On Saturday the Government launched a competition to host the new Great British Railways (GBR) headquarters. It followed hot on the heels of last week’s white paper, which set out how the Government plans to ‘level up’ the UK by 2030, including by locating public sector bodies across the UK and moving 22,000 civil servant jobs out of London.
These moves are intended to contribute to levelling up in two ways: by creating new jobs and opportunities in places outside London, and by bringing decision-making closer to communities across the country.
Our recent evidence briefing on public sector relocation focuses on the first of these aims. It is designed to help decision-makers assess the likely local economic impacts of public sector relocation, from the positive impacts on local demand, to the unintended consequences of new jobs – such as their effects on costs for other local businesses.
The four insights below give a flavour of how looking past the headline numbers can help places to understand likely impacts, make the most of new public sector jobs, and guard against unintended consequences – the full briefing provides more examples and further detail.
1. It matters who moves
One of the main ways in which public sector relocations can improve local economic outcomes is through increased spending by those newly employed in the public sector organisation. This impact will be larger if those jobs are more senior, and therefore better paid. The white paper provided figures for five departments, and for these, an average of about 1 in 10 of the jobs to be moved by 2030 will be higher paid ‘Senior Civil Service’ roles, but this is likely to vary a lot by place.
2. Impacts might be different post-pandemic
Working from home will have implications for where relocated employees will spend their money. With more flexible working practices, the impact on retail and hospitality businesses close to where the jobs are based will not be the same as it would have been before the pandemic. More opportunities to work from home might also affect where new employees decide to live and spend.
3. ‘Crowding out’ should be taken seriously
‘Crowding out’ happens when a public sector employer negatively affects local private sector firms, for example, by paying relatively high wages, making it harder for other local employers to attract workers. This will be a particular issue for places with weaker economies, because public sector wages are usually set nationally or regionally, and so tend to be more competitive in areas where wages are otherwise relatively low. In some of the studies looking at the effect of past relocations, crowding out effects were large enough to more than offset the additional jobs created through things like increased local spending.
4. New ‘clusters’ are rare
It’s easy to look at the BBC’s move to Media City in Salford, for example, and hope that new public sector employment will be the catalyst for a new employment ‘cluster’, but that’s rare. The BBC relocation partly built on an existing cluster including the BBC’s previous North-West headquarters on Oxford Road in Manchester. In contrast, the Office for National Statistics’ move to Newport in 2005 shows that even large numbers of new public sector jobs will not necessarily attract other major employers. The evidence suggests that seeking to strengthen an existing cluster is more realistic than aiming to create one from scratch.
On average, the evidence shows that these relocations directly create new public sector jobs, and create additional jobs in the private sector too – previous evaluations suggest an additional 0.25 private sector jobs for every new public sector job. But the size of the impact varies a lot, and occasionally these additional new jobs are more than offset by factors such as crowding out. That’s why, whether assessing the impact of an impending relocation or bidding for a new one such as the GBR headquarters, it’s important to assess the likely impact, and understand which local factors will make a difference to it. Our new briefing should help people to do that.