Durham Business School (DBS), with backing from Durham City Council, has calculated that Esh Group, the County Durham based construction company, benefited the North East by around £357million in 2007 as a direct result of its ‘Buy Local’ strategy.

DBS has just completed Phase 1 of a two year study into the economic value of Esh Group’s active policy which supports regional suppliers and contractors and is reflected in its recruitment strategy.  The policy is fundamental to the philosophy of Esh Group and its subsidiary companies, which include - Lumsden & Carroll Construction, Dunelm Property Services, Wilkinson Facilities Services, Dunelm Homes, Deerness Fencing, Sones Landscaping - which have always sought to source products, services and labour from the North East wherever possible.

The study has been carried out with support from the Knowledge Transfer Partnerships programme (KTP) which involves high calibre graduates working within companies to help improve competitiveness and productivity through the better use of knowledge, technology and skills that reside within the UK Knowledge Base.

Explaining the findings, Professor Rob Dixon, Dean & Professor of Management Accounting at DBS said:
“The findings of this study are very important.  They clearly show that Esh Group, through employing a conscientious commercial strategy has delivered significant financial benefit to the economic territory in which it is based.

“This is a powerful message for all those seeking to invigorate the North East economy in these challenging times.  Our findings suggest that we need look no further than our own backyard in order to infuse economic vibrancy.”

The methodology employed in the study is known as the Local Multiplier (LM3).  LM3 measures the multiplier effect of income into a local economy over three rounds of spending.  The measuring process tracks these monetary movements within a defined geographic area.   In Esh Group’s case the LM3 figure was high, at 2.38.  The study measured:
• Esh Group’s turnover or procurement and employee budget
• how Esh Group spends that budget
• how suppliers to and employees of Esh Group re-spend their incomes

Professor Dixon continued:
“The key principle is that money entering an economy has a multiplied impact on that economy based on the way people spend and re-spend money.  More re-spending in the local economy results in a higher multiplier effect because more income is generated.

“Esh Group’s very good LM3 figure of 2.38 shows that for every £1 Esh Group receives in income, a further £1.38 is generated in the local economy.  Grossed up against Esh Group’s turnover in 2007 of £150 million this equates to a boost of over £357 million to the local economy.”

Brian Manning, Chief Executive of Esh Group, said:
“We are obviously very pleased with these findings.  It’s really satisfying to have solid evidence that the way we run Esh Group is so beneficial to the North East economy.

“Now we believe it’s important to ask ‘what next’?  We hope that by showing the very real benefits of our ‘buy local’ policy that others may follow our lead.

“This is not only about direct financial spend, it’s about reinvesting in the region’s management teams and the effect of having the decision making process in the region.  Our shareholders and direct employees, along with those of many other indigenous companies, all live and work in the region and their expenditure is therefore predominantly in the region.

“We are not advocating a ring fenced region – we are looking to promote sustainable procurement that looks at price and quality AND also delivers added value benefits to the region such as CSR, local employment and workforce development at all levels, as well as enabling local decision making at the highest level.”

In 2007 the North East Chamber of Commerce initiated the ‘Buy North East’ campaign, aimed at encouraging councils to spend more money buying services from local firms.  James Ramsbotham, Chief Executive of the North East Chamber of Commerce commented:
“The results of this study are inspiring; I am really impressed that Esh Group allowed Durham Business School to examine the business in such depth and detail.

“Buying local makes absolute sound economic common sense.  Clearly there will be exceptions in some companies, however, it is in all our best interests to buy local wherever possible – and here is the hard evidence to prove it.

“We estimate that if all businesses in the North East spent within the region, wherever practicable, with, importantly, suppliers which also adopted this policy the North East economy could be boosted by over £20 billion each year.  Whilst this figure is only an estimate it takes very little imagination to see what a difference it would make!”

The ‘Buy North East’ campaign showed that if public bodies spent just 1% more of their budgets with local contractors and suppliers each year until 2016 - the North-East economy would be boosted by £1.35 billion and 6,000 jobs would be created.  This study reinforces the case for the private sector.  More information is available at www.dur.ac.uk/dbs and www.necc.co.uk and www.esh.uk.com.