Larkhall – Milngavie Railway Project Evaluation Study Final Report
8. WIDER ECONOMIC BENEFITS
8.1. In addition to the conventional user and non-user benefits such as journey time savings, reliability improvements and environmental impacts, new transport infrastructure can also impact the local economy. An improved transport network can lead to greater efficiency within the economy through improved links between firms, and between firms and their employees. New stations in particular can also lead to increased investment and regenerate an area. These economic impacts are known as Wider Economic Benefits (WEBs).
8.2. STAG identifies four possible types of WEB:
- agglomeration impacts;
- wider benefits arising from improved labour supply;
- increased competition as a result of better transport; and
- increased output in imperfectly competitive markets.
8.3. WEBs are harder to quantify than conventional transport benefits and are a relatively new feature of economic appraisal within the transport sector; they were not formally assessed at the time the Larkhall – Milngavie railway project appraisal was undertaken in 2000. It was however acknowledged that there would likely be additional effects beyond those captured by conventional appraisal including effects on the economy of the area.
8.4. The extent to which WEBs have been generated by the Larkhall-Milngavie rail project and their impact on local economies, communities and businesses was therefore assessed.
8.5. Of the WEBs listed above, the following two areas were assessed:
- agglomeration impacts; and
- wider benefits arising from improved labour supply.
8.6. The two other types of WEB listed above were not considered: STAG considers the 'increased competition as a result of better transport' as neutral and 'increased output in imperfectly competitive markets' is accounted for as an uplift in the cost-benefit analysis.
8.7. In addition to the WEBs analysis (which assumes a fixed land use in applying conventional transport appraisal cost benefit analysis), changes in land use were also investigated as a result of the project (e.g. the conversion of previously vacant or derelict land) to industrial or commercial use resulting in new businesses opening in the area.
8.8. As acknowledged by STAG, WEBs are difficult to identify and quantify. The aim of the analysis was therefore to provide an indicative exploration of the existence and scale of the WEBs generated as a direct result of the rail project, rather than attempt to provide a precise monetary value of the impacts. The findings will inform the extent to which WEBs should be investigated in future appraisal and evaluations of similar schemes.
8.9. Given the limited impact of the Larkhall-Milngavie rail project, a proportionate assessment was carried out in line with STAG.
8.10. The main source used to provide the required data for the WEBs analysis was the Business Survey discussed in chapter 14.
8.11. Additionally, the User Survey results and accessibility analysis undertaken to calculate the impact of the rail project on public transport journey times to key business destinations across Glasgow ( chapter 5) were drawn upon.
8.12. Agglomeration benefits can arise from improved transport links because businesses derive productivity benefits from being close to one another and from being located closer to larger labour markets. If transport investment brings businesses closer together and close to their workforce this may generate an increase in labour productivity above and beyond that which would be expected from the conventional user benefits alone (e.g. journey time savings).
8.13. To address whether the Larkhall-Milngavie rail project has created agglomeration impacts, the responses from the Business Survey in relation to how the project has impacted businesses' performance by improving the accessibility / proximity to other firms and labour markets were analysed. Additionally, the results from the accessibility analysis undertaken ( chapter 5) were used.
8.14. Businesses that have been operating in the area since before the completion of the Larkhall-Milngavie rail project (n=19) were asked a series of questions to determine how the project has impacted their business.
General Business Performance
8.15. At a general level, nearly half (47%, n=9) of the businesses operating in the area since before the Larkhall-Milngavie rail project was completed stated that the project had a positive impact on the performance of their business. The remainder stated there had been neither a positive nor a negative impact.
8.16. Over half of businesses (53%, n=10) felt that there would be a strongly or slightly negative impact on their business if there was no railway.
8.17. As demonstrated in chapter 5, the Larkhall – Milngavie project has led to reduced public transport journey times. This may therefore have improved accessibility to a business's suppliers, customers and other branches.
8.18. This is evidenced through almost half of business survey respondents (47%, n=9) indicating the rail project has improved access to key services (suppliers, markets and other business functions). Slightly fewer (37%, n=7) thought it has improved access to their existing and potentially new customer base ( Figure 18).
8.19. The belief that the rail project has improved accessibility is reinforced by the increased use of rail ( Table 10), particularly for commuting with nearly two-thirds (63%, n=12) of businesses stating their staff are more likely to travel by rail to/from work. Businesses are also now more likely to use rail to meet with customers and/or suppliers (48%, n=9) and for travelling to other branches (37%, n=7).
8.20. A key product of agglomeration is a more efficient labour market interaction which can lead to increased competition between businesses and reduce inefficiencies.
8.21. However, the impact on competition between businesses as a result of the Larkhall-Milngavie rail project appears to be minimal with nearly all businesses (89%, n=17) saying the rail project had had no impact in this respect.
8.22. Agglomeration benefits can lead to reduced business costs through more efficient input and output markets.
8.23. However, as with competition, the impact of the rail project on reducing business costs has been minimal with 79% (n=15) stating there has been no impact. For those businesses that stated there had been an impact, savings have been modest (maximum of £5k per annum).
8.24. Transport costs can affect the overall costs and benefits to an individual:
- more people can choose to work if the costs of commuting (time and/or fare) are reduced;
- people may choose to work more hours if their commuting time falls; and
- improved transport links can open up new opportunities and lead to better matching of labour supply with demand, resulting in higher productivity.
8.25. To assess whether the Larkhall-Milngavie rail project has improved the labour supply, the responses from the Business Survey in relation to whether it is now easier to retain and/or recruit staff were analysed.
8.26. Additionally, the responses from the User Survey were analysed to determine whether the changes to rail services due to the Larkhall-Milngavie rail project have reduced commuting journey times or influenced respondents' decisions to change jobs.
8.27. Businesses that have been operating in the area since before the completion of the Larkhall-Milngavie rail project (n=19) were asked a series of questions to determine how the project has impacted the ability of their business to recruit and/or retain staff, and if so, the main reasons for this.
8.28. Nearly half (47%, n=9) of respondents stated that the Larkhall-Milngavie rail project has had a positive impact on their ability to retain staff and recruit new and/or more highly-skilled staff. The reasons given for this were:
- reduced commuting times (67%, n=6);
- providing a viable alternative to car or bus travel (56%, n=5); and
- making the location more accessible (44%, n=4).
User Survey Analysis
8.29. In the User Survey, respondents whose nearest stations were one of the four newly opened stations (Larkhall, Merryton, Chatelherault and Kelvindale) were asked whether the changes to rail services due to the Larkhall-Milngavie rail project have reduced their travel time to/from work and/or influenced their decision to change jobs.
8.30. Nearly half of respondents whose nearest station is Larkhall, Merryton, Chatelherault (48%, n=40) said the new stations have reduced the time they spend travelling to/from work. Of the respondents who had changed jobs in the last 5 years, 38% (n=12) stated that the improvements influenced their decision to move to their current job.
8.31. Residents for whom Kelvindale is the nearest station (n=12), 83% (n=10) say the new station has reduced the time they spend travelling to/from work. Of the 47% (n=7) of Kelvindale residents who have changed jobs in the last 5 years, just one (17%) stated that the improvements influenced their decision to move to their current job.
8.32. This evidence is supported by the accessibility analysis which has shown that the rail project has reduced public transport journey times.
8.33. In addition to WEBs (which assume a fixed land use), major transport projects can result in changes to land use. For example, businesses may relocate as a result of improved connectivity resulting in the conversion of previously vacant or derelict land to industrial or commercial use.
8.34. Productivity benefits can arise through businesses relocating to a more convenient location due to:
- an increase in turnover/profitability through reduced costs e.g. lower rents and other operational costs;
- reduced time spent travelling to/from work; and
- better access to labour market, suppliers and customers.
8.35. To assess whether the Larkhall-Milngavie rail project has resulted in land use changes, information was obtained from South Lanarkshire Council as to whether there have been any new business developments in the area since 2005. Additionally, the responses from the Business Survey in relation to whether the rail improvements influenced a business's relocation decision were analysed.
New Business Developments
8.36. As discussed in chapter 5, based on the information received from South Lanarkshire Council, there have been no significant industrial developments in the Larkhall area since 2005. The exception is the opening of the NHS distribution warehouse in Canderside, south of Larkhall.
Business Survey Analysis
8.37. The Business Survey respondents who had opened a new branch or relocated to the area since the completion of the Larkhall-Milngavie rail project (i.e. since the end of 2005 (n=17)) were asked whether the rail improvements had influenced their decision.
8.38. Only three respondents stated that the Larkhall-Milngavie rail project had influenced their decision to open a new branch or relocate and just one of those stated that it was the main factor (the other two said it was an important factor amongst others). The reasons given were that the rail improvements have made it easier:
- for staff to commute to/from work (n=2);
- to meet customers and/or suppliers (n=2); and
- to travel to other branches of the business (n=1).
8.39. Although the rail project does not appear to have been a factor in the majority of businesses' decision to open a new branch or relocate, nearly half (n=8) stated there would be a negative impact if there was no rail service.
8.40. Although there are limits to the conclusions that can be drawn from a small business survey, the analysis carried out above suggests that the rail project has been overall beneficial to businesses, with nearly half of those surveyed stating it has had a positive impact on their performance. However, evidence of sustained and significant WEBs is limited.
8.41. The accessibility analysis has demonstrated that connectivity and public transport journey times to key destinations from locations along the Larkhall-Milngavie route have been improved. There is some evidence that this has created opportunities for agglomeration benefits to materialise through, for example, increased use of rail for better access to markets, suppliers and customers.
8.42. However, quantifiable evidence is more limited with few businesses able to demonstrate any substantial reduction in business costs as a direct result of the rail improvements.
Improved Labour Supply
8.43. There is evidence that the rail project has improved the labour supply to local businesses with nearly half of the Business Survey respondents stating that the rail improvements have made it easier to retain and/or recruit staff.
8.44. This is reinforced by rail users stating that the rail improvements have reduced their commuting times and, particularly in the Larkhall area, influenced their decision to move jobs.
Land Use Changes
8.45. There is little evidence that the rail improvements have influenced businesses' decisions to open new branches or relocate. In the Larkhall area, there has so far been no significant change in land use for new business developments.
Reasons for limitations to WEBs
8.46. There are several reasons why WEBs arising from the Larkhall-Milngavie rail project may have been limited:
i. Main benefits are restricted to service improvements along one corridor
8.47. The main change to the majority of users of the Larkhall-Milngavie rail project has been the doubling in frequency of services on large sections of the line. Whilst this will have reduced waiting times, it will not have significantly altered connectivity or accessibility, or opened up new destinations and markets in a way that would have a tangible impact on a business's individual performance.
8.48. A more valuable project from businesses' perspective may have been a rail link to Glasgow airport; several of the Business Survey responses commented on this and stated that this would make a real difference to their business's accessibility.
8.49. When transport improvements are restricted to one corridor within a city, WEBs are always likely to be localised and small-scale. Agglomeration and other WEBs tend only to be significant where transport infrastructure improvements facilitate step change improvements in connectivity and journey times between major economic centres.
ii. Larkhall was already well-connected and primarily a residential area
8.50. The main step change improvements of the Larkhall-Milngavie rail project have been focused in the Larkhall area with the re-opening of the line and Larkhall, Merryton and Chatelherault stations.
8.51. Although this has improved accessibility to Larkhall, access to Larkhall even before the completion of the project was not considered a problem because of its location adjacent to the M74 motorway. Considering car was and remains the dominant mode for commuting and business travel, the presence of the railway in the area is unlikely to have had a significant impact on existing businesses' performances or played a key role in attracting businesses to the area.
8.52. Furthermore, since the closure of Larkhall's traditional industries such as the iron and steel works, the town is now predominantly residential and may not fit with a new business's aspirations, even with the rail improvements. Larkhall may therefore find it difficult to attract significant new business investment. This is compounded by the fact that there are better-connected locations such as Hamilton and Motherwell in close proximity which have a larger 'white collar' business presence.
8.53. However, this situation may change in the future should road congestion worsen which may lead to the introduction of policies to discourage car use (e.g. road-user charging). The presence of a good rail link may become a more important factor for a business considering new locations and encourage investment in the town.
iii. Business investment due to rail improvements may take many years to materialise
8.54. Although the Larkhall-Milngavie rail project was completed nearly a decade ago, WEBs and land use changes can take many years to materialise, particularly regarding a business's decision to open a new branch or relocate. Furthermore, the recession of 2008-09 may have stalled any plans for expansion plans and new business investment in locations such as Larkhall.
8.55. As the economy recovers, areas along the line such as Larkhall may become more successful at attracting new investment. One large investment decision alone could create several hundred new jobs and precipitate a steady stream of new businesses and investment.