QMark: EIA and economic impact assessment

16th February 2017

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  • Business & Industry ,
  • Built environment ,
  • Planning ,
  • Management


Rachel Leck

Matthew Kinghan, associate director of Nexus Planning, considers issues that can arise from varying methodology on economic impact assessment in EIA.

The Environmental Impact Assessment (EIA) process as a whole is backed up by a strong regulatory framework, with clear guidance on when an impact assessment is required. The scoping process typically identifies the need for an assessment of socioeconomic impacts with receptors including health, education, employment, population, deprivation and housing.

Within the context of measuring potential socioeconomic impacts, there is some industry variation in the methodology employed, most specifically in terms of the employment or economic impact. This partly reflects the lack of clear framework or guidance as to how this should be undertaken.

Considerable differences can arise in outcome and impact as a result of differing approaches and levels of detail employed. This highlights a weakness in the process.

Outside the planning framework, there is guidance for determining economic impact, which provides the basis for improved EIA-specific regulation and guidance.

Current guidance

Although there is no clear regulatory framework to structure socio-economic impact within EIA, a range of government publications have been produced that tackle the measurement of economic impact.

The Treasury’s Green Book guidance for central government provides a long-term and analytically robust approach to appraisal and evaluation. Other useful sources include the 2010 Office for National Statistics Measuring the Economic Impact of an Intervention on an Investment; and the Homes and Communities Agency (HCA) Additionality Guide 2014, which takes on a more development-focused context and provides guidance figures for different development uses.

While these documents have a greater focus on evaluating the effectiveness of public sector interventions, they also provide the key principles for undertaking economic impact work for private investments and developments. Even so, there may be areas which require further consideration, for example referencing or modelling the economic benefits of residential spend, particularly in relation to residential schemes.

Discrepancy issues

An inconsistent approach to measuring economic impact can lead to potentially misleading reports of the effect of developments on local economies. Key factors that should be considered in any assessment are the base scenario (deadweight), multiplier effects, displacement, leakage and persistence.

Most assessments, through acknowledging the baseline and operational phases of development, provide a reasonable picture of on-site employment change, accounting for a discount of the baseline position, which is particularly relevant for brownfield or town centre schemes.

However it is other factors which tend to be omitted. Economic multipliers can be applied for indirect (supply chain linkages) and induced (spend of workers) effects. This varies across industries, but as an example the HCA additionality guide provides a ‘ready reckoner’ combined induced and indirect figure of 1.1 at the local level, and 1.5 at the regional level. Therefore if the net increase in onsite jobs of a development is 100, we might expect 10 further jobs in the local area and 50 in the wider region.

Displacement is another often overlooked area and one which has a range of implications. In the construction process, a development proposal may lead to a draw on labour which prevents other schemes from progressing, thus limiting economic growth. Alternatively, growth in business space may result in incoming firms which are in fact local relocations, resulting in little net economic benefit.

Accounting for leakage is also important, as EIAs tend to set both immediate and wider zones of influence. Due to travel to work or local labour market patterns, jobs created on site do not automatically result in local economic benefit, thus reducing effects.

Taking these factors into account as examples of possible omissions, impact measurements could be inaccurate to a factor of 50% or greater. Even accounting for and accepting a level of judgment involved in assumptions, a lack of consistency in methodology can create misleading outcomes.


The lack of clear direction within EIA regulations regarding the socio-economic impact assessment of a development is a barrier to consistent and adequate measurement of outcomes, particularly in terms of economic impact. Taking into account the increasing weight given to the economic impact of development, emerging most notably from the National Planning Policy Framework, it is worrying that there is room for such inconsistency.

Given that economic guidance does exist, albeit largely outside of the planning framework, there are opportunities to enhance EIA-specific regulation and guidance to improve the consistency and accuracy of assessment.


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