@hmetcalfe

Version 2 with 7,264 polygons (#MSOA #Census small areas in #England and #Wales) and 1,531,286 points (active #postcodes in EW)

it's a loop over all MSOAs, considering only points and neighbors (using #rstats {spdep}) of one MSOA at a time, then binding

steadiliy below 3GB RAM, it's less than a second for most, with the occasional longer, in 10 mins it got beyond 1K polygons

with so many points it's possible there'll be some probs with intersections, to be dealt with afterwards