Public sector relocation typically involves the movement of central government functions – and the employment associated with them – from one part of the country to another. In the UK, this has generally involved relocation from London to the rest of the country outside of South East England.
This briefing provides a framework to help policymakers think through the benefits and costs of public sector relocation.
Summary of findings
The main impact of public sector relocations will be an increase in employment in the destination area. Some issues to consider when assessing the local employment impacts of the relocation include:
- Focus on the number of new roles, not the headline figures.
- Establish how many roles will be unfilled and require recruitment on relocation.
- Carefully assess the risk of crowding out based on local pay and labour market conditions, and the degree of similarity between the activities and skills demands of the relocating organisations and existing local employers.
- The total number of jobs created can be estimated using a multiplier. When applying a multiplier, carefully consider the factors that will affect the size of the multiplier, including supply chain links and where workers work, live and spend.
- Compare the total number of new jobs to the size of the local labour market to assess the likely scale of the impact on the employment rate.
Public sector relocation may also have other economic impacts – on productivity, private sector demand for high skilled workers, and house prices – although in most cases these are likely to be small or confined to specific sectors or neighbourhoods.
Public sector relocations may also have other impacts on local areas.
- While it is unlikely that public sector relocation will raise local educational attainment, close cooperation with the organisations being relocated could yield benefits in terms of raising awareness amongst local students of public sector careers.
- Public sector relocation may increase pride in place amongst residents.
- Public sector relocation may create opportunities for local policymakers and other local stakeholders to have their voices heard in national policymaking processes. Creating opportunities for deeper interaction between the relocating organisations and local stakeholders may help maximise these benefits.
Costs should be assessed and compared to potential benefits. Understanding existing pressures on local public services and transport infrastructure will help clarify what additional pressure may occur because of the relocation.
Rapid evidence review
To support the drafting of the evidence briefing, we undertook a rapid evidence review. Our search identified eight evaluations. Four are evaluations of public sector relocations and four evaluated the impacts of other changes in public sector employment that are likely to have similar impacts as relocations.
All eight studies consider the effect of public sector relocations or public sector employment on private sector employment. The evaluation evidence is mixed, suggesting that whilst public sector relocations may have an impact on employment, these are not guaranteed to be positive, with a risk that public sector employment will crowd out private sector employment.
Employment effects vary across sectors, with any increases generally seen in service sector employment (especially non-tradeable services such as retail and hospitality) and any decreases in manufacturing employment. The concentration of impacts in non-tradeable services is likely to be a reason impacts appear to be highly localised.
Some of the studies also consider other economic outcomes such as population, unemployment, wages, productivity and house prices. Again, findings are mixed.
Need for more evidence
- There is a need for more evaluation evidence on the local economic impacts of public sector relocations. Evaluations should focus on understanding the impacts on employment, wages, and productivity.
- Government should commit to undertaking robust impact evaluations of future relocations and the establishment of new government agencies and bodies.
Note: This briefing replaces an earlier version published in January 2022.