Preston: Building a new local economics

Preston Council is leading a community wealth building project, aimed at keeping more money in the local economy

Almost £500m leaks out of Preston each year. Now the council is working with the city’s anchor institutions to help them use their spending power locally.

Anchor institutions – local authorities, hospitals, universities and housing providers – are key components of local economies and places. They are significant employers and investors in communities, largely unfettered by global economic change, and wedded to place.

They are also significant spenders, with large annual budgets for staff, food, energy and other supplies and services.

The challenge facing anchor institutions is that while they are wedded to place they are far from embedded in place. They draw in labour from other towns and cities, purchase goods and services from large non-local corporates, and will often fail to collaborate with key local institutions, instead operating on a silo basis.

Inspired by the Evergreen model in Cleveland, Ohio, and the co-operative culture of Mondragon in Spain, Preston has embarked on a period of behaviour change in its own anchor institutions to help them bring maximum benefit to the local economy and Preston residents.

Locally responsible behaviour of anchor institutions formed part of a suite of proposals adopted by the returning Labour Group in 2011. Their manifesto was framed around ensuring any existing or new investments for the city reaped fair outcomes, starting with Preston Council becoming the first in the north of England to be accredited living wage status.

The council recognised the potential of anchor institutions towards boosting the wider growth of the Preston and Lancashire economies and helping sustain local businesses and employment. In autumn 2013 it began to steward the behaviour of the local housing organisation Community Gateway, and other public institutions, starting with a conversation about procurement and purchasing choices.

The Evergreen project in Cleveland, Ohio, was the inspiration for Preston’s work with anchor institutions

Local institutions ‘shocked’ into change

The work with anchor institutions around procurement has two broad objectives.

Firstly, it analyses the extent to which anchor institutions already spend with suppliers based in the Preston and Lancashire economies and whether there is potential to repatriate some of that spend.

Secondly, it identifies whether there are any particular services used by anchor institutions which would lend themselves to future delivery by local worker-led co-operatives.

The baseline supply chain analysis revealed some interesting results. Analysing the procurement spend of six anchor institutions with their top 300 suppliers – some £750m of spend – the research found that just 5% of their collective spend was with Preston organisations; a total 39% was spent with organisations based in Lancashire. This meant that £488m was effectively being leaked out of Lancashire each year.

The amount spent by anchor institutions is significant and

there is the potential for the local economy to evolve around that spend

The supply chain analysis shocked the anchor institutions into action and they now have a collaborative desire to ensure procurement spend reaps far greater local economic and community reward. Preston Council has delved deeper into its own spend and identified that which is ‘influenceable’; subsequently it has found local organisations in those sectors which could potentially bid for and deliver those services in the future.

Lancashire Council has reframed its procurement practices so that economic and social value have much greater emphasis. And local organisation Community Gateway now request that suppliers demonstrate the local economic multiplier effect of the delivery of its capital and maintenance projects.

Preston Council as steward of the project (working with the Centre for Local Economic Strategies) is leading the activity, and its goals include embedding the principles of Evergreen and Mondragon into the behaviour of anchor institutions in Preston, through workshops and education.

An anchor institution charter has been developed with terms of reference which anchor institutions are expected to adhere to when commissioning and procuring, and the council is exploring other ways in which anchor institutions can enable community wealth creation.

Common principles, engagement, evidence, and a commitment to collaboration have already led to changes in the cultures and practices of anchor institutions around procurement. It will take longer for the quantitative impacts of the activities to bear fruition in terms of the contribution of the anchor institutions to the local economy.

We would argue that there are four key lessons to be learnt from the anchor institution work in Preston.

1. Scale is important. The amount spent by anchor institutions is significant and there is the potential for the local economy to evolve around that spend.
2. There needs to be a desire from anchor institutions to shift their behaviour and become more embedded in place.
3. The work needs to be rooted in evidence. An understanding of current spend is crucial to shifting spend in the future.
4. It is important to convince anchor institutions that change is practical and not just tied up in strategy and policymaking.

The work in Preston continues apace. Collaborative anchor institution engagement is continuing through a cross-anchor procurement practitioners group. Anchor institution policy in the UK is rare and the work in Preston is effectively a unique marker for using place-based institutions more effectively to deliver local economic and social outcomes.

• Written by Matthew Jackson, deputy chief executive of Cles, Councillor Matthew Brown, cabinet member for social justice, inclusion and policy at Preston Council, and Derek Whyte, assistant director of economic regeneration at Preston Council
• To find out more about Preston’s work with anchor institutions click here or email Matthew Jackson.