The relocation of public sector functions and employment from London to other parts of the country might not be a new idea, but it’s increasingly in the spotlight due to the government’s ’Places for Growth‘ programme, currently half way to its target of moving 22,000 civil service roles out of the Capital.
What effect might this have on the local areas that are the destinations for the relocated or new public sector activity? What Work Growth’s new evidence briefing on public sector relocation is intended to help policymakers – especially those at the local level – answer this question.
Understand how many new jobs will come to the area
The main local economic benefit of public sector relocation will be the new roles that the relocation brings to the local economy. But the number of new roles might not correspond to the headline number of jobs in announcements about a relocation. Politicians may include roles that are already in the area in their announcement, and some relocated positions may already be filled because the person doing the job is moving to the new location. There are different benefits from unfilled vacancies and individuals moving into the region – so it’s important to know how many of each are anticipated.
Think carefully about the effects new jobs might have – both positive and negative
Once the number of new roles is clear, two key things to consider are crowding out, and multipliers.
Crowding out occurs if the new public sector employment opportunities have a negative effect on the local private sector. Public sector pay can be higher than local private sector pay (as it is generally set centrally) and public sector conditions may also be better. Depending on the nature of the jobs being relocated, they could compete for – ‘crowd out‘ – employment in the some parts of private sector. Understanding whether this is likely to be an issue ahead of time will allow consideration of how to mitigate these risks.
Multipliers refer to the additional jobs created indirectly in a local economy as a result of the direct employment increases from the relocation. The relocation could create increased demand in local supply chains, creating additional jobs – although public sector multipliers tend to be smaller than those in the private sector because lots of public sector procurement happens at the national level. Relocations could also increase demand for local ’non-tradeable’ services, like hospitality and entertainment, if relocated workers spend their earnings locally. The number of indirect new jobs can be estimated by taking the number of relocated jobs and applying an employer multiplier figure – the evidence briefing has more details on how to do this, and some multiplier figures that can be used.
Be aware of possible wider benefits and costs
One potential downside is the possibility relocation generates house price increases, especially if lots of public sector employees relocate with their roles. Increased demand from new employees hired for open roles moving into the area will also push up demand. Generally, overall house price effects are unlikely to be large because in most cases only a relatively small number of people will be moving into the area, but there could be larger effects in some specific areas, for example in neighbourhoods closer to the site of public sector employment, or neighbourhoods known to offer good local amenities such as highly ranked schools. Increases in pressure on local public transport infrastructure and local public services may also occur in certain areas.
More positively, it’s worth considering whether the relocation could be used to help support educational aspirations or training opportunities, especially amongst young people. A heightened public sector presence in the area could help raise awareness about public sector careers, and there could be work experience or even training opportunities too. Harnessing this would likely require additional complimentary activities on the part of local authorities, in close cooperation with the relocated public sector body. Thinking carefully ahead of time about these opportunities would be important because there’s not much evidence that they will happen without these complimentary activities.
A bigger public sector presence may also help improve residents’ pride in their local area, especially where relocated government activities are perceived as being important or high profile. That said, as the evidence briefing highlights, there’s no evidence that considers whether these benefits happen in practice.
Public sector relocation generates benefits and costs in local areas. Better understanding these should allow policymakers to amplify the gains, while reducing the downside. We’ve touched on some of the key issues here, but there’s much more to consider and we hope that our new briefing helps areas consider the likely impacts and appropriate policy responses.
Read the evidence briefing and rapid evidence reviews
The evidence briefing and the accompanying rapid evidence review provide more information and evidence on these key issues and other points to think about.