The document discusses the local money multiplier effect and how money circulating within a local economy strengthens that economy through jobs, wealth, and well-being. It provides examples comparing the economic impact of hotels versus bed and breakfasts in Tayside, showing that while hotels bring in more initial income, bed and breakfasts recirculate a greater percentage of money within the local economy through local staff, suppliers, and owner spending. Similarly, independent local retailers recirculate a higher percentage of their turnover within the local economy compared to supermarkets, whose profits and supply chains extend beyond the local community. Keeping money circulating within a local area rather than leaving it provides greater economic benefits.

1. Local Money Multiplier
And why local businesses matter
far more than you think
Source: The Money Trail>>>
£
£
£

2. The local multiplier effect
• Looks at the impact of money that is
spent and re-spent within a local
economy
• Demonstrates that the more money
circulates a local economy, the
stronger that economy is in terms of
jobs, wealth and wellbeing
• Both the New Economics Foundation
and the Centre for Local Economic
Studies have worked with local
communities and public agencies to
demonstrate the effectiveness of this
approach
£
£
£
£
£
Local
economy

3. Practical example: Comparison
between hotels and B&Bs located in
Tayside
• This compares not just the
initial income from hotels
and B&B’s but what
happens after:
– How the money is re-spent
and how much of it stays in a
locality vs how much leaves
– It then adds up both the
initial income and the money
re-spent over four rounds to
give a total figure
Initial income
Re-spend
over 4
rounds
Total money spent

4. Tay hotels bring in 70% more income
£100,000.00
£170,000.00
£-
£20,000.00
£40,000.00
£60,000.00
£80,000.00
£100,000.00
£120,000.00
£140,000.00
£160,000.00
£180,000.00
Tay B&B's Hotels
Initial Income
A ‘no brainer’ isn’t it?
Chain hotels have got
to be good for Tay!

5. £(10,000.00)
£10,000.00
£30,000.00
£50,000.00
£70,000.00
£90,000.00
£110,000.00
£130,000.00
£150,000.00
£170,000.00
Initial Income Re-spend 1 Re-spend 2 Re-spend 3 Re-spend 4 Re-spend 5
Hotels
Initial
income of
170,000
70%
higher
than for
B&B’s
Only 20%
spent
locally
Monery spent and re-spent locally is
looked at over 5 cycles+ initial income
Total money spend and re-spent comes to £235,875
But actually most of this money
goes straight out to Head Offices
and external suppliers. Only 20%
of that initial income is re-
spent in Tay

6. £100,000.00
£80,000.00
£40,000.00
£20,000.00
£10,000.00
£5,000.00
£(10,000.00)
£10,000.00
£30,000.00
£50,000.00
£70,000.00
£90,000.00
£110,000.00
£130,000.00
£150,000.00
£170,000.00
Initial Income Re-spend 1 Re-spend 2 Re-spend 3 Re-spend 4 Re-spend 5
Tay B&B's
Tay B&B’s
re-spent
80% of
Gross
income on
local staff,
Linen, local
produce
and
services
Gross
income/
Sales
Half of
80,000
Cycle
repeats
Total money spend and re-spent comes to £255,000
While the local
B&B’s bring in less
initial income
More of it is re-spent in
the local economy –
local staff, local suppliers
and local owners
spending their profits

7. The result is surprising
£255,000
£235,875
Tay B&B's Hotels
TotalsMore money
stays and
circulates in the
local economy
through Business
generated by
local B&B’s than
hotels.

8. £
£
£
£
£
What applies to B&B’s applies to
other local businesses
They keep jobs
and wealth in the
local community
£
Chain Stores don’t!
Source: The Money
Trail>>>>>

9. Half of the turnover of
an independent local
retailer goes back into
the local economy
50%
Leakage
50% goes
back into
Local
economy
supplies and
services outside
the local area
£Turnover
Local businesses often
have strong local supply
chains, spend their profits
locally and employ local
staff

10. …while just 5% of the turnover
of a supermarket does
• Supplies
• VAT
• Rent
• Profit
• Labour
• Shareholders
Re-spend in
local
community
5%
Leakage
95%
Source: Federation of Small
Businesses Keep Trade Local>>>

11. Local retailer: 50% of
money stays locally
£1,000
£500
re-spent
locally
£250
re-spent
locally
£125
re-spent
locally
£1,000
sales
After four rounds,
the initial income +
re-spend amounts
to: £1,875
£500 leaves local
economy
£250
leaves local
economy
£125 leaves
local economy

12. Supermarket: 5% of
money stays locally
£1,000
£50
re-spent
locally
£2.50
re-spent locally
£1,000
sales
After three rounds,
the initial income +
re-spend amounts
to: £1,052.50
£950 leaves
local economy
£47.50
leaves local
economy