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Evidence briefing: Assessing the impacts of public sector relocation on local economies

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In 2020, the Government committed to moving 22,000 civil service jobs out of London over ten years. Among other moves, they have announced a new “Treasury North” campus in Darlington to house 400 relocated Treasury staff and 350 from other departments; at least 500 Department of Levelling Up jobs across the West Midlands, with a headquarters in Wolverhampton; and a new government hub at Fletton Quays in Peterborough for more than 1,000 civil servants.

This briefing aims to help decision-makers assess the likely impact of public sector relocation on an area. This involves using multipliers to estimate likely employment impacts, and drawing on economic theory, available evidence, and contextual knowledge to assess the likely impact on productivity, skills, wages, and house prices

Summary of findings

Public sector relocations directly create new jobs in the local area.

They can also indirectly generate local jobs through increased demand for local goods and services from the public sector employer or its new employees; or by creating or strengthening ‘clusters’ of firms. In general:

  • The impact on local supply chains is likely to be limited unless the public sector organisation is unusual in the amount it procures locally.
  • Public sector relocation is unlikely to create a new cluster from scratch. Seeking to strengthen an existing cluster is more realistic.
  • Increased local demand for goods and services from people newly employed is the most likely way in which a relocation will indirectly create jobs. The size of the impact will depend on the number of additional jobs (created directly and indirectly); how well those jobs are paid; and what percentage of income new employees spend locally.

Public sector relocations can also have some negative impacts on jobs.

‘Displacement’ occurs when new jobs are offset (wholly or partially) by job losses in other organisations. For example, a new supermarket can create jobs but put smaller shops out of business. For public sector jobs, local displacement is rare, because public sector organisations are not usually competing directly with one another.

‘Crowding out’ occurs when a public sector employer negatively affects local private sector firms, for example, by paying high wages relative to other local employers, making it harder for them to attract workers. This can be a particular problem in places with weaker economies. Some crowding out may occur, and in a worst-case scenario it could more than offset the additional new jobs created through factors such as increased local demand.

The local employment ‘multiplier’ is a figure which captures the overall impact of a relocation on the number of local jobs, accounting for the positive and negative impacts discussed above. The multiplier will be different in each case,but evidence suggests that for public sector relocation, a good starting point is that, on average, each new public sector job could create between 0.25 and 0.37 additional private sector jobs.

An increase in local jobs can affect house prices by increasing demand. Public sector relocations are rarely of sufficient scale to drive up house prices across an area, but there might be increases in particular neighbourhoods. This would benefit home-owners, but renters could be priced out.

The scale of most public sector relocations is small relative to the overall local economy. This means that the effect of a relocation on local productivity, or the demand for and supply of skilled workers, is likely to be small, unless it creates or significantly strengthens a cluster.

Additional interventions may be required to ensure public sector relocation benefits existing residents as well as people who move to the area to work. For example, training programmes to help people access new employment opportunities, or increased capacity for local public services to counter increased demand from new residents. 

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Evidence Briefing: Assessing the impacts of public sector relocation on local economies