How can building six terraced homes generate £2.1 million mostly for the local economy as claimed by Berrys? There will be economic benefit from construction, purchase of materials and from the wages that construction and other workers spend. That amounts to £900,000 according Berrys and “every £1 spent on construction generates a total of £2.84 in extra economic activity, most of which is generated in the local area.”
Nonsense. This a bloated claim that has no legitimacy. It is not even up to date with industry estimates. The £2.84 claim relates to all construction – airports, power stations and more, not specifically housing. The economic uplift is to GDP not the local economy.
Shropshire Homes, which has retained Berrys to make the technical arguments in the planning appeal, is clutching at straws. Straws can be used to build houses but we must hope that straw houses will not convince a planning inspector.
Yesterday, I wrote that the long awaited appeal for six terraced homes on Castle View Terrace in finally underway. When I penned that article, I was puzzling over some of the numbers in the case presented by Berrys in favour of the development. I said that the appeal will be a technical swordfight and in several respects a game of words. Now I look at the appeal documents in more detail, I am sure that is the case.
I have been involved with planning applications for decades. I cannot recall seeing such an inflated and poorly researched claim. Let’s think this through. Six terraced homes will, according to Berrys, provide an economic benefit of about £350,000 each “most of which is generated in the local area.” That suggests that local builders and suppliers will be engaged but Shropshire Homes is not giving a formal commitment to that.
The claim of £2.84 economic benefit from every pound spent comes from a report twelve years ago. Berrys has clearly not seen the update to this published in February last year. That report by Oxford Economics for the CBI shows that “every £1 spent on UK construction creates £2.92 of value to the whole economy.” The emphases are mine. “UK construction” includes new roads, rail lines, ports, power stations, airports, offices, manufacturing facilities and of course housing. The “whole economy” is Gross Domestic Product.
I can find nothing that suggests that every house built generates an economic benefit of nearly three times its construction costs, let alone a local economic benefit.
The main economic benefit of this scheme will be to Shropshire Homes. Each home will cost about £180,000 to construct and will perhaps sell for about £280,000. That’s around £600,000 profit and that explains why Shropshire Homes has turned down the community offer of around £130,000 for the meadow and why it is so intent on this appeal.
Update. Oxford Economics has confirmed my interpretation of the economic analysis: “You are correct the GDP multiplier cited in the CBI report is for the construction sector as a whole, not housing. The multiplier is also for the UK as a whole, so I wouldn’t say the use of the word local economy is appropriate either, unless they meant the UK.”