I was wondering if by fitting sprinklers I can convert a loft into a habitable room and access it through the open plan leaving/kitchen area which is located on the first floor of a purpose built 1920's two storey block.

The floor of the loft would be the only floor above 4.5 m and the open plan leaving/kitchen area below has a direct access to an external stair on the first floor and a door leading to a protected stair going down to the entrance on the ground floor.

I have been told that by fitting sprinklers I would not need to compartmentalise the escape route from the loft, could you advise me on this?

It does appear your proposal does not meet the requirement of Approve Documented B Fire Safety but I would suggest you contact your local building control officer and put you proposals forward explaining you would consider installing a residential sprinkler as a compromise which may be accepted.