Localise West Midlands argues that small and medium locally based businesses, including those who may be part of a larger national franchise, have a greater ‘local multiplier effect’ on local communities, increasing the community’s prosperity directly, as well as creating comparatively high numbers of jobs.

In summer 2012, Lincolnshire Co-operative, an outstandingly well-run society, used the Local Multiplier 3 (LM3) to measure the local economic impact of its operations on Lincolnshire. The process was sponsored by Co-operatives UK and economic analysts K2A evaluated Lincolnshire’s project.

LM3 study coverLM3 methodology is set out in The Money Trail, a handbook published by nef in 2002 and authored by Justin Sacks, now with K2A; Justin advised LWM on the workshops following their 07 report for Birmingham Strategic Partnership, ‘Developing Sustainable Procurement in Birmingham’.

His evaluation of Lincolnshire’s project was published in a booklet Sticky Money (left), which can be downloaded here.

Research by K2A followed the money spent by customers of the Lincolnshire Co-operative and found that it increased in value by going to local suppliers, to customers as a dividend and to employees in wages, who in turn spent a proportion of their money locally.

On conservative estimates, using internationally accepted benchmarks, the co-operative generated an additional £40 for the local economy for every £100 spent by a customer, rather than generating profits for outside investors and global suppliers.

The study referred to the money generated for the local economy by Lincolnshire Co-operative as ‘sticky’ – because after being passed on to suppliers, employees and customers it passed through local people’s hands five times, generating local wealth and jobs in the process.

In addition, £5 million a year, that would have gone to external investors in a conventional shareholder business, is distributed to the 205,000 owner members of the society in Lincolnshire as a dividend, which can be spent locally again.

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Lincolnshire Co-operative sustains 2,800 local jobs in all parts of the business, using more than 600 local suppliers, 47% of which see their contract with the co-operative as a significant part of their business. It supports small local suppliers by helping them to grow their business to a scale where they can supply a large retail operation; where some local businesses supplying Lincolnshire have faced closure, the co-operative has stepped in to save the jobs and business. 

As Ed Mayo, Secretary General of Co-operatives UK said: “Every pound spent in a co-operative shop is a real boost to the local economy. In fact, every pound spent in a co-operative store changes hands five times, at diminishing levels, until the final penny leaves the local economy. This adds a wonderful life to any local community.”