Moving public agencies out of London was a major plank of the levelling-up agenda. The effects on local economies seem smaller than hoped – and it’s important to compare them with those of other tools of regional policy: key infrastructure, new institutions and encouraging private sector investment.
In 2011-12, the BBC shifted key functions – and 1,700 skilled workers – from London to the MediaCity site in Salford, Greater Manchester. This was the biggest public sector move in the UK this century.
Relocating big firms and scientific infrastructure can produce ‘halo effects’ for local areas, boosting the performance of their economies. Can relocating public sector activity do the same?
Many policy-makers – in the UK and elsewhere – see government relocation as a tool for transforming local economies, but hard evidence on its effects is sparse. A new study exploring the BBC’s relocation helps us to understand the likely impacts (Nathan et al, 2024).
The resulting multiplier effects – caused by increased local spending by the BBC and its employees – helped the area’s creative industries grow, adding 2,000 further jobs and over 220 businesses by 2017. But the research shows no effects on creative industries in the wider city-region and few broader impacts on Salford’s economy.
Why should public sector relocation matter for local economies?
Many people think of public sector relocation as just about cost-saving – shifting civil servants out of big, expensive cities to save taxpayers money. In fact, relocations often have two aims: to cut property and salary costs; and to stimulate local economies (Nickson et al, 2020).
The real-world scope of such relocations varies hugely. At one extreme, Brazil, Germany and Indonesia have moved the whole of national government from one city to another. At the other extreme, the UK has shifted multiple government agencies, ministries and back-office functions out of London to smaller, cheaper cities around the country. Two notable examples are the Office of National Statistics (ONS) moving to Newport in 2010 and, most recently, the Treasury campus opening in Darlington in 2021.
How might these relocations boost local economies? First, there is a direct labour market effect from the jobs moved.
Wider impacts depend on local multipliers – the extent to which a move creates additional jobs in the local economy, as the new arrival buys services from local businesses and their employees spend money in local shops and cafes (Moretti, 2010).
These effects may be felt beyond the labour market. For example, an injection of knowledge-intensive jobs might help to boost innovation through knowledge spillovers to other firms. Against this, big relocations may crowd out local firms, which are forced to compete harder for staff. Big moves may also raise local housing costs, as employees look for places to live.
What does the evidence tell us?
Politicians driving these relocations often assume that the economic impacts are very large. This is despite there being little hard evidence on the actual effects. Evidence is especially thin on the ‘anchor institution’ moves – large firms, major infrastructure or government departments – at the centre of policy debates.
Some clues come from big relocations in the private sector. Two recent OECD-wide evidence reviews suggest that an additional ‘tradable’ private sector job – that is, jobs that produce goods and services for national or international, rather than local, markets – typically results in another 0.9 jobs in local services (What Works Centre for Local Economic Growth 2019; 2023).
For high-value jobs in the technology sector, this figure (the multiplier) is around 2.5. Another study finds that big factory openings are linked to a 1.5% increase in local earnings in that industry (Greenstone et al, 2010).
Looking at past industrial and ‘big push’ place-based policy provides further insight, especially for relocations – like the BBC’s move to Manchester – which shift high-skill creative activities and people.
Public research and development (R&D) programmes often have a strong place-based component, reflecting a local place’s strength in particular technologies and industrial know-how (Juhász et al, 2023). For example, NASA’s 1960s moonshot programme involved spatially focused investments with lasting local effects (Kantor and Whalley 2023).
In the UK, the Diamond Light Source in Oxfordshire – the country’s synchrotron science facility – drove up scientific output in related research fields, as scientists clustered nearby (Helmers and Overman, 2017).
More broadly, new research institutions – new universities in Sweden, or ‘science cities’ in Soviet-era Russia – have had visible long-term effects on local innovation and productivity (Andersson et al, 2009; Schweiger et al, 2022).
In contrast, cluster policies have a much more chequered history (Nathan, 2022). One reason for this is that cluster initiatives often both target key industries in a place, and try to influence wider local ecosystems (Duranton, 2013). This makes policy more complex, and outcomes harder to define and achieve.
The most direct evidence on public sector relocations themselves is still sparse. What evidence we do have suggests that public sector jobs multipliers are lower than those in the private sector in the short term. But over the course of two decades or more, these do move closer together.
One UK study finds a public to private sector multiplier of 0.21 (Faggio and Overman, 2014). Another finds a multiplier of 0.55 from a UK-wide programme of small-scale relocations in the 2000s (Faggio, 2019). Both of these studies look at impacts over five years.
Studies looking over longer periods find larger public sector multipliers on local services: 0.8 for Spain over 20 years, and 0.86 for Germany over 30 years (Jofre-Monseny et al, 2020; Becker et al, 2021).
The BBC’s move to MediaCity
As a case study, the BBC’s move to Salford stands out for three reasons. First, it was large by UK standards – 1,700 BBC staff relocated, another 600 were hired and, by 2017, the corporation had around 4,000 people on site.
Second, rather than back-office roles, the BBC moved highly-paid staff in flagship activities. These included staff working on BBC Sport, Breakfast, children’s programming, 5 Live radio, Future Media and the BBC Academy, among others.
Third, the BBC aimed to build and deepen links to Greater Manchester’s large cluster of creative industries, and out into the wider North West, through commissioning programmes and enlisting local creators. Essentially, the BBC hoped to serve audiences in the North better – and to help local and regional economies in the process.
Local planners suggested that the relocation might create up to 15,000 new jobs in Salford alone. Establishing what actually happened is tricky.
Normally economists assess the impact of place-based policies by comparing changes in ‘treated’ places with those in similar ‘control’ locations. In the case of Amazon HQ2 in the United States, for example, the firm ran a competition, so the winning city (Crystal City, Virginia) can be compared with the losing bidders. (There were initially two winners – Crystal City and Long Island City – but Amazon pulled out of the latter in 2019.)
In the BBC case, there is only one treated location – Salford – and no viable runners-up, as the BBC seems only to have considered Greater Manchester when planning the move. To get around this, we develop a ‘synthetic Salford’ – a doppelgänger location built using data from other UK towns and cities, and weighted to resemble Salford’s local economy before the move as closely as possible. We then use changes in real versus synthetic Salford to work out the effects of the BBC relocation.
What impacts did the BBC move have?
The headline finding from this research is that in the first five years after the move, every three BBC jobs led to another job in Salford’s creative industries (a multiplier of 0.34). That ripple effect gets bigger over time: by 2017, the multiplier is 0.55. This means that every two BBC positions led to another job in local creative firms (see Figure 1).
These effect sizes are close to the other UK studies mentioned above, where the timeframe is similar. We find similar gains for counts of creative firms, and creative firm size – and some of these even happen after the move is announced but before it happens.
But this chain reaction stops when we look beyond the creative industries. Effects on adjacent activities, like technology, are marginal. What’s more, we find no jobs gains across the wider Salford economy, including on local services.
This is perhaps disappointing for policy-makers, but it makes sense. In the short term, we might expect the BBC’s halo effects to be strongest on local creative people, especially those involved in programme-making and media.
Figure 1: The BBC relocation and creative employment in Salford
Source: Business Structure Database (BSD)
Note: The chart shows changes in creative industries employment (as defined by the Department for Digital, Culture, Media and Sport, DCMS) from 1997 to 2017. The solid line shows the trend in Salford local authority. The dotted line shows our synthetic control. The vertical line shows the relocation. BSD data cover financial years, so the relocation is placed in 2012.
These shifts in the local creative economy seem to come mostly from new firms or those moving into the area. So, did the relocation simply shuffle activity around the city-region?
The research indicates no statistically significant effects for displacement – that is, negative impacts of the BBC relocation on the creative economy in the rest of Greater Manchester. Similarly, there does not appear to be evidence of lasting damage to London’s creative economy – although our tests here are much ‘noisier’. London’s creative economy is big and the BBC move was relatively small, so we are less confident about this result.
What about broader impacts on the area? Average wages rise in Salford, even when we take out the effect of higher-paid BBC jobs. The growth in higher-paid creative jobs may explain this.
Conversely, there is no evidence that the move drives up local house prices, although these shifts might be very localised. The effects on rental prices, which might be more responsive, are unclear as we are unable to look at these.
What can policy-makers take from this?
When we have talked to politicians and officials about this research, they typically see it as a levelling-up win-win: Salford and Manchester gain; London does not lose.
We broadly agree, although as academics we must add some caveats. First, there are halo effects from this relocation, but they are limited – there are job gains but a lot fewer than predicted, and multipliers are restricted to the creative industries. And as we have flagged above, we are less clear about the impacts on London than we would like to be.
Second, this is a very large relocation by UK standards, and one that carefully moved one part of one big creative cluster to another. Other proposed government relocations are much smaller and involve many different parts of the country. Policy-makers should consider the scope for concentrating future state relocations, as well as comparing the impact relative to other policy tools – key infrastructure, new institutions or encouraging private sector investment.
It’s also important to say that we look at early impacts – we would like to expand this analysis to look at the full decade and a half since the BBC moved to Salford once the data become available. And we would encourage others to explore wider impacts – on innovation, on productivity and on changes in local people’s access to jobs and opportunities.
Where can I find out more?
- What would it take to level up the UK? Economics Observatory article by Henry Overman and Helen Simpson.
- Industrial Strategy Green Paper 2024: UK government.
- The impact of public employment: Evidence from West Germany’s post-war capital Bonn: VoxEU piece by Stephan Heblich, Daniel Sturm and Sascha Becker.
- The long-run effects of R&D place-based policies: Evidence from Russian science cities: VoxEU piece by Helena Schweiger and Alexander Stepanov.
- Regions really do benefit from relocation plans – just look at Salford since the BBC’s move: Write-up by Torsten Bell in The Observer. /
- Moving out: making a success of civil service relocation: Report by the Institute for Government.
- Are public sector relocations a tool to boost high-skilled jobs in struggling areas? Centre for Cities blog on public sector relocation and economic development.
- Moving to Manchester: Tom Forth’s 2017 BBC analysis.
Who are experts on this question?
- Henry Overman, London School of Economics
- Max Nathan, University College London
- Helen Simpson, University of Bristol
- Giulia Faggio, City University
