Guidance - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/267296/vfm-advice-local-decision-makers.pdf 34 The BCR inclusive of all costs (not just TfL costs) is in the ‘low’ value for money category, for which the range is between 1.0 and 1.5. However, this is not the basis for the BCR estimate adopted by the BCDM. Under this approach the addition of additional benefits would take the value for money assessment from low to medium value for money.

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Scenario Analysis

148. A number of scenario tests have been undertaken assuming alternative demand assumptions.

149. The Core Case presented scenario assumes that the residents associated with the 6,800 ‘dependent’ dwellings would, in the absence of BRE, live in the remainder of LBBD and LBH. This assumption has been employed for the purpose of the economic case, and is considered prudent and reasonable.

150. The alternative demand scenarios we have considered are:

• Scenario 1 - Economic appraisal based on a ‘Dependent Development Approach’. Under this the demand assumptions are the same as the core case, but the benefits are based on the DfT’s dependent development guidance.

• Scenario 2 – Net Additionality Scenario. This considers a scenario where the demand associated with the enabled 6,800 ‘dependent’ homes would not exist in the ‘without BRE’ scenario, i.e. all new Barking Riverside residents once the BRE is in place are completely new to London.

• Scenarios 3 & 4 – Fixed Demand Scenarios are 4,000 and 10,800 homes respectively. Under these scenarios the level and location of development is assumed to be the same (fixed) in both the ‘with BRE’ and ‘without BRE’ scenarios.

151. These are summarised below.

Scenario 1 - Economic Appraisal based on Dependent Development Approach

The ‘Dependent Development Approach’ has been constructed to align with DfT’s guidance on appraising Dependent Development. Using this approach the overall impacts are similar to the Core Case.

152. As the primary aim of the BRE is to enable housing delivery, TfL has also assessed an alternative ‘Dependent Development Approach’ based on the DfT’s Guidance on appraising transport projects with dependent development35. The demand assumptions underpinning this case are the same as for the Core Case, but with the key difference is that under the Dependent Development Approach transport benefits are estimated based only at the 4,000 homes level36, and that the benefits of the additional 6,800 homes is captured through a ‘land value uplift’.

153. The benefits associated the dependent housing development (the additional 6,800 homes enabled by the BRE) is based on the uplift in land value in the Barking Riverside Development Area as a result of the change in land use from ex-industrial to residential. The benefit accrues to the landowner.

35 WebTag Unit A2.3 Dependent Development (January 2014)- https://www.gov.uk/government/publications/webtag-tag-unit-a2-3-transport-appraisal-in-the-context-of-dependent-development 36 The Core Case captures the transport benefits associated with the 10,800 homes, and excludes any land value uplift. The transport benefits are the driver of the accessibility and connectivity improvements that underpin the land value uplift, and therefore to include both would be double counting. The Core Case assesses the benefits from the 6,800 homes based only on ‘transport benefits’ (time savings to users) whereas the dependent development scenario assesses the benefits of the 6,800 homes based on the ‘land value uplift’, and includes transport benefits based only on the 4,000 homes that could be delivered with or without the BRE.

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154. Real estate advisors JLL, working with BRL and TfL, estimated the land value of the site based on its designation as industrial land (its value without BRE) compared to its value as residential (with BRE) to inform the business case. JLL has estimated the overall land value uplift associated with the additional development enabled by the BRE as £261m in 2015 prices.

155. The appraisal also takes into account the externality impacts of the additional demand. This includes the change in public transport crowding and highway congestion as a result of the additional 6,800 units delivered in the Barking Riverside Development Area compared to LBBD and LBH. These externality impacts due to the additional demand in the Barking Riverside Development Area have been incorporated within the transport benefits.

156. The results under the Dependent Development Approach, compared to the Core Case, are summarised below:

• The transport benefits based on the Dependent Development Approach scenario total £224m PV over 60-years, which compares to £444m PV for the Core Case.

• The transport benefits are lower (by £220m) as the transport benefits represented under the Dependent Development Approach scenario only account for benefits to the 4,000 homes in Barking Riverside, compared to 10,800 in the Core Case.

157. The land value uplift of £261m represents the benefit related to the additional 6,800 homes that are enabled by the BRE in the Dependent Development Approach scenario. This land value uplift benefit, which cannot be realised without the BRE is greater than the corresponding reduction (of £220m) in transport benefits compared to the Core Case. However, DfT guidance is clear that the land value uplift is not wholly additive to the transport benefits within the economic appraisal. This is because the transport costs are one of many infrastructure costs that are required to deliver the housing (water, electricity, schools etc.) and the benefits cannot therefore be fully attributed to the transport scheme. Accordingly, we have not presented a BCR that includes the land value uplift.

158. DfT guidance provides qualitative assessment scores for the valuation of development unlocked by transport. There are three value ‘thresholds’ that correspond to slight, medium and large beneficial qualitative assessment scores. The ‘large beneficial’ threshold is £100m, which means that the value of the unlocked development for BRE, at £261m, exceeds the level required to achieve highest value threshold by a factor of 2.6.

159. The DfT guidance on dependent development values the ‘benefit’ of enabling dependent development based on the increase in value that accrues to the developer. The guidance and approach does not consider the wider benefits of housing delivery to the London economy (beyond the benefits that accrue directly to the landowner). In the London context shortage of housing supply is identified as a key economic risk37, and therefore the additional housing delivered by BRE would have a strategic role in helping address this risk.

37 Refer to Chapter 2 Strategic Case of this Economic and Business Case - paragraphs 44-46

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Scenario 2 - Net Additionality Scenario (Illustrative)

160. TfL has assessed the impact of BRE assuming that the 6,800 homes, and therefore the associated population, are net additional (i.e. would not live or work in London without BRE). This is unrealistic, but the assessment indicates the externality impacts (adding to crowding on public transport and congestion on the highway network) on the transport network. This externality impact would be counterbalanced by the additional productivity that additional workers would bring to London. The analysis suggests that for each £1 of externality disbenefit, there would be a GVA benefit from increased employment of £6 (using the average GVA of LBBD residents, and current employment rates)38.

161. It is recognised that there would be other costs associated with net additional residents (e.g. education, health, other services), though the tax-take from additional workers would be correspondingly higher.

162. Overall, the test strongly suggests that the economic benefit of residents in the Barking Riverside Development Area that are net additional due to the BRE would significantly outweigh the transport externality costs. In practice the high cost of living in London, driven largely by high property costs (rent or mortgage) related to lack of housing supply, will deter some people from living in London. The BRE helps address this market failure in the housing market and will have an impact on supply and affordability, influencing peoples’ decision to choose to live and work in London at the margin. Where this is the case, this analysis suggests these economic benefits would be significantly higher than those captured within the Core Case.

Scenarios 3 and 4 - Fixed Demand Scenarios (Illustrative) 163. The Core Case and Dependent Development Approach scenario assumes that, with the

BRE in place, the number of homes in the Barking Riverside Development Area will increase from 4,000 to 10,800.

164. TfL’s approach to the Core Case explicitly recognises the differential level of development that can be supported with and without the BRE in place – in line with DfT guidance on dependent development. However, the appraisal of ‘conventional’ transport schemes (which aim to deliver transport improvements but do not enable large-scale dependent development) are assessed using the same level of demand in both the ‘with scheme’ and ‘without scheme’ scenarios. We have therefore assessed the benefits using a ‘fixed matrix’ approach, as a sensitivity.

165. Two ‘Fixed Demand’ scenarios have been considered. Each assumes a different level of homes (4,000/10,800) delivered in the Barking Riverside Development Area irrespective of the BRE. The commentary of these scenarios is summarised in Table 9.

38 The externality effects have been estimated using the transport models in a consistent way as the core scenario. GVA impacts are based on the average GVA per worker of people living in LBBD.

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Table 9: Fixed Demand Scenario Tests

Number of Homes Rationale for Scenario Findings

10,800 homes • Based on the number of homes that can be delivered with BRE

• Assumes that all 10,800 homes can be delivered irrespective of BRE which is not considered realistic or consistent with planning conditions on BRL.

• In line with how ‘standard’ transport appraisal is undertaken.

• More benefits to “existing” users, fewer benefits from more sustainable travel patterns

• Overall transport benefits similar to the Dependent Development Approach

• BCR >1 4,000 homes • Based on the number of homes that can

be delivered with a TWAO for BRE • Assumes that only 4,000 homes are

delivered irrespective of BRE – an unrealistic view given London’s housing needs and the proposals put forward by BRL.

• Consistent with WebTAG approach to assessing transport impacts with dependent development.

• Transport benefits broadly proportionate to the number of homes assumed

• BCR <1

166. The BCR under the 10,800 homes scenario would be positive. However, It should be

noted that this scenario is not fully consistent with WebTAG guidance, in that the 10,800 homes are not deliverable without the BRE, and hence the use of a 10,800 home reference case is unrealistic.

167. Under the 4,000 homes scenario the benefit cost ratio of the scheme would be below 1 : 1. The test, while internally consistent in appraisal terms, assumes that only 4,000 homes would be built in the Barking Riverside Development Area, and implicitly that the dependent development that the scheme aims to deliver will not occur within the 60-year appraisal period. The test is therefore considered unrealistic in that it assumes that the level of long-term development, even with the BRE implemented, would not be developed beyond 4,000 homes.

Sensitivity Tests 168. Two sensitivity tests have been undertaken to illustrate the transport only scenario with

different levels of Optimism Bias and national Values of Time from WebTAG:

• 22% Optimism Bias on Capital Costs – the optimism bias is assumed to be reduced from 44% to 22%. This better reflects TfL’s experience on other projects at a similar stage of its cost development; and

• National Values of Time – the economic appraisal undertaken in this chapter up until this section employs TfL Business Case Development Manual (BCDM) values of time. These BCDM values of time are preferred to the standard values of time because they reflect the higher earnings and productivity of Londoners. In this sensitivity test the standard national values of time in WebTAG have been assumed39.

39 WebTAG Data Book December 2015. https://www.gov.uk/government/publications/webtag-tag-data-book-december-2015 values have been used. Revised WebTAG national values of time are currently under consultation but at the time of analysis these have not yet been formally adopted.

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169. The results of these sensitivity tests are set out in Table 10. The results show that a lower optimism bias would improve the economic case of the BRE, delivering a BCR of 2.5 : 1. The National Values of Time test shows that the economic case of the BRE would perform slightly worse than the central case, but would still deliver a positive BCR of 1.7:1.

Table 10: Economic Appraisal Results – Sensitivity Tests

TfL Benefit : Cost Ratio

Core Case 1.9 :1 22% Optimism on Capital Costs 2.5 :1

National Values of Time 1.7 :1

Conclusions 170. The Core Case demonstrates that the BRE would deliver a benefit-cost ratio of 1.95 : 1

based on TfL costs. The Core Case captures the transport impacts and benefits associated with delivering the additional ‘dependent’ 6,800 homes. The BRE delivers £444m in benefits including wider impacts.

171. A range of sensitivity and scenario tests have been undertaken. These suggest that the economic performance of the BRE is robust under a range of reasonable scenarios.

172. The economic analysis presented does not fully capture the strategic benefits that supporting housing delivery of 6,800 additional homes will deliver to the London economy, through directly addressing the critical challenge of housing delivery that is a key economic policy priority for London.

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4 Financial, Commercial and Management Cases

Introduction 173. The Business Case for the BRE was developed in accordance with DfT40 and HM Treasury

Green Book guidance41 which utilises a five case model in developing transport business cases. This section of the document therefore presents an overview of the following cases:

• Financial Case • Commercial Case • Management Case

Financial Case 174. The Financial Case sets out the ongoing operating costs associated with the project and

the financing and funding arrangements to deliver the scheme.

A full funding package has been developed to enable the delivery of the BRE scheme.

175. The breakdown of funding sources is set out in Table 11 below:

Table 11: Breakdown of funding sources for the BRE

176. The developer, Barking Riverside Limited (BRL) will contribute a total of £172m towards the cost of the BRE. Together with a contribution from TfL of £91m means that the scheme is fully funded. This financial commitment from BRL demonstrates that the developer sees a clear need for the BRE to be delivered.

177. Operating and maintenance costs for the BRE will be £3.1m per annum in 2015 prices, including Network Rail track access charges, electrical supply for trains, rolling stock maintenance and lease charges, staff costs, station maintenance and cleaning and utilities.

178. TfL has estimated the renewal cost estimate to be £80,000 per annum in 2015 prices. This is based on an allowance of 1% per annum of the capital cost for Barking Riverside station at £8m. It should be noted that the rolling stock capital lease charge (within the operating costs) will include an allowance for refurbish and renewals required to meet minimum asset conditions. Track maintenance and renewal responsibility will be passed

40 Department for Transport WebTag guidance - https://www.gov.uk/guidance/transport-analysis-guidance-webtag#guidance-for-the-appraisal-practitioner 41 HM Treasury Green Book - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220541/green_book_complete.pdf

Source of funding contribution £m contribution towards EFC

Percentage of project costs

Third Party (developer) contributions £172m 65%

TfL Business Plan £91m 35%

Total £263m

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onto Network Rail, and these costs will be incurred through the track access charges payable to Network Rail, also included within the operating costs.

179. All ongoing costs would be covered as part of the TfL business plan allocation to operate the wider London Overground network.

The Commercial Case 180. The commercial case presents the commercial structure and procurement approach for

the BRE project.

181. The BRE scheme is promoted by TfL and supported by Network Rail. The construction contract for the BRE will be procured by TfL through a competitive tendering process. TfL will deliver the construction of the new railway infrastructure through a competitively tendered process via EU compliant means in the Official Journal of the European Union (OJEU).

182. Train procurement for the BRE is included in a wider procurement of new Class 710 electric rolling stock as part of a wider order for new trains for the West Anglia suburban route, the Shenfield to Liverpool Street (non-Crossrail) corridor and for the Gospel Oak to Barking route which will be electrified. Network Rail have scheduled the completion of this electrification work by 2018. The new Barking Riverside train services will be included as part of the new London Overground concession

183. The Gospel Oak to Barking Overground service forms part of the London Overground Rail Concession, which is to be re-tendered in 2016. This will make future provision to extend these services to Barking Riverside from the opening of the route in 2021. An additional two additional 4-car Class 710 electric multiple unit trains will be leased to operate the extension.

184. Although TfL undertakes procurement for projects implemented in the capital, the wider benefit to the UK is extensive, with over 60,000 jobs estimated to be supported by services TfL procures from outside of London. The construction of the BRE would add to the pipeline of capital investment that supports jobs across the UK.

185. The procurement strategy for this stage of the project will be refined and improved as the scheme is further developed.

The Management Case 186. The management case presents the project management and governance commercial

structure for the BRE project.

Collaborative Working

187. TfL has been working closely with Network Rail, the GLA, BRL and the London Borough of Barking & Dagenham to develop the BRE. Since late 2014, further planning and scheme development has been undertaken in readiness for the submission of a TWAO application.

188. The Section 73 application submitted by BRL in January 2016, is fully consistent with the TWAO application for the BRE. In particular, it seeks a number of amendments to the approved Barking Riverside scheme, including changes that are necessary in light of the proposed BRE route alignment and station that form part of this TWAO application.

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Project Management

189. TfL has developed extensive project management experience in delivering track and station improvements on the LO network, in partnership with Network Rail over the last ten years. Recent projects delivered by TfL in partnership with Network Rail include the extension of the LO on the East London Line – Phase 1, Phase IA and Phase 2, as well as an extension to the South London line. These works included significant multi-disciplinary engineering tasks to integrate the extensions onto the existing network. TfL has also recently delivered the London Overground Capacity Improvement Programme (LOCIP) requiring platforms extensions, signalling changes and selective door opening in order to introduce new 5-car train services on most LO corridors, except the Gospel Oak-Barking route, which is in the process of being electrified to accommodate the new Class 710 4-car electric trains.

190. TfL also has extensive experience of delivering a range of large capital infrastructure projects that involve the procurement of skills and services that will all be highly relevant to that required for the construction of BRE. TfL has significant experience in the procurement and construction of major infrastructure projects, including rail tunnels and highway improvements, on projects such as Crossrail, the Northern Line Extension, Docklands Light Railway extensions, and major station upgrade schemes such as King’s Cross St Pancras, Victoria and Bank.

191. The approach and lessons learned from managing these significant projects will be reviewed to ensure competent management of the BRE. Suppliers have been engaged early in the proposed BRE and have already been able to apply learning and experience from involvement on other major schemes to inform the approach to be undertaken.

192. TfL uses a Project Management Framework called ‘Pathway’. Pathway is an integrated and consistent framework with the clear objective to provide the tools for delivery teams and their stakeholders in order for them to work effectively.

193. Working on Network Rail infrastructure also requires adherence by TfL to Network Rail’s Governance for Rail Investment Projects (GRIP) process which provides a similar check on project maturity.

194. A Risk Management Strategy has been developed for the project to ensure risk is proactively managed and mitigation measures identified and allocated. Corporate risks were identified through a series of risk workshops by the project team. These are reviewed periodically.

195. A quantified risk assessment was undertaken to ensure appropriate provision for risk has been included within the cost estimate.

Governance and Organisational Structure

196. A Project Board has been established for the BRE to sign off project decisions and provide strategic direction to the project team. The Project Board is a key decision making forum, endorsing project decisions and identifying issues for escalation to the Rail and Underground Board (RUB). The Board provides instruction and guidance to the Sponsor and Project Manager delivering the scheme and acts as the delegated project authority for change control, approving any proposed changes to scope, programme and project deliverables, including any changes that impact current or future authority.

197. The Governance structure is shown in Figure 12.

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Figure 12: BRE Internal Governance Structure

TfL Board

Finance & Policy Committee

Rail and Underground Board

Barking Riverside Extension Project Board

Project Team

Programme Linkages

198. The BRE is fully integrated with the electrification of the Gospel Oak-Barking line which is currently taking place and due to complete in 2017, and proposed changes to Barking station platforms and track layout which will allow for new Class 710 electric trains that will operate on the Gospel Oak to Barking service to be extended beyond Barking to serve Barking Riverside station.

199. The project also has synergies with the Beam Park station project – which will see a new station delivered on the Essex Thameside (Tilbury loop) line between Dagenham Dock and Rainham, which would be served by c2c services. During construction, TfL is working with Network Rail to co-ordinate track possessions and access planning to reduce the impact of construction of the two projects on the operational railway.

200. Train operator c2c are obligated as part of their Franchise Agreement with the Department for Transport to deliver additional station capacity and step free access at Barking station. TfL is working with both c2c and Network Rail to coordinate the timing of works and mitigate negative impacts on passengers.

Communications and Stakeholder Management

201. A Stakeholder Engagement Strategy has been prepared for the project, identifying key stakeholder groups and providing an outline of the type of engagement required to support the project. A full list of key stakeholders alongside the engagement that has taken place is detailed within the BRE Statement of Consultation42.

202. The Sponsor and Project Manager are responsible for engaging with technical and non-technical stakeholders such as borough officers, train operators, other infrastructure projects, statutory stakeholders politicians and other non-statutory and non-elected stakeholders.

42 BRE/A7 Statement of Consultation (March 2015)- <http://content.tfl.gov.uk/bre-a7-statement-of-consultation.pdf>

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203. Public Consultation was undertaken in Autumn 2014, Spring 2015 and Autumn 2015 in advance of TWAO submission. The autumn 2014 consultation focused on whether public were supportive in principle to an extension, with 90% of respondents backing the scheme. The Spring 2015 consultation focussed on two potential alignment options and revisited support in principle for the scheme. 90% of respondents again supported the scheme with 55% preferring the selection of alignment B. The Autumn 2015 consultation focused on the detailed route alignment as well as limits of land to be acquired or used and construction routes.

Conclusion 204. This section of the document has presented an overview of the financial, commercial

and management cases associated with the proposed BRE. This document confirms that a funding package as well as robust procurement & project management approaches are in place to aide the delivery of the BRE and enable the realisation of the benefits associated with the BRE and the Barking Riverside development area.

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5 Conclusion

205. This economic and business case demonstrates that the BRE would meet a set of regeneration and wider economic development objectives that fully align with the London Plan objectives of accommodating forecast London’s employment and population growth sustainably and the objectives of the London Riverside Opportunity Area Planning Framework.

206. There is a clear ‘case for change’. Through providing the transport infrastructure necessary to enable the sustainable development of the Barking Riverside development area, the BRE would unlock the full residential development potential of 10,800 homes within the Barking Riverside development area.

207. BRL has estimated that the 65,000 square metres of non-residential development and he 27,000 new residents of the Barking Riverside development area would support the creation of up to 2,500 new full-time equivalent direct, indirect and induced jobs in the locality.

208. The BRE would play a crucial role in supporting the sustainable growth and regeneration of the LROA – a significant location for planned growth within east London, which is considered a priority area for accommodating growth in the London Plan.

209. The costs and benefits of the BRE have been appraised according to DfT and HM Treasury guidance. The Core Case demonstrates that the BRE would deliver a benefit-cost ratio of 1.95 : 1 based on TfL costs. The Core Case captures the transport impacts and benefits associated with delivering the additional ‘dependent’ 6,800 homes. The BRE delivers £444m in benefits including wider impacts.

210. A range of sensitivity and scenario tests have been undertaken. These suggest that the economic performance of the BRE is robust under a range of reasonable scenarios.

211. The economic analysis presented does not fully capture the strategic benefits that supporting housing delivery of 6,800 additional homes will deliver to the London economy, through directly addressing the critical challenge of housing delivery that is a key economic policy priority for London.

212. A full funding package has been agreed and robust procurement and project management approaches are in place to aide the delivery of the BRE and enable the realisation of the benefits associated with the BRE and the Barking Riverside development area.

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Appendix A – Economic Appraisal Assumptions Real Cost Inflation

1. The inflation within the capital costs is based on TfL’s tender price inflation guidance from March 2014 as shown in Table 12 below.

Table 12: Capital Cost Inflation Assumptions

14/15 15/16 16/17 17/18 18/19

Tender Price Inflation (March 14) 3.2% 4.1% 5.2% 7.8% 7.9%

Operating Cost Breakdown

2. The breakdown in annual operating costs in 2015 prices43 is shown in Table 13 below.

Table 13: Operating and Maintenance Cost Assumptions (2015 prices)

Cost Item BRE Operating and Maintenance Cost Estimate (2015 prices)

Capacity and Variable Usage Charge £65,000

Fixed Charge £122,000

Rolling Stock Maintenance and Lease Costs £1,555,000

Traction Current £98,000

Staff Costs £919,000

TVM Maintenance £16,000

Station Maintenance and Cleaning £23,000

Fault Management £107,000

Utilities £16,000

Sub-Total £2,921,000

43 The operating and maintenance cost of £3.1m per annum set out in paragraph 113 is based on the costs in Table 13 inflated to 2016 prices.

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GDP Deflator and RPI Growth Assumptions

3. The GDP Deflator and RPI Growth assumptions are shown in Table 14 below. These are sourced from the DfT WebTAG Data Book December 2015.

Table 14: GDP Deflator and RPI Growth Assumptions

Year GDP Deflator Per Annum RPI Growth Per Annum

2010 3.00% 5.00% 2011 1.55% 4.80% 2012 1.83% 3.10% 2013 2.11% 2.90% 2014 1.43% 2.00% 2015 1.40% 1.20% 2016 1.70% 2.30% 2017 1.80% 3.00% 2018 1.90% 3.20% 2019 2.10% 3.20% 2020 2.20% 3.20% 2021 2.23% 3.15% 2022 2.25% 3.10% 2023 2.28% 3.05% 2024 and beyond 2.30% 3.00%

Annualisation Assumptions

4. In order to convert Railplan (3-hour AM peak, 6-hour inter-peak) and ELHAM (1-hour average AM peak and 1-hour average inter-peak) into annual forecasts, annualisation factors have been developed and presented in Table 15.

Table 15: Annualisation Factors

AM Peak and Inter-peak factors Public Transport - AM Peak 505 Public Transport - Inter-peak 502 Highway Demand - AM Peak 1,562 Highway Demand - Inter-peak 4,893 Highway Congestion - AM Peak 1,562 Highway Congestion - Inter-peak 3,365

5. The derivation of the factors is summarised below:

• The public transport annualisation factors are based on the Gospel Oak - Barking line average from London Overground’s origin destination data 2013;

• The highway annualisation factors are based on automatic traffic count (ATC) sites in the Barking Riverside area; and

• The highway congestion annualisation is lower than the highway demand annualisation as flows less than 40% of peak flow is assumed to be in free-flow in those periods and congestion is not proportionate to demand.

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Economic Appraisal Assumptions 6. The development of the economic appraisal employs a range of standard appraisal

assumptions and parameters, which are set out in Table 16 below.

Table 16: Key Economic Appraisal Assumptions

Parameter Assumption / Approach Source and Notes

Opening year 2021 Project specific assumption

Appraisal Period 60 years WebTAG/BCDM

Discount Rate 3.5% (year 1-30) 3.0% (year 31-75)

WebTAG A1.1.1

Appraisal Price Base 2015 present values Project specific assumption

GDP Deflator Standard Treasury GDP Deflator assumptions

WebTAG Data Book December 2015

Value of Time Standard TfL values of time BCDM (based on DfT WebTAG values of time and include an uprating of values to reflect the higher values of time in London)

Growth in Value of Time

DfT value of time growth WebTAG Data Book December 2015

Public transport benefit calculation

TUBA Application of TUBA as set out in TAG 1.3. Based on borough matrix outputs from Railplan

Highway transport benefit calculation

Marginal external cost unit rates per change in car km

WebTAG Data Book December 2015 / WebTAG Table 5.4.2

Demand and revenue build-up

35% - 2021 75% - 2022 90% - 2023 100% - 2024 onwards

BCDM Section 3.5

Demand, revenue and benefit profiling

Transport impacts change linearly between 2021 and 2031 Transport impacts constant post 2031 Housing Impacts from net additional development build up between 2021 and 2031 in line with Barking Riverside development area dwellings schedule

BCDM L.6.2 BCDM A.3.5 Project specific assumption

Capital cost inflation See Table 12 TfL tender price inflation guidance March 2014

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Parameter Assumption / Approach Source and Notes

Operating cost inflation

Staff cost inflation at RPI+1% p.a. for the appraisal period No real inflation for non-staff costs beyond 2015 as measured by standard inflation (GDP Deflator) See Table 14.

RPI and GDP deflator from WebTAG Data Book December 2015 Project specific assumption agreed with TfL

Revenue inflation Fare growth in line with RPI+1% p.a. to 2026, RPI p.a. thereafter

RPI and GDP deflator from WebTAG Data Book December 2015 Project specific assumption agreed with TfL

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