Baseline and displacement in an economic impact assessment
Gross job numbers carry almost no weight in a planning balance. This is how the leakage, displacement, substitution and multiplier adjustments are built and reported so an officer can test them.
An Economic Impact Assessment earns its place in a planning submission only when it reports net additional effects rather than gross ones. That distinction is the whole argument. A scheme claiming 400 jobs on the strength of floorspace multiplied by an employment density, with no adjustment for leakage or substitution, invites a case officer to discount the benefit almost entirely. Getting from gross to net is the part of the work that decides how much weight the planning balance can carry, and in an Economic Impact Assessment displacement is usually where the reporting is thinnest.
What the assessment is measuring
Two things, in sequence. First, the change in economic activity attributable to the proposal measured against a defined baseline. Second, how much of that change is new to the study area rather than moved within it.
The baseline matters more than it appears to. A vacant industrial building is not the same baseline as an occupied one, and a site carrying an extant permission for employment floorspace is not the same as a site with none. State the baseline in terms a reviewer can test: current lawful use, current occupancy, current employment on site, and the counterfactual if consent is refused. If the honest answer is that the building would carry on declining, say that and evidence it with marketing history and a condition survey. If the land would probably come forward for something else anyway, that alternative belongs in the baseline discussion and not buried in an appendix.
Study area definition is the second structural decision. Displacement measured across a travel-to-work area gives a very different answer from displacement measured across a single ward. Use the geography the council's own economic evidence uses, normally the authority area plus the wider functional economic market area, and report both.
Gross jobs and floorspace as the starting point
Gross employment is usually derived from net internal floorspace divided by an employment density for the use in question. The method is transparent, which is its virtue. Its weakness is that densities vary widely by sector, so a single figure applied across a mixed employment scheme will be challenged, and rightly.
Three habits make this section defensible:
- Report net internal area by use rather than gross external area, and name the drawing and revision the areas came from.
- Name the density source and its publication date for every use you apply it to.
- Set the arithmetic out in a table so a reviewer can substitute a different density and see what happens to the answer.
Where the end occupier is unknown, give a range instead of a point estimate and carry that range through every later stage. A single number that survives to the conclusion without a sensitivity test reads as advocacy.
Leakage, displacement and substitution
These three adjustments are distinct and are frequently muddled.
Leakage is the share of the benefit that falls outside the study area. Jobs taken by commuters from a neighbouring authority still exist, but they do not accrue to the area the council cares about. Travel-to-work data and the site's accessibility drive the estimate.
Displacement is the share of activity that reduces output or employment elsewhere in the study area. A new convenience store draws trade from existing ones. A new warehouse may be filled by an occupier relocating from two miles away. High displacement is not fatal to a case, but pretending it is nil will cost you credibility on everything else in the report.
Substitution is narrower. It captures an occupier switching an existing activity for a subsidised or newly available one without changing total output, for instance moving staff between two of its own sites.
| Adjustment | Question it answers | Typical evidence |
|---|---|---|
| Leakage | Who captures the benefit geographically? | Travel-to-work patterns, catchment analysis, accessibility |
| Displacement | What activity in the area contracts as a result? | Vacancy rates, existing capacity, sector competition |
| Substitution | Is the occupier simply relabelling existing activity? | Occupier intentions, relocation history |
| Multiplier | What further activity follows in the supply chain? | Published composite multipliers for the sector |
Apply the adjustments in order and show each step. A reader should be able to follow gross, then net of leakage, then net of displacement, then net of substitution, and finally the multiplier effect, without reconstructing your spreadsheet.
Multiplier effects and how far to claim them
Multipliers pick up supply chain purchases and the income spent locally by people in the new jobs. They are real. They are also the easiest part of the calculation to inflate, because a composite multiplier applied at the local level can produce a number that looks unarguable and is not.
Two rules keep you honest. Use a multiplier derived for the geography you are reporting on, because a national multiplier applied to a district overstates local capture badly. And state whether the figure is a Type I multiplier covering supplier effects only or a composite figure that also includes income effects, since mixing the two double counts.
If you cannot source a sector and geography specific multiplier, report the direct net effect and describe supply chain benefits qualitatively. A described benefit with no number attached is more persuasive than a number a reviewer can dismantle.
Construction phase against operational effects
Construction employment is temporary and should never be presented as if it were permanent. Express it as person years of employment, or as an average annual figure across the build programme, and state the programme length you assumed. A 60 unit scheme built over 30 months does not create the same thing as 40 permanent jobs, and describing both as "jobs" in a summary table is the single most common criticism of these reports.
Operational effects need their own treatment. Where the scheme is residential, the operational economic case rests on household expenditure, council tax and the spending power added to local centres, all of which are more sensitive to displacement than employment floorspace is. Where it is employment led, the operational case rests on occupier intentions and market evidence.
Illustrative example. A 4,000 m² light industrial scheme on an allocated employment site, with a density assumption of 47 m² per job, produces roughly 85 gross jobs. Assume a fifth of those are taken by residents outside the authority, a third of the activity displaces capacity already available in nearby units, and a modest local multiplier applies. The net additional figure lands in the region of 45 to 55 jobs. That is the number to put in the planning balance, with the working shown, and every input in it is an assumption rather than a measurement. Treat the figures here as illustrative only.
Evidence sources that are defensible
Officers do not expect original research. They expect named, dated, public sources, and consistency with the evidence base the council itself adopted. The Homes England additionality guide sets out the leakage, displacement and substitution framework that most assessments follow, and using its terminology makes your adjustments legible. Employment densities should come from a published guide with a stated edition. Local capacity and vacancy evidence should come from the council's own employment land review or authority monitoring report, because contradicting the council's own evidence without explaining why is an avoidable fight.
Where a planning obligation or a local labour agreement is offered, describe the mechanism and leave the quantified benefit out of the headline. Obligations are secured by a section 106 agreement and belong in the obligations discussion, not in the additionality arithmetic. If the scheme is a major application that also needs a Viability Assessment, keep the two documents numerically consistent, because an inspector will read them together and any mismatch in floorspace or phasing will be noticed.
For employment led proposals, the supporting evidence usually sits alongside an Employment Land Assessment, and the supply side reasoning in that document should not contradict the demand side reasoning in yours. Our note on the supply chapter of an Employment Land Assessment sets out how that side of the evidence is normally built.
Reporting net additional impact honestly
Lead the report with the net figure, not the gross one. Put the gross figure and every adjustment in a single table on the same page, with the source for each percentage. Give a low, central and high case. Then say plainly which of your assumptions the conclusion is most sensitive to, because a reviewer will find it anyway and it is better that you name it first.
State the limitations. Employment densities are averages. Displacement percentages are judgements informed by market evidence rather than measurements. The counterfactual is unknowable. None of that weakens the case; it tells the decision maker how much weight the number can bear, which is what they actually need.
This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it.
A PlanScope draft Economic Impact Assessment sets up the baseline, the adjustment sequence and the reporting tables, and flags the inputs that need local evidence before the document is submitted. For specialist technical reports, qualified professional input may be required.
PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
What is displacement in an economic impact assessment?
Displacement is the share of the new activity that reduces output or employment elsewhere within the study area. A new retail unit drawing trade from existing shops nearby, or a warehouse filled by an occupier relocating two miles away, are both displacement. It is estimated from vacancy rates, existing capacity and sector competition, then deducted from the gross figure before any multiplier is applied.
How is leakage different from displacement?
Leakage is geographic and displacement is economic. Leakage measures the benefit that falls outside the study area, typically jobs taken by residents of a neighbouring authority. Displacement measures activity inside the area that contracts because of the proposal. Both reduce the net additional figure, but they are estimated from different evidence and should never be combined into one percentage.
Can construction jobs be counted as a planning benefit?
Yes, provided they are described accurately. Express construction employment as person years, or as an average annual figure across a stated build programme, and keep it separate from permanent operational employment in every table. Presenting temporary construction posts alongside permanent jobs under a single heading is the criticism these reports attract most often at appeal.
Which multiplier should a local assessment use?
One derived for the geography being reported on. A national multiplier applied at district level overstates how much supply chain and income spending is captured locally. State whether your figure covers supplier effects only or also includes income effects, because using a composite multiplier after separately counting induced spending double counts the same activity.
Does an Economic Impact Assessment need a qualified author?
Councils generally expect an author with economic appraisal experience, and professional review is strongly advised before submission. The document is not one where a licensed or competent person is legally required, unlike ecology or fire safety work, but the arithmetic will be tested by officers and at appeal, so the assumptions need to withstand scrutiny.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.