The Local Multiplier 3 (LM3) enables the company to see how much investment a housing scheme brings to an area by analysing where the project income is spent – and re-spent within the wider economy. The tool tracks how much money from a project is retained within the specific local area by monitoring the money that goes to suppliers, subcontractors and employees, and where they then re-spend the money.
The company has trialled the system in Pennyburn, North Ayrshire, where Lovell built 22 homes for social rent for Irvine Housing Association. The spending analysis shows that every £1 from the gross project income generated an additional £1.03 locally (within a 25-mile radius of the housing development). The total local income generated from the project was £3.8m.
To arrive at this figure, Lovell measured its own spending on the project – the income going to employees, subcontractors and suppliers – and then surveyed those people and organisations to establish where that money was re-spent. That enabled the company to calculate how much of the money had been retained locally.
LM3 was developed by the New Economics Foundation, a social and economic justice think tank. Lovell says that it will now be able to work out the ‘multiplier effect’ of its housing projects across the whole country - the impact that money flowing in from a project has on the rest of the local economy – and how it can be enhanced.
“The LM3 tool allows us to assess the economic contribution our projects make at a local level and also identify areas where we can improve the impact of this spend in the local area,” said Lovell sustainability co-ordinator Alice Flint.
“In addition, it enables the organisations who appoint us to demonstrate that they are meeting the requirement of the recent Social Value Act. The Act requires public bodies to take into account wider social, economic and environmental benefits when commissioning services, rather than simply focusing on cost.”