Transcript FCERM and the wider economy

Joint Defra/EA FCERM R&D programme - project FD2662
Flood and coastal erosion risk management and the local
economy
Scoping note on the national implications of local economic
impacts
March 2014
© Frontier Economics Ltd, London.
Purpose and content of this report
Purpose of this report
economy:
The risk of flooding in the UK is of national concern. About six million UK
properties (or one in six) are currently exposed to some degree of flood
risk, with about 560,000 properties in England and Wales at significant
likelihood of tidal or river flooding. This is projected to rise to between
800,000 and 2.1 million properties by the 2050s (HR Wallingford et al,
2012).
 In 2013, there were 4.98million million businesses in the UK , 95% of
which employed 9 people or less (BIS, Business Population
Estimates, 2013 )
Public funding decisions for flood risk management are currently made
in the context of increasing fiscal constraints and the imperative of
supporting balanced economic growth across the country. To inform
those decisions, evidence on the costs and benefits of flood risk
management to society and the national economy is needed.
Environment Agency flood and coastal erosion risk management
appraisal guidance (FCERM-AG) describes how impacts on society
(‘welfare’) can be assessed, including social, environmental and
economic impacts.
Building on FCERM-AG, there are likely to be additional impacts on the
local economy over time that arise from business decisions in response
to flood risk. In some cases, these impacts could also affect the national
economy. This report aims to provide Defra and the Environment
Agency with a deeper understanding of those additional impacts and in
particular, the conditions under which the national economy may be
affected.
The appraisal issues discussed in this report are consistent with both
the FCERM-AG, and central government guidance on appraisal which is
HM Treasury’s Green Book.
The economic context
Businesses play a fundamental role in driving the strength and growth of
the national economy. Some facts and figures illustrate the magnitude of
business activity and the importance of foreign investors to our
 Together, all businesses in the UK generated £3,500 billion and
employed 31.3 million people (BIS, Business Population Estimates,
2013 )
 Around 1% of businesses in the UK were foreign owned in 2011 but
they contributed around 28% of UK GVA (ONS, Business ownership
in the UK 2011)
 In 2012/13, Foreign Direct Investment generated 1,559 new projects
which brought 60,000 new jobs to the UK economy and safeguarded
110,000 existing jobs (UKTI Inward Investment Annual Report
2012/13)
Protecting the economic activity of these businesses against flood risk
would be expected to contribute to growth.
Content and structure of this report
To build an initial understanding about the potential impacts on the wider
national economy of FCERM, this report sets out:
 A brief reminder of the government policy context for FCERM
 A framework for considering how FCERM can impact on the local
economy (the ‘transmission mechanism’)
 The conditions under which impacts on the local economy* could lead
to impacts on the national economy, with some worked illustrations;
and,
 Recommendations for research to provide evidence to assess the
impacts of flood risk on the national economy.
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* Impacts on the local economy are described in full in the accompanying TOOLKIT report .
Brief reminder of the government policy context for FCERM
What government action and policies are currently in place?
economic growth
The Government is currently investing significant sums in FCERM activity
and taking policy action to address current market failures, for example in
relation to flood insurance. FCERM-AG allows us to assess the impacts
on society (or national ‘welfare’) of FCERM interventions. But there is a
growing interest in understanding the impacts of interventions on the
national economy more specifically.
 In November 2013, the government published its response to the
consultation on Flood Re which seeks to secure the availability and
affordability of flood insurance for households. Flood Re would be
funded by a levy paid into by all UK household insurers. This fund
could be used to pay claims for people in high-flood-risk homes (Defra,
2013).
The notion of the impacts on the national economy (or Gross Value
Added, as it is measured) differs from the impacts on national welfare
because it captures only those factors that impact on economic activity
(value added in producing products or services) and productivity (how
efficiently resources are used to generate those products and services).
National welfare is a much broader concept covering all economic, social
and environmental impacts, including those that cannot be valued with
market prices.
The scale of these activities demonstrates the importance of FCERM to
the nation. It also highlights the need to understand the impacts of
FCERM interventions on the national economy to inform effective national
government policy.
The next section explains how FCERM can impact local economic activity.
The report then considers when impacts on the national economy are
likely.
Government policy addresses both economic and welfare issues at the
national level. The following outlines some examples of key FCERMrelated activities:
 More than £3.2 billion will be invested by government in flood and
coastal erosion risk management over the five years April 2010 to
March 2015 (Defra, 2014)
 Partnership funding was introduced in 2011 and is intended to attract
complementary investment so that government funds can go further
(Defra, 2011)
 More widely, the National Infrastructure Plan 2013 (HMT, 2013)
incorporated an estimate of the spending on flood defences in the
pipeline to be £3,959 million (42 projects and 25 programmes)
 In November 2012, 9 areas were selected for sharing £60 million
FCERM funding due to their potential to unlock opportunities for
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A framework for considering how flood risk can impact on economic activity
What do we mean by economic activity?
Economic activity generally comprises two components, both of which
can be affected by flood risk. First, the amount of value added to the
economy when goods and services are produced; and, second,
productivity; this is amount of goods or services that can be produced
per unit of input.
In the accompanying “Toolkit” report for assessing the impacts of
FCERM on the local economy, the unit of measurement to assess these
impacts is changes to the value added by businesses and their
employees (Gross Value Added or GVA). This is a standard measure of
the ‘size’ of economic activity.
How can flood risk impact on economic activity?
The Environment Agency currently has detailed guidance for appraising
the impacts on national welfare of FCERM interventions. This includes
an assessment of economic, environmental and social impacts.
Several impacts on the economy are assessed within that framework.
These include the changes in flood risk brought about by FCERM on
expected:
 Damage to commercial property
 Transport disruption (but only disruption to business and freight travel
are relevant for GVA assessment purposes)
 Lost agricultural output and yield
 Damage to utilities infrastructure
These lower GVA because they require resources to be used for repair,
replacement or substitution that could otherwise have been used for
productive purposes. These impacts are assessed assuming
businesses and other agents in the economy do not change their
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behaviour over time in response to the flood risk i.e. their business
location and operations remain as they are. We therefore call these
‘first-round’ impacts on the economy.
This report adds to this approach by considering the impacts of a
change in flood risk because of FCERM on businesses over time. For
example, when faced with a change in the risk of flooding, a business
may change its behaviour or investment decisions. This can affect GVA.
We call these impacts ‘dynamic’ impacts on the economy. We
assume they depend on adaptive capacity and location dependence of
businesses (see Annex 1 and 2) and include:
1. Business continuity and sector composition impacts: FCERM
can lower disruption to businesses, plus it can help to avoid a loss of
economic value-added where businesses would otherwise move or shut
down and are not replaced.
2. Unlocked investment: FCERM may facilitate new investment
opportunities to be taken, such as new site developments.
3. Spillover impacts: businesses may depend on each other or other
infrastructure to improve their efficiency, so FCERM can help to keep
businesses in their preferred location and protect the public
infrastructure on which they rely.
The sum of first-round and dynamic impacts provides an estimate of the
overall impact of FCERM on economic activity. Figure 1 shows what we
call ‘the transmission mechanism’ i.e. the channels through which firstround impacts feed through into impacts on business responses and
ultimately, GVA.
Further detail can be found in the accompanying “Toolkit” report for
assessing the impacts of FCERM on the local economy.
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Figure 1 The framework: the transmission mechanism
The ‘transmission mechanism’ shows how lowering the risk of flooding through FCERM can feed through into impacts on the local
economy. The benefits of FCERM are assessed by comparing the case with the intervention (the ‘do something’) with the case without the
intervention (the ‘do nothing’).
First round
impacts
Business
characteristics
Commercial
property
damage
Business and
freight travel
disruption
Lost
agricultural
output
Business
responses
Stay + Do
Nothing
Adaptive
Capacity
Location
Dependence
Move/shut
down
Stay + Adapt
Investment
Damage to
utilities
infrastructure
Dynamic impacts
Business continuity (avoided
disruption), and sector composition
(minimising the number of firms that
close or move)
No change to GVA – optimal
adaptation investment offers
comparable returns to other
investments made
“Unlocked investment”: New
developments, business investment +
FDI
Impacts on
GVA
First round
impacts
+
Dynamic
impacts
Total impact
on GVA
Spillover impacts may arise if
efficiency gains from co-location,
shared infrastructure or access to
markets are affected
FCERM lowers
these impacts
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These vary by
sector, size of
business
Response depends on
business characteristics
All of these can be assessed
Impacts on GVA
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Conditions under which an impact on the national economy may be likely
Start with the impacts on the local economy
To assess the impacts on the national economy of FCERM interventions,
we begin by first considering what the impacts are on the local economy.
There are some impacts that will be local only, and not affect the national
economy. Whether an impact on the national economy is likely depends
on a series of considerations as outlined in government’s appraisal
guidance, the HMT Green Book. These are:
 Leakage – the extent to which the change in flood risk impacts on
those not in the flood risk area. This refers to how the impacts
cascade across other areas, for example through the supply chain.
FCERM could therefore not only benefit those in the local economy,
but those businesses in other areas too.
 Displacement or substitution – for example, if without FCERM, a
disruption to economic activity in one area because of flooding is
displaced to another less productive area, then there would be a
negative impact on the national economy from lost productivity.
FCERM could therefore help to retain businesses in their preferred,
and more productive, location. This would be a national benefit.
Then consider the conditions for a national economy impact
The range of conditions under which an impact on the local economy of
FCERM is also an impact on the national economy are now considered.
These are:
 All reductions in damage to commercial property, assets,
inventories and infrastructure, along with lost travel time to
business and freight as a result of re-routing or delays are both a
local and a national economy benefit because resources are no longer
diverted from productive activity to pay for repair and replacement.
The degree of such avoided damage is likely to be higher in locations
in which the density of businesses with low adaptive capacity is
greater (because they are not able to prepare and respond to flood
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risk effectively).
 Foreign Direct Investment: FCERM can increase the attractiveness
of an area to overseas investors because by lowering flood risk, it
makes sites more viable. Where the investor would otherwise have
invested in another country (instead of elsewhere in the UK) then
attracting this investment would be a national benefit.
 If capacity to absorb economic activity elsewhere in the economy
is constrained, then without FCERM there would have been a
national loss of economic activity in the event of a flood. FCERM
which lowers flood risk would therefore provide a national benefit by
minimising these impacts.
 Agglomeration impacts: if flood risk leads to businesses moving
away from their preferred, most productive, location without FCERM,
their productivity may decline. This would be a cost to the national
economy because efficiency gains from co-location (‘agglomeration’)
would be lost. FCERM which minimises (or prevents) businesses
moving to less preferred locations would be a national benefit.
 Supply chains: FCERM is able to minimise interruptions across a
widespread supply chain. The uniqueness of such long and complex
chains implies a national benefit.
 Infrastructure dependency: if business efficiency is dependent on
the use of particular infrastructure (transport, communications, water,
communications) then there are likely to be national gains from
minimising disruptions to those infrastructure services through
FCERM.
 FCERM can facilitate unlocked investment in new site
developments. By lowering flood risk, in some cases this can justify
planning permission where it may not have otherwise been possible. If
that investment in new developments would not have occurred
elsewhere in the country, this would be a national benefit.
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Examples of when an impact on the national economy may be likely
The table below highlights where we would expect FCERM to benefit the national economy. Further research and evidence would be
needed to add more detail and corroborate these hypotheses.
Conditions for increased
likelihood of national
economy impact
Example sectors/businesses
Notes
Avoided damage to commercial
property
Any commercial property
These are assessed within FCERM-AG
Incentives for Foreign Direct
Investment
Globally competitive industries such as
pharmaceuticals, motor manufacturing, food
manufacturing, insurance
Foreign owned businesses contribute about 28% of UK GVA
so they are an important part of the UK economy. They are
typically large multinationals
Lowering flood risk where there is
limited availability of substitutes in
the UK or constrained spare
capacity
Specialist chemicals; specialist pharmaceuticals;
niche technology companies; some agricultural
products
Where substitutes are not available in the UK, imports may
be needed to meet demand. UK capability may be stretched
and not able to meet demand (and may cause price inflation)
Supporting agglomerations/
technology hubs by lowering flood
risk
Some chemical companies, financial
services/banking, technology companies (e.g.
Cambridge technology cluster), science facilities all
tend to cluster
Certain industries tend to gain more from clustering –
FCERM which facilitates keeping those clusters in tact could
enhance productivity gains
Protecting long or complex supply
chains from flood risk
Motor manufacturing; computer hardware; hi-tech
manufacturing
These rely on long or complex supply chains with few
alternative input sources
Lowering flood risk where there
are interdependencies
Manufacturing companies reliant on just-in-time (e.g.
motor manufacturing, technology manufacturing);
sectors reliant on smart technology (motorways,
water companies, energy companies, mobile
operators)
Industries reliant on communications, energy, transport or
water infrastructure are at risk of a lack of resilience
cascading across those interdependent businesses
Facilitating new development
If a site is in all other ways ideal for an investment,
flood risk could constrain planning permission. If that
development does not occur elsewhere in the UK,
this is a national loss
Often a development may shift to another region so this
needs to be considered on a case by case basis
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Examples of when an impact on the national economy may be likely
Examples of some real interventions are interesting as they highlight
the conditions under which a local impact on the economy from
FCERM could also be national.
The following examples are case studies for flood alleviation schemes
in:
 Nottingham
 Redcar
 Sandwich
Nottingham
The city of Nottingham is situated in the Lower Trent Area of the
East Midlands Region. The recent FCERM scheme involved
raising or replacing parts of the existing defences that were below
the standard required to provide protection against 1 in 100 year
floods.
It is understood that the scheme has facilitated the development
of the ‘Boots Enterprise Zone’ within the floodplain, owned by
the Boots Alliance Group. The existing development employs
over 8,000 people on the site. As planning consent is generally
not given to sites at high risk of flooding, we are told it would have
been extremely difficult for the zone to get the go-ahead if it
wasn’t for the flood defence scheme. FCERM could therefore
have facilitated GVA equivalent to around £60-120 million per
year. This would be a national impact if Boots would not have
invested elsewhere in the UK.
In addition, £0.6 million national GVA per year in first-round
impacts (avoided damage to commercial property) was identified.
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Redcar
Redcar is a coastal town located in North East England to the east
of Middlesbrough and south of the Tees Estuary. The intervention
includes replacement of the seawall and works at the seafront
which reduce the flood risk and prevent loss of property and
infrastructure due to coastal erosion. It provides a 1 in 300
standard of protection.
Stakeholder evidence suggests further developments have been
facilitated by the investment in the flood defences: four new
businesses have been developed in the town since the completion
of the flood defences and 7 new more properties are under
construction. This contrasts with the declining economic activity
before the flood defence and regeneration investment. If we
assume that these businesses are more of the most common type
of business in the Redcar area (micro wholesale and retail) then
this would be equivalent to an estimated extra £1m GVA per
annum in the Redcar economy as a result of the investment in
FCERM.
Redcar’s investment in FCERM allows for the borough to
participate in the Teesside Enterprise Zone, benefitting the local
economy significantly over the longer-term. This could be a
national impact if the new business investment in Redcar would
have otherwise gone overseas or if it delivers jobs to unemployed
workers.
In addition, £2.6 million national GVA per year in first-round
impacts (avoided damage to commercial property) was identified.
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Sandwich
Summary of conditions
Sandwich is a medieval town and civil parish on the right bank
of the River Stour in Kent. The FCERM intervention involved
embankment raising, improved and raised defences, a tidal
flood relief area and flood walls. This delivers a 1 in 200 level of
protection.
Given the number of impacts, page 10 offers a summary of the
types of local GVA impact that can arise as a result of FCERM,
and the conditions under which they may also be a national
impact.
After the improved flood defences were put in place, the largest
employer in the area, Pfizer, sold a 3million square feet
Research and Development site to Discovery Park Limited for
use as an Enterprise Zone. Without the investment in FCERM,
Pfizer would have been likely to develop parts of the site, but
would have been likely to have demolished a significant
proportion of the industrial space. The investment in FCERM
was a necessary but not sufficient condition for the Pfizer
site to become an Enterprise Zone because planning
permission is not likely to have been possible without it.
This report has set out the conditions under which the impacts of
FCERM on the local economy could also lead to impacts on the
national economy. For some impacts, it is straightforward to
convert local economy impacts to national. For example:
Pfizer maintains 800 jobs on the site and 65 new businesses
have been set up at the Discovery Park. Approximately 100150 people are employed at product range spin-off companies,
and there are 10-12 spin-off science companies with 3-10
employees in each. Assuming a conservative 3 jobs per new
business, and applying average earnings for the most likely
sector-type for those jobs, the Discovery Park could
generate an additional annual national GVA equivalent to
perhaps £4 million. This would be a national effect if this
investment would have otherwise gone overseas.
In addition, £5.8 million GVA per year in first-round impacts
(avoided damage to commercial property) was identified.
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Evidence to support the analysis
 All first-round impacts that relate to avoided expected damage
to commercial property, lost agricultural output, disruption to
business and freight travel, lost timber yield, would be both a
local and a national impact because they require resources for
repair and replacement.
 Where new development has been constrained in a particular
location because of flood risk, this could be a local and a
national impact if that development would not be possible to
undertake elsewhere in the country, or if it adds less value in an
alternative location.
For other impacts, it is less clear whether they would be local and
national, or just local. For this, further evidence is needed in order
to understand the complex interactions across the economy in the
event of flooding.
To undertake a robust assessment of the degree to which local
impacts on the economy are also national, Figure 3 provides our
recommendations.
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Summary of impacts of likelihood of FCERM on the national economy
Type of impact
Impacts assessed within current FCERM appraisal
guidance
Stay and adapt
Stay and do nothing
Business responses
Move to another area
Close down
Business survival in local and
prefered area
Foreign direct investment
Incentives for FDI
New developments
Planning permission now granted
because of lower flood risk
New investment
Access to insurance and credit
Spillover impacts
Land values
Agglomeration
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Outcome
National Impact Likey?
FIRST-ROUND IMPACTS
Avoided lost inventory
Yes
Avoided commercial property damage
Yes
Reduced damage to crops and lost yield
Yes
Reduced damage to utility infrastructure
Yes
Avoided loss of timber production
Yes
Yes if:
- workers cannot get to work and they are not able to work equally as
productively at home for the duration of the disruption
Minimised transport disruption
- freight travel interrupted or higher cost so that deliveries are not made or
are late (with contractual penalties)
- business trips are prevented and cannot easily be substituted to
alternative times
DYNAMIC IMPACTS
Flood risk is managed through the
Not if the business adapts optimally
business investment in adaptation
Yes if:
Minimised interruptions to production
- interruptions to business activity are not off-set by increases in activity by
or service delivery
other businesses or simply delayed to a later date after the flood event
Yes if: businesses' current location is where they are most productive so a
move to another location in England lowers productivity. Or if economic
Business retention in local and
activity or the business as a whole is re-located to a site outside England
preferred area
No if: they would have been equally productive in another area
Yes if:
- those businesses that closed are not replaced
Yes if: that foreign investment would not have been made in other areas of
England
Yes if: that investment would not have been made in other areas of England
in a way that delivers equal value
Lower flood risk means more likely Yes: insurance is likely to increase resilience and could improves access to
to have lower cost insurance premia credit to invest
FCERM could allow land values to
remain or increase
Retention of businesses in
productive clusters
Yes (though care needs to be taken not to double count impacts)
Yes: if businesses are less productive elsewhere
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Evidence needed to assess national impacts
Figure 3: suggested areas for future research to provide evidence on the impacts of FCERM on the national economy
Issue
Evidence needed
How can the evidence be generated
Temporary substitution of
economic activity from one
area to another in response
to flood risk
In repose to flood risk, the extent to which
businesses
(i) delay production until a later date
(ii) carry out that production in another site or
(iii) experience competitors increasing their
economic activity to absorb the lost economic
activity in the flooded area
Possible options include:
(i) a literature review of observed substitutability in the UK or
overseas in the event of flooding disruption, and for which
types of businesses
(ii) Analysis of the extent to which there is spare capacity in the
economy to absorb additional economic activity, and the extent
to which imports are the only alternative
(iii) surveys or interviews with businesses that have been flooded
(iv) case study evaluations involving stakeholder engagement and
quantified impacts of the consequences
Perception of foreign
investors to UK flood risk
The degree to which perception of flood risk impacts
on foreign investors location decisions
Interviews or surveys of foreign investors that have invested in the
UK. Case studies could be used to quantify the impacts.
Displacement of economic
activity: propensity for
businesses to move in
response to flood risk
The degree to which businesses have a propensity
to leave the flood risk area in favour of another in
response to a change in flood risk. If they would
move, where would they move to.
This would also aim to understand the flood risk
threshold i.e. the tipping point that makes them more
likely to move to another area
Potential options include:
(i) Case study evaluations involving stakeholder engagement and
quantified impacts of the consequences
(ii) Literature reviews of evidence available in the UK or overseas
(iii) Surveys and interviews with businesses in flood risk areas
Degree to which
interdependencies affect
business resilience to
flooding
Quantification of the impacts to different types of
businesses of flood-risk in supply chains or where
infrastructure is shared, despite those businesses
having take adaption actions
Case study assessments could be undertaken of the degree to
which a business could be affected by interdependencies and the
expected benefits from co-ordinated FCERM to address those
interdependencies
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Issue
Evidence needed
How can the evidence be generated
Duration of flooding
disruption to business
activity for different flood
severities
Typical duration of disruption to business functions in
the event of flooding
Literature review and case study assessments of the duration of
disruption. Emerging themes must be identified and the conditions
under which normal business is resumed accounting for (i)
severity of flood (ii) degree of adaptation action taken (iii) nature of
business activity
Tolerance of flood-risk
disruption before shutting
the business is the optimal
decision
Quantified analysis of the tipping points that define
the frequency and duration of flood impacts that
mean closing down is optimal
This could be undertaken for different business types based on
interviews and observed historic action
Productivity impacts:
whether uncertainty and risk
affect investment decisions
for growth or innovation
The extent to which productivity is affected by
operating under flood risk. This could consider the
elasticity of productivity with respect to flood risk
If data allows, quantitative analysis could explore the extent to
which flood-risk is a driver of changes in productivity over time.
Randomised control trials could be undertaken to generate the
evidence base.
Flood risk impact on new
development
Extent to which planning approval limits new
development, and in turn whether those
developments take place in other locations instead
Interviews with developers and case studies to quantify the scale of
impacts
Attribution: where FCERM
facilitated unlocked
investment, what proportion
of the benefits are
attributable to FCERM
Evidence on a justified attribution of the benefits
across different organisations
A detailed assessment of the extent to which FCERM was a driver
of an investment decision
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ANNEXES
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Annex 1: Adaptive capacity
Where is adaptive capacity likely to be higher?
Adaptive capacity is likely to be higher when there are:
 Well understood risks and organisations with in-house
capability to respond
 Flexible planning and processes embedded into decisionmaking – e.g., manufacturing can be shifted to alternative sites
or supply chains can be diversified (generally in larger,
multinational companies)
 Lack of awareness of climate change and its relevance
persists, and lack of willingness to accept the nature of a risk,
e.g., some vulnerable organisations do not wish to accept that
they may be ‘vulnerable’
 Lack of financial support and skills to adapt – e.g.
small/medium-sized organisations may struggle to invest
resources
 Partnerships and collaboration – such as local authorities
working with voluntary organisations
 Lack of specialised skills and training to understand and
respond to climate change impacts, e.g. there may be
difficulties in accessing the required advice to bolster resilience
to flooding
 Operational planning that already accounts for similar
risks to those expected to increase from climate change –
e.g., process risk management in the chemicals sector
 Poorly targeted information – information can be
overwhelming e.g., generic information for businesses may not
be practical and may come from a range of sources
 Access to risk spreading mechanisms – e.g. insurance
 Limited ability to influence decision making – e.g., business
tenants are dependent on landlords to take action to respond to
certain risks
 Agents of change or champions within the organisation
 Strong leadership and culture – e.g., corporations in the
automotive sector are able to influence certain suppliers
 Support networks – particularly important for smaller
organisations and individuals, and where long-term planning is
limited
(Source: Frontier et al, 2012).
Where might adaptive capacity be lower?
Adaptive capacity is likely to be lower where there is:
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 Lack of engagement with vulnerable businesses – e.g.
some isolated businesses or those in remote areas may not
have access to the required information
 Diversity of responsibility across parties with different
objectives – e.g. where businesses are dependent on other
service or infrastructure providers taking action to prepare and
respond to flooding
 Competing demands arise from different users – e.g.
different requirements for resilience may arise for farmers,
industry or other businesses.
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Annex 2: location dependence
The following three factors can be identified as key drivers of location dependence:
1
Operational factors
• Investment in capital assets (such as business premises or large-scale machinery). If a business has made significant investments in
these assets, the cost of moving is likely to be large. This could prohibit a business from relocating, especially if they have limited access to
borrowing,
• Dependence on proximity to similar businesses. Some businesses prefer to locate in areas where similar businesses are also located. This
is because firms may find it easier to innovate (and potentially reduce their costs) if this is the case, as they are better able to share ideas (and
potentially assets), and learn from each other. Silicon valley and TechCity are examples of this.
2
Dependence on local resources
• Dependence on local infrastructure. For example, dependence on local road links (for logistics), sea ports or airports (international
connectivity), high speed connectivity (trading and internet-based companies).
• Dependence on local natural resources. For example, local gas reserves (energy production companies) or water supply (chemical
companies, water treatment companies).
• Dependence on local stock of labour. For example, biotechnology firms may be dependent on a location in the Nottingham area, given the
biotech hub that has been created by the two Universities there.
• Dependence on ‘local identity’. For example, a particular business may be branded based on the local area, for example, ‘Stowells of York’
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Dependence on local markets
• Dependence on local customer base, or specifically, the demand/taste preferences of the local population.
• Dependence on the local labour market base for key skills and experience.
• Obligation to serve the local area. This is true for most public sector organisations. For example, local county council buildings have to be
located in a particular local area, as they are obliged to serve the people in that particular area.
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References
 Defra Flood and Coastal Resilience Partnership Funding Defra policy statement on an outcome-focused, partnership approach
to funding flood and coastal erosion risk management, 2011
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/221094/pb13896-flood-coastal-resiliencepolicy.pdf
 Defra Government response to the public consultation on securing the future availability and affordability of home insurance in
areas of flood risk., 2013 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/259362/flood-insurancesum-resp.pdf
 Defra Defra Funding for Flood and Coastal Erosion Risk Management in England, 2014
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/300247/pb13900-flood-funding.pdf
 Environment Agency Flood and coastal erosion risk management (FCERM) Appraisal Guidance http://www.environmentagency.gov.uk/research/planning/116705.aspx
 HM Treasury National Infrastructure Plan, 2013
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263159/national_infrastructure_plan_2013.pdf
 HR Wallingford, AMEC Environment & Infrastructure UK Ltd, The Met Office, Collingwood Environmental Planning, Alexander
Ballard Ltd, Paul Watkiss Associates, Metroeconomica The UK Climate Change Risk Assessment 2012 Evidence Report, 2012
 IPCC Fourth Assessment Report: Climate Change 2007: Working Group II: Impacts, Adaptation and Vulnerability M.L. Parry,
O.F. Canziani, J.P. Palutikof, P.J. van der Linden and C.E. Hanson (eds) Cambridge University Press, Cambridge, United
Kingdom and New York, NY, US
 ONS Business Population Estimates 2013 https://www.gov.uk/government/publications/business-population-estimates-2013
 ONS Business Ownership in the UK Infographic, 2013 http://www.ons.gov.uk/ons/rel/abs/annual-business-survey/foreignownership/info-business-ownership.html
 UK Trade and Investment Inward Investment Annual Report 2012/13
http://www.ukti.gov.uk/investintheuk/investintheukhome/item/553980.html
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