Local Money Multiplier And why local businesses matter far more than you think

Source: The Money Trail>>>

£

£

£

The local multiplier effect

• Looks at the impact of money that is spent and re-spent within a local economy

• Demonstrates that the more money circulates a local economy, the stronger that economy is in terms of jobs, wealth and wellbeing

• Both the New Economics Foundation and the Centre for Local Economic Studies have worked with local communities and public agencies to demonstrate the effectiveness of this approach

£

£

£

£

£ Local

economy

Practical example: Comparison between hotels and B&Bs located in Tayside • This compares not just the

initial income from hotels and B&B’s but what happens after: – How the money is re-spent

and how much of it stays in a locality vs how much leaves

– It then adds up both the initial income and the money re-spent over four rounds to give a total figure

Initial income

Re-spend over 4 rounds

Total money spent

Tay hotels bring in 70% more income

£100,000.00

£170,000.00

£-

£20,000.00

£40,000.00

£60,000.00

£80,000.00

£100,000.00

£120,000.00

£140,000.00

£160,000.00

£180,000.00

Tay B&B's Hotels

Initial Income

A ‘no brainer’ isn’t it? Chain hotels have got

to be good for Tay!

£(10,000.00)

£10,000.00

£30,000.00

£50,000.00

£70,000.00

£90,000.00

£110,000.00

£130,000.00

£150,000.00

£170,000.00

Initial Income Re-spend 1 Re-spend 2 Re-spend 3 Re-spend 4 Re-spend 5

Hotels

Initial income of 170,000 70% higher than for B&B’s

Only 20% spent locally

Monery spent and re-spent locally is looked at over 5 cycles+ initial income

Total money spend and re-spent comes to £235,875

But actually most of this money goes straight out to Head Offices

and external suppliers. Only 20% of that initial income is re-

spent in Tay

£100,000.00

£80,000.00

£40,000.00

£20,000.00

£10,000.00 £5,000.00

£(10,000.00)

£10,000.00

£30,000.00

£50,000.00

£70,000.00

£90,000.00

£110,000.00

£130,000.00

£150,000.00

£170,000.00

Initial Income Re-spend 1 Re-spend 2 Re-spend 3 Re-spend 4 Re-spend 5

Tay B&B's

Tay B&B’s re-spent 80% of Gross income on local staff, Linen, local produce and services

Gross income/ Sales

Half of 80,000

Cycle repeats

Total money spend and re-spent comes to £255,000

While the local B&B’s bring in less

initial income More of it is re-spent in

the local economy – local staff, local suppliers

and local owners spending their profits

The result is surprising

£255,000 £235,875

Tay B&B's Hotels

Totals More money stays and circulates in the local economy through Business generated by local B&B’s than hotels.

£

£

£

£

£

What applies to B&B’s applies to other local businesses

They keep jobs and wealth in the local community

£ Chain Stores don’t!

Source: The Money Trail>>>>>

Half of the turnover of an independent local

retailer goes back into the local economy

50% Leakage

50% goes back into Local economy

supplies and services outside the local area

£ Tu

rno

ver Local businesses often

have strong local supply chains, spend their profits

locally and employ local staff

…while just 5% of the turnover of a supermarket does

• Supplies

• VAT

• Rent

• Profit

• Labour

• Shareholders

Re-spend in local

community 5%

Leakage 95%

Source: Federation of Small Businesses Keep Trade Local>>>

Local retailer: 50% of money stays locally

£1

,00

0

£500 re-spent locally

£250 re-spent locally

£125 re-spent locally

£1,000 sales

After four rounds, the initial income + re-spend amounts to: £1,875

£500 leaves local economy

£250 leaves local economy £125 leaves

local economy

Supermarket: 5% of money stays locally

£1

,00

0

£50 re-spent locally

£2.50 re-spent locally

£1,000 sales

After three rounds, the initial income + re-spend amounts to: £1,052.50

£950 leaves local economy

£47.50 leaves local economy