EC1
Supply chain spending
Economy
Supply chain spending
Supply chain spending (also called local supply chain spend or procurement spend) refers to the money an organisation pays to its suppliers, specifically those based in the local area, for goods, works, and services needed to deliver a project or contract, or for general organisational management.
What Counts as Supply Chain Spend?
These are the payments a business makes to other firms as part of producing its output, for example:
- Materials and components: raw inputs bought from local suppliers
- Subcontracted services e.g. hiring a local groundworks firm on a construction project
- Energy, utilities, and equipment sourced locally
- Professional services e.g. local legal, accounting, HR, or logistics firms
Key Value
An economic value of £per £1 spent across different types of supplier in a localised area x Local Economic Multiplier
A record of £1 spent with local suppliers by type, and an estimated £X of additional GVA based on location generated in the local economy.
Where does this headline value come from?
The headline value comes from the multiplier which is specifically designed to estimate the additional local GVA generated when money circulates within the local supply chain (HM Treasury, 2022). When a business procures locally:
- The local supplier receives income
- That supplier pays local wages and buys from other local firms
- Those workers and firms spend locally, and so on
This circulation is what the multiplier captures. Spend that leaves the area (imports, external suppliers) is accounted for via the leakage rate (default 20% in the tool), which reduces the multiplier accordingly (HCA, 2014).
Local Economic Multiplier
▸ This MeasureUp value is to generate a Local Economic Multiplier to calculate additional local GVA generated by the local supply chain spending.
▸ It combines sector-specific and regional economic evidence to produce a single multiplier that, when applied to local supply chain spend, estimates the additional GVA generated through local supply-chain effects.
▸ All inputs are sourced from official ONS data and can be adjusted to reflect local circumstances.
MeasureUp have developed a Local Economic Multiplier tool to support users with using this value. This is available HERE and is most useful for Silver level measurement and valuation.
Bronze
Effort
Accuracy
Monetised value:
In bronze level, count only the local spending.
Type of organisation e..g. whether with SME, MSME, VCSE can be recorded in this level. This should be informed by the PPN001 SME and VCSE procurement spend targets policy note.
The note defines SMEs as: SMEs are defined under section 123 of the Act1 as suppliers that:
- have fewer than 250 staff, and
- have a turnover of an amount less than or equal to £44 million, or a balance sheet total of an amount less than or equal to £38 million
And VCSEs as: VCSEs are defined under section 9 of the Procurement Regulations 2024 as ‘a non-governmental organisation that is value-driven and which principally reinvests its surpluses to further social, environmental or cultural objectives.
Silver
Effort
Accuracy
Monetised value:
For every £1 spent with suppliers based in Local Area and industry, an estimated £[X] of additional local GVA is generated, based on confirmed procurement spend and a locally calibrated multiplier.
At Silver level you can estimate your local economic ‘gross value added’ uplift because of your supply chain spend using UK Government published GVA multipliers.
MeasureUp have developed a ‘Local Economic Multiplier’ tool to support users available HERE
Example: Local Economic Multiplier use case
Scenario: Construction project in Greater Manchester South East
| PROJECT DETAILS | |||
| Procurement spend with local suppliers | £2,000,000 | ||
| Sector | Construction | ||
| Region | Greater Manchester South East | ||
| Type of organisation
|
SME | ||
| Leakage rate | 20% | ||
| LOCAL ECONOMIC MULTIPLIER | ||
| Local Economic Multiplier | 0.47 | |
| Every £1 of local procurement generates £0.47 of additional local GVA | ||
| ADDITIONAL LOCAL GVA GENERATED | ||
| Calculation | £2,000,000 × 0.47 | |
| Additional Local GVA | £940,000 | |
| REPORTING SUMMARY | |
| Item | Amount |
| Procurement spend with local suppliers | £2,000,000 |
| Local Economic Multiplier | 0.47 |
| Additional local GVA generated | £940,000 |
| PLAIN ENGLISH SUMMARY |
| By awarding £2m of construction contracts to local suppliers in Greater Manchester South East, this project is estimated to generate an additional £940,000 of new economic value in the local economy through supply-chain effects. |
| ASSUMPTIONS TO DISCLOSE | |
| Sector | Construction |
| Region | Greater Manchester South East (localised using ONS GVA per head) |
| Leakage rate | 20% (default — update with local evidence if available) |
| Status | Results are indicative estimates and subject to sensitivity testing |
Gold
Effort
Accuracy
Monetised value:
At Gold level you are looking to build on your silver estimations by engaging directly with your supply chain to inform your understanding of economic impact.
Gold level can include the following further evidence improvements:
- Supplier-level spend data is verified (e.g. invoices, contracts, financial records), with suppliers geocoded to confirm local presence
- The leakage rate is informed by primary local evidence — for example, a supplier survey on their own local purchasing behaviour, or a commissioned local economic model
- A full sensitivity analysis is presented, varying the GVA-to-output ratio, leakage rate, and multiplier across a plausible range, with low/central/high estimates reported
- Displacement and deadweight are qualitatively assessed (and quantified where evidence allows.
- LM3 ‘Local Multiplier 3’ methodology.
LM3 Method
At Gold level LM3 Method can be used.
The New Economics Foundation (NEF) has developed a method called LM3, which stands for ‘Local Multiplier 3’ to measure local economic impact. The purpose of LM3 is to measure local economic retention, encourage community wealth building and help organisations to improve their local impact.
LM3 captures how money flows through a local economy after an initial spend. It tracks:
– Direct spend (e.g. by a project),
– How that money is re-spent by employees and suppliers, and
– How much stays in the local area.
Round 1
Your first step is to determine the initial income. This may be the income of an organisation, such as a business or charity; or of a group of people, such as cashpoint users or grant recipients.
Round 2
In Round 2, you will determine how much your organisation spends locally versus non-locally. The principal items organisations spend money on in the local area tend to be: staff, contractors and sub-contractors, suppliers of goods and services, investment in the company, and rent/mortgage.
Round 3
In Round 3, you will determine how much the various local people and organisations who receive money from your organisation then re-spend their incomes. The organisations will spend money on similar local items as your organisation. The principal items people spend money on in the local area tend to be food, clothing, entertainment, and rent/mortgage.
LM3 =
(Round1+Round2+Round3)Round 1Round1+Round2+Round3Round 1
The details of the LM3 multiplier is available in the following link: https://new-economicsf.files.svdcdn.com/production/files/money-trial.pdf?dm=1601649770
Support in developing your Gold approach is available through the MeasureUp partners, so please do reach out to Impact, State of Life or PRD.
Gold+
Effort
Accuracy
Monetised value:
At the Gold+ level, you are building on your Gold value calculation by assessing the value against the counterfactual, or ‘what would have happened anyway’.
To do this you should identify a control group suitable to assess in line with your intervention, in order to more accurately attribute any changes to your intervention.
You could also consider any other discount or causality elements linked to your activity.
Support in developing your Gold+ counterfactual, causality and discount approach is available through the Measure Up partners, so please do reach out to Impact, State of Life or PRD.
| Value Type: | Activity |
What's this?
This is the type of value. Some values are outcomes, which means many different interventions might lead to them, others are ‘activities’ , specific interventions that have a set value. |
|---|---|---|
| UN SDG Categories: |
|
What's this?
The UN Sustainable Development Goals are global goals adopted in 2015 for all signed up nations to achieve for us to have a sustainable global future by 2030. There are 17 Goals that address the global challenges we face, including those related to poverty, inequality, climate change, environmental degradation, peace and justice. The Goals are all interconnected, and in order to leave no one behind, it is important that we achieve them all by 2030. |
| 2020 Social Value Models: |
|
What's this?
PPN 06/20 Taking account of social value in the award of central government contracts introduced the Central Government Social Value Model in 2020 which all Central Government contracting authorities must use in their in scope procurements. It consists of 5 themes, 8 policy outcomes, and 24 Model Award Criteria which outline key priority areas to achieve more social value. |
| 2025 Social Value Models: |
|
What's this?
PPN 06/20 was superseded by PPN 002 Taking account of social value in the award of contracts, published in February 2025 in line with the Royal assent of the Procurement Act 2023. This PPN outlined the requirement to use the new 2025 Central Government Social Value Model. The Model applies to all Central Government procurements commencing on or after 1 October 2025 under the Procurement Act 2023. Out of scope procurements can choose to apply the model but are not required to do so. The updated model is structured around 5 government missions and 8 outcomes, with 17 Model Award Criteria, and a mandatory minimum 10% weighting of the total evaluation score assigned to social value. |
Evidence
Measure Up focuses on empowering you to numerically measure the impact you’re having. We recommend that numeric reports are backed up with stories and other types of evidence to help illustrate, in human terms, the impact that’s being made on individuals.
We recommend seeing consent from one or more participants in your intervention to collect and tell their story. This should include a little background on the participant, a summing up of life before the intervention, the human impact of the intervention, and the longer term (if known) impact on the person’s life outside of, and after, the intervention.
Providing photographs, audio recordings, video interviews or even artefacts from the intervention (for example, writing, paintings, music, etc from creative interventions) can add more colour, and convey the emotional impact of interventions more directly.
In some cases it’s appropriate to anonymise or abbreviate the personal information of case study participants. No story should be published or shared without the recorded consent of the individual(s) it concerns. Individuals continue to own the rights to their stories and if they request you stop sharing the story or making it available online you should do so promptly and without need for justification.
Feedback
Measure Up is an open, collaborative and transparent. If you have any suggestions or feedback on our pragmatic, recommended approach to measuring Life Satisfaction please get in touch so we can share and discuss this at our next Advisory Group meeting.
More help
We want to empower anyone to perform and improve their impact measurement – without needing a degree in economics.
If you need any more help, or just someone to do the legwork for you we can help signpost you to software, training and consultancy to help you get to grips with the impact you’re having.
