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Community Wealth Building for local growth and wider outcomes

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Last Wednesday we held the third event in our ‘thinking through’ series, this time looking at Community Wealth Building (CWB). This series is part of a project that aims to understand the evidence on local economic impacts of interventions not considered as ‘economic’, as well as approaches such as CWB which are economic but not part of the traditional local growth toolkit.

CWB is an approach to local economic development which focuses on retaining public spending and economic activity in a local area. It is characterised by five strands, and Wednesday’s session looked at three of those – supporting SMEs and non-profits, increasing local investment, and promoting fair employment. The other two strands – local procurement and utilising local assets – are covered by our previous event on public procurement and future event on social capital.

You can watch a recording of the event here:

Assessing CWB’s local economic impacts

One strand of CWB aims to support local SMEs and non-profits (like social enterprises and cooperatives) to create local jobs. This support can have a positive effect on local employment, but generating these benefits is not necessarily straightforward. At least in the short term, any positive impacts will probably be small relative to total employment in the area. Additionally, support for businesses in the non-tradeable sector – those providing goods or services which can’t easily be sold in another location, for example retail or hospitality – can result in displacement (increases in activity in supported businesses coming at the expense of similar non-supported local businesses) and lower employment multipliers (the additional local jobs created because of the jobs directly tied to the business).

Another strand of CWB focuses on increasing local investment by supporting community banks and credit unions, and through using local government pension schemes to invest locally. Supporting community banks may be effective, however the limited evidence available is mixed on whether these institutions are actually more likely to lend to small and local businesses. When they do, interest rates may be higher than from larger providers. For pension schemes, it is important to remember that local investments may not result in returns as strong as those from other options, which could have implications for the health of the scheme.

When focusing on fair employment, one CWB approach involves encouraging local employers to pay the real Living Wage. When thinking through the impacts of this, it is important to think both about how many workers are likely to be affected, and what level of uplift in wages they will see. Additional pay for workers on the lowest wages is more likely to be spent than saved, meaning it is more likely to contribute to multiplier effects locally. Not all workers will necessarily live in the area in question though, so some of these benefits may not be felt there. If local employers are working with a fixed budget, wage uplifts could potentially lead to fewer full-time jobs.

The evidence on wider benefits

In principle, supporting local businesses may have benefits for pride in a local community, where this leads to a stronger and more prominent local business base. Encouraging local businesses to sponsor local events or sports teams, and to take part in local community activities could enhance this. While these effects may be important in and of themselves, tracing them through to impacts on the local economy is always going to be difficult.

What else do we need to think about?

Both our local government speakers emphasised the importance of monitoring and collecting good data as part of their programmes – a fair employment charter, and a fund for supporting local businesses.

As far as possible, having a strong picture of the initial baseline, and monitoring against the key relevant indicators, will be important ways of keeping track of the project. If possible, tracking wider indicators over the same period will also help you see any broader benefits. For example, one of our speakers explained how they are keeping track of apprenticeships and local supply chains as well as core business outcomes.

Ideally, you could also monitor a comparison group to allow for an impact evaluation to fully assess the effects of the project.

Thanks to our speakers Colette Kennedy, Senior Fair Employment Charter Officer, Liverpool City Region CA, and David Ayton-Hill, Assistant Director for Communities, Warwickshire County Council. The full briefing and rapid evidence review on Community Wealth Building will be published later in Spring.

If you missed them, you can read our blogs about the previous events in this series on public procurement, and public spaces. Sign up to our newsletter for updates on publication dates of all our wider interventions briefings, as well as our other work.