Cities need to be supported by enough resources -- that includes enough water, proximity to arable land, hospitable climate, and ease of access. The 2% figure you quoted can be a bit misleading because we can never develop 100% of the land into houses.
But as Japan/China/Korea has shown, it is probably still very possible for England to become much denser than it currently is. It would require all the residents to change their lifestyles to match though.