Economic impact assessments and how councils use them

An economic impact assessment in planning converts a development proposal into jobs, gross value added and local spend, and its usefulness depends almost entirely on whether those figures are net or gross. Councils use it in the planning balance, to justify weight given to economic benefits where a scheme conflicts with policy, and to shape employment and training obligations. A document reporting gross construction jobs with no source for the ratio behind them adds nothing an officer can rely on. One that nets off deadweight, displacement and leakage, and says what is secured by obligation, can carry real weight.

What the assessment is expected to demonstrate

At its simplest the document answers four questions. How much economic activity does the proposal generate, where does it land geographically, how much of it is genuinely additional, and what part of it can be secured.

The last question is the one applicants skip. Section 70(2) of the Town and Country Planning Act 1990 requires the decision maker to have regard to local finance considerations so far as they are material, which brings business rates and similar effects into the frame. Whether a benefit attracts weight, and how much, is a judgement for the decision maker, and a benefit nobody can guarantee will attract less than one written into a planning obligation.

So the assessment should read as an evidence document rather than as advocacy. Officers see a great many that read the other way.

Construction phase and operational phase

The two phases behave differently and should be reported separately.

Construction effects are temporary and are conventionally expressed in person years of employment rather than jobs, derived from construction spend and a published spend per job ratio. A scheme that supports 200 person years over a three year build is not creating 200 permanent jobs, and describing it that way is the single most common overstatement in these documents.

Operational effects are ongoing. For employment floorspace they are usually estimated from floorspace using published employment density guidance, which gives a floorspace per job figure by use type. For residential schemes the operational effects are household expenditure, council tax and the indirect support that spending gives to local businesses.

State the source and the vintage of every ratio in the text. A density figure taken from national guidance that predates a change in how the sector uses space is arguable, and it is better to acknowledge that than to have a consultee point it out.

Additionality, displacement and leakage

This is where a credible assessment separates itself. Four adjustments convert gross effects into net additional ones, and all four should be applied explicitly with the assumed percentages stated.

1. Deadweight. What would have happened anyway, including on the reference case where the site is developed by someone else or an alternative permitted scheme proceeds.
2. Leakage. The share of benefits accruing to people or businesses outside the study area, which depends on how you define that area.
3. Displacement. Activity that moves from elsewhere within the study area rather than being created, which is the adjustment that matters most for retail and for relocating occupiers.
4. Multipliers. Indirect supply chain and induced income effects, applied after the other three and not double counted with them.

Define the study area first, because every one of those adjustments depends on it. A district level assessment and a regional one produce very different leakage and displacement figures for the same scheme, and choosing the wider area to reduce displacement is a transparent tactic.

Where the occupier is known and is relocating from within the same authority, say so and net it off. Where the occupier is unknown because the permission would allow any use within a class, the honest position is a range rather than a point estimate.

Obligations that follow the numbers

Once a council accepts an employment case, it usually wants part of it secured. The mechanisms are familiar: a local employment and training agreement, targeted recruitment from defined wards, a stated number of apprenticeships or work placements, a construction skills contribution where a scheme cannot deliver placements directly, and reporting obligations with a monitoring fee.

Any obligation has to meet the statutory tests: necessary to make the development acceptable, directly related to the development, and fairly and reasonably related in scale and kind. An employment obligation on a small scheme often fails the first test, and a contribution calculated from a published formula in an adopted document is easier to defend than one negotiated from scratch.

Authorities also report on what they have collected and spent, and the article on infrastructure funding statements explains where to find that record. It is worth reading before you agree a contribution, because the authority's own statement shows how similar obligations have been used.

Where the assessment carries real weight

Four situations, in rough order of how much difference it makes.

Where the scheme conflicts with the development plan and the case rests on benefits outweighing harm. Green Belt cases seeking very special circumstances, proposals in protected landscapes, and departures from an allocation all fall here, and a quantified economic case is part of the argument rather than decoration.

Where the policy test is expressly economic. Loss of employment land, where an employment land assessment tests whether the site remains suitable and deliverable for its allocated use. Retail impact, where economic effects sit alongside the vitality question.

Where a scheme is large enough that the local authority's economic development team becomes a consultee in practice, and its response shapes the officer report.

Where viability is contested, since the economic case and the viability assessment have to tell a consistent story. An applicant arguing that the scheme cannot afford affordable housing while also claiming substantial economic returns invites an obvious question.

Where it carries very little

On householder and small residential applications it is noise. On a scheme whose benefits are entirely gross, it is discounted. Where the claimed jobs cannot be tied to the permission because the use class allows any occupier, an officer will treat them as speculative.

And where the assessment contradicts the applicant's own documents, it damages the case. Consistency across the pack matters more than the size of any single number.

An illustrative example: a 4,000 m² light industrial scheme on an allocated employment site. The assessment estimated operational employment from published density guidance, deducted 30 per cent for displacement on the basis that two thirds of likely occupiers would relocate from within the district, applied a leakage adjustment for the travel to work area, and reported construction effects in person years across a two year build. The net figure was substantially smaller than the gross one, and the officer report adopted it. A gross figure three times larger would have been given no weight at all.

Methods that survive scrutiny

Six habits separate an economic impact assessment that helps from one that is ignored.

Define the study area and justify it. Source every ratio and give its date. Report gross and net side by side so the adjustments are visible. Sensitivity test the two or three assumptions that move the answer most. Separate temporary construction effects from permanent operational ones throughout. And state clearly which benefits are capable of being secured and by what mechanism.

One honest uncertainty. There is no standard methodology mandated for these assessments in the planning system, so the approach varies between practitioners and between authorities. That makes transparency about method more important than precision in the output, because a reader who can follow your reasoning can accept your conclusion even where they would have chosen different assumptions.

This is general guidance rather than legal advice. Check the position with your local planning authority or a qualified professional before relying on it.

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