Gross to net additionality in an economic impact assessment
Gross jobs is the wrong number. Net additional employment, after deadweight, leakage, displacement and substitution, is what an officer can rely on in the planning balance.
An economic impact assessment that reports gross jobs is reporting the wrong number. The figure a planning officer or a consultee can rely on is net additional employment, which is gross jobs adjusted for leakage out of the study area, displacement of activity already there, what would have happened without the scheme, and then uplifted by a multiplier for supply chain and income effects. Each of those adjustments reduces the headline, often by half or more, and an assessment that skips them reads as advocacy.
The structure to use is the one in the Treasury Green Book and the additionality guidance that supports it. Officers recognise it, and a table following that structure is far harder to argue with than a narrative.
What additionality means in practice
Additionality is the part of the impact that would not have happened anyway. Everything in the gross figure that would have occurred elsewhere, or at another time, or without the development, is not additional.
Four adjustments do the work, applied in sequence to the gross figure:
- Deadweight, sometimes called the reference case: what would have happened on the site and in the area without the scheme. A site already consented for a similar use has a high deadweight.
- Leakage: the share of benefits going to people or firms outside the defined study area, which is why the study area has to be defined before any number is produced.
- Displacement: the share of the benefit that reduces benefit elsewhere in the study area, high for a retail or leisure use competing for the same spend, lower for an export oriented manufacturer.
- Substitution: a firm substituting one activity, site or input for another without a net gain, which matters most for relocations.
Then a multiplier is applied for supply linkage and income effects. The published guidance sets out default low, medium and high ratios for each adjustment and composite multipliers at local and regional level. Use the published defaults, state which you used, and justify any departure with evidence rather than judgement.
Gross jobs and how they are estimated
Gross employment comes from floorspace and employment density, not from the applicant's business plan unless there is a named occupier.
The standard source is the employment density guidance published for Homes England, which gives floorspace per full time equivalent by use. General office space sits at the dense end, industrial space in the middle, and large scale warehousing at the sparse end, where a single building can be measured in tens of square metres per job. Take the figures from the current edition and state the area basis, because net internal area and gross internal area give materially different answers for the same building.
Three refinements make the estimate credible. Apply a vacancy or occupancy assumption rather than assuming every square metre is occupied on day one. Convert full time equivalents to headcount only if the policy requires it, and say which you are reporting. And for a scheme with a named occupier and an actual staffing plan, use the plan and say so, with the density calculation as a cross check.
Where the scheme involves employment land allocation rather than a specific building, this is work for an Employment Land Assessment rather than an impact assessment, and the two documents answer different questions.
Construction employment in person years
Construction jobs are temporary, so expressing them as jobs overstates them. The convention is person years of employment, or full time equivalent years, which can then be annualised across the build programme.
Derive the figure from construction output per worker published by the Office for National Statistics, applied to the construction cost, rather than from a rule of thumb about jobs per million pounds. Then state the build programme, so a reader can see that 200 person years over a four year programme is around 50 people on site at any time rather than 200 new jobs.
Say plainly that these are temporary. An assessment that adds construction person years to permanent full time equivalents and reports a single total is the most common error in the field, and a consultee who spots it discounts the whole document.
Leakage, displacement and the study area
Define the study area first, in a sentence, with a map. Everything else depends on it.
A travel to work area, a local authority boundary and a five mile radius give different leakage results for the same scheme, and choosing the largest area to minimise leakage is transparent to anyone reading carefully. Pick the area that matches the policy question the assessment is answering, usually the authority area for a local plan policy and a wider functional area for a strategic allocation.
Displacement needs a sector judgement. A distribution unit serving a national network displaces little locally. A convenience store, a gym or a café displaces a great deal, because the spend is largely transferred from existing operators in the same catchment. Where retail is involved the displacement argument overlaps with the sequential and impact tests, and the evidence discipline in our note on retail sequential test evidence applies.
| Adjustment | What it answers | Where it bites hardest |
|---|---|---|
| Deadweight | What happens without the scheme | Sites with an existing consent or occupier |
| Leakage | Who outside the area gets the benefit | Schemes near a boundary with a larger neighbouring centre |
| Displacement | What is taken from others inside the area | Retail, leisure, convenience and food uses |
| Substitution | Whether the firm simply moved activity | Relocations and consolidations |
| Multiplier | Supply chain and wage spending effects | Manufacturing and construction heavy schemes |
Gross value added and its limits
Gross value added per worker, taken from national or regional accounts for the relevant sector, converts net additional jobs into an annual output figure. It is useful because it is comparable between schemes and because decision makers understand it.
Its limits deserve a sentence in the assessment. Gross value added measures output, not welfare, and a scheme generating high output with few local jobs can look better on this measure than a scheme employing more local people at lower productivity. It also carries the sectoral assumption all the way through, so a change of occupier type changes the result.
Report a range rather than a point estimate, with the low case using high leakage and displacement ratios and the high case using low ones. A single number implies a precision the method does not have.
Presenting figures that survive scrutiny
One table, built in the order of the adjustments, with the source for every row. That is the whole presentational trick.
- Gross jobs, with floorspace, area basis, density source and occupancy assumption.
- Deadweight adjustment, with the reference case described.
- Leakage adjustment, with the study area and the ratio source.
- Displacement adjustment, with the sector reasoning.
- Net direct jobs, then the multiplier and the net additional total.
- Construction employment in person years, reported separately and never added to the permanent total.
- Gross value added as a range, with the sector and the year of the data stated.
Then a short sensitivity section showing what happens at the high and low ratios. An officer reading a planning balance wants to know whether the economic benefit survives pessimistic assumptions, because that is the weight they can safely attach to it in the report.
An Economic Impact Assessment drafted on PlanScope gives you that structure and the policy framing, with the site specific inputs flagged where they are missing. Drafts are AI-assisted and should be reviewed before submission, and we do not guarantee planning approval. Where the scheme also raises social and health effects, the companion approach in our note on health determinants inside a health impact assessment sets out the parallel method.
This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it.
Frequently asked questions
What is additionality in an economic impact assessment?
The share of the impact that would not have happened without the scheme. Gross figures are adjusted for deadweight, which is what would have occurred anyway, leakage outside the study area, displacement of activity already inside it, and substitution within a firm, then uplifted by a multiplier for supply chain and income effects.
How are gross jobs estimated from floorspace?
By applying employment densities to the floorspace, using the employment density guidance published for Homes England. State the area basis, because net internal and gross internal areas give different answers, and apply an occupancy assumption rather than assuming full occupation from day one. Where there is a named occupier with a staffing plan, use the plan.
Why are construction jobs reported in person years?
Because they are temporary. Expressing them as jobs implies permanent employment. Person years, derived from construction output per worker published by the Office for National Statistics applied to the construction cost, can be annualised across the build programme so a reader can see how many people are on site at one time.
How is the study area chosen?
It should match the policy question. An authority area suits a local plan policy, and a wider functional area such as a travel to work area suits a strategic allocation. Define it with a map before producing any figures, because leakage is measured against it, and choosing a large area purely to reduce leakage is obvious to a careful reader.
Which uses have high displacement?
Retail, leisure, convenience and food and drink uses, because the spend they capture is largely transferred from existing operators in the same catchment. Export oriented manufacturing and national distribution displace far less locally. Where retail is involved the displacement reasoning overlaps with the sequential and impact tests in national policy.
Should the assessment report a single figure?
No. Report a range, with the low case using high leakage and displacement ratios and the high case using low ones, and show a short sensitivity analysis. A decision maker needs to know whether the economic benefit survives pessimistic assumptions, because that determines the weight it can carry in the planning balance.
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.