For many years until recently, Preston had consistently failed to deliver its full economic potential: it attracted very little inward investment between 2004 and 2008, and had suffered since 2008 as a result of the financial crisis and subsequent austerity measures. In 2013, Preston City Council and the Centre for Local Economic Strategies sought to reverse this trend. They started to reform the city’s public procurement processes by “harnessing the potential of anchor institutions” via community wealth building. In 2016, they managed to invest GBP4 million to benefit their community directly, and the “Preston Model” has since become an economic policy proposal for the Labour Party and a model for other small cities.
Preston is a city of around 140,00 inhabitants in Central Lancashire in the UK. With the 2008/2009 financial crisis and the subsequent steep austerity measures enforced out by the UK government, there has been a significant decline of wealth in the community. It has therefore faced a buildup of severe socioeconomic challenges.
In May 2009, the Northwest Regional Development Agency (NRDA) published a report entitled Economic Potential of Preston. It pointed out that Central Lancashire had consistently failed to deliver its full economic potential during the previous decade. Regarding the region’s failure to attract a significant share of Northwest FDI over recent years, NRDA Inward Investment Team Statistics indicate that the region had only a 3 percent share of inward investment projects between 2004 and 2008. Preston’s VAT stock grew only by 6.1 percent between 2001 and 2008, less than half of the national UK rate.
While the employment rate in the public sector has increased by over 15.000 jobs in mainly administrative and secretarial roles, the gross-value-added (GVA) from those jobs has not kept pace. “Central Lancashire… has posted an employment increase of 19 percent, GVA has grown by 29 percent. By implication, if productivity growth ratio had kept pace with the regional average then GVA growth should have been 67 percent.” Earnings in Preston are also comparatively lower than in the nearby cities of Liverpool and Manchester, trailing the UK average wage earnings by 7 percent.
There were a number of indicators of decline in Preston’s socioeconomic situation in the 2000s: population growth had begun to stagnate; retail floor space had increased by only 2 percent since between 1998 and 2009; “a significant amount [of housing] in east Preston remained of low price and low quality”; and 22 percent of children living in Preston were classified as living below the poverty line.
Since 2011, Preston City Council has been working with the Mancunian thinktank, The Centre for Local Economic Strategies (CLES), to tackle the economic challenges faced by the city. In 2013, they entered into an official strategic partnership to reform the city’s public procurement processes by “harnessing the potential of anchor institutions”. Based on previous work conducted in Birmingham and Manchester, “anchor institutions” in this context were defined as local institutions or local enterprises, such as councils, universities and hospitals, which have deep roots in their local community. They have a specific mission, invested capital, close relationships with customers, employees or vendors in their local area, and they control significant economic, human, intellectual and institutional resources there.
For example, an anchor institution such as a hospital would choose to be supplied by a local dry-cleaning company instead of outsourcing the service to a supplier outside the region. The aim in Preston was to generate more local wealth through anchor institutions by encouraging them to transfer external spending into the local economy via “progressive” procurement processes. In Preston itself, the six anchor institutions that were engaged throughout the initiative were:
- Preston City Council
- Lancashire County Council
- Lancashire Constabulary
- University of Central Lancashire (UCLAN)
- Preston’s College, a further education institution
- Community Gateway Association.
On paper, CLES modelled their reform on “community wealth building”, a model previously developed in the American city of Cleveland, Ohio by The Democracy Collaborative. It is a collection of policy approaches and models that utilise specific policy strategies to make it more difficult for “local financial resources to leak out” of the local economy. They leverage procurement rules and investments from anchor institutions for “community benefiting purposes”.
In order to achieve these objectives, the community wealth building model aims to:
- “Increase asset ownership
- “Anchor jobs locally by broadening ownership over capital
- “Help achieve key environmental goals (including decreasing carbon emissions)
- “Expand the provision of public services by strengthening the municipal tax base
- “Ensure local economic stability.”
Preston City Council adopted this approach and applied it to the needs of their city, calling it “the Preston Model”. Whenever the local economy was unable to supply the goods and services needed by anchor institutions, CLES and the city council advocated for the creation of worker-owned cooperatives. These were meant to fill the gaps in the local economy, where the local economy was as yet unable to deliver the requested goods and services.
The public impact
Within a few years of changing the local procurement processes in Preston, the city has become a model for how local economies in the UK can generate their own wealth. In times of austerity measures and budget cuts by local authorities of up to 56 percent, the Preston model has flourished. During the 2016 UK general election, Jeremy Corbyn, the Labour Party leader, praised it as a model town for economic development, and other Labour MPs began to endorse the model.
The public impact of the community wealth building efforts in Preston was significant, with GBP4 million redirected to Preston from previously unsuccessful inward investment. In 2016, three years after the initiative started, public service spending in the local community had gone up by GBP74 million in Preston and by GBP200 million in the wider Lancashire area. “In 2012/13, out of GBP750 million spent on goods and services by six anchor institutions, 5 percent was spent in Preston and 39 percent in Lancashire as a whole. By 2016/17, out of GBP620 million spent on goods and services by the same anchor institutions, 19 percent was spent in Preston and 81 percent in Lancashire as a whole.” This means that, even though funding from the central government to local councils has decreased, local spending has increased.
Apart from the increase in local procurement spending, the community wealth building efforts of the Preston model has had additional public impact because it created a sense of community and belonging for the people of Preston. “If there are opportunities for making a success of life in Preston, a place where people have a sense of identity and belonging, then social capital is potentially increased, pride of place is enhanced, a sense of citizenship is developed, and democracy becomes relevant and vital.”
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What did and didn't work
Stakeholder Engagement Good
The main external stakeholder is the US-based organisation The Democracy Collaborative. Before CLES and Preston City Council entered into their strategic partnership in 2013, they attended events together and organised talks in 2012 to present The Democracy Collaborative’s community wealth building successes in Cleveland. This organisation came up with a practical model, which was then adapted by CLES for the specific context in Preston. CLES and Preston council ensured that The Democracy Collaborative was involved in the initial planning phase of the project, and Councillor Matthew Brown later became a fellow at the institute (see Evidence below). Furthermore, Preston City Council started to engage with the EU and with other members of Cities in Europe to advocate for more progressive EU-wide procurement rules.
The main internal stakeholders are the six anchor institutions based in Preston or the county of Lancashire: Preston City Council, Lancashire County Council, Lancashire Constabulary, UCLAN, Preston’s College, and the Community Gateway Association (see also The Initiative above). CLES raised awareness of community wealth building with these institutions, and actively involved them in discussing the new public procurement approach in various meetings, events and analyses.
The first step in engaging potential anchor institutions was to set up face-to-face meetings with lead politicians to introduce the principles of community wealth building at senior levels of their organisations. The institution had to be willing to make changes in their procurement behaviour, share their data on procurement spending, and grant CLES access to their procurement officers. Once they had agreed to this, they were identified as an official anchor institution, and CLES analysed their procurement spending and its spending impact on the local economy.
After the analysis was ready, procurement officers, CEOs, and political leaders were brought together to discuss the best procurement approaches and reach a “common and agreed statement of intent across the institutions around how procurement spend could be maximised for the benefit of the local economy and residents”. For example, one of the key behavioural changes that came about for the Lancashire Constabulary was their new procurement practices to monitor their suppliers “against social value indicators such as: completion of a set number of NVQs (National Vocational Qualifications) per GBP1 million of contract value; 31 percent of project spend being within 10 miles of the site; and 75 percent on construction value to be through SMEs”.
Political Commitment Strong
A mix of strong support from the opposition Labour Party leadership, as well as the individual leadership of Councillor Matthew Brown, was a big driving force behind the success of the Preston Model. While there was no particular support from the Conservative government, Jeremy Corbyn, the leader of the opposition, declared it a “model town” of the economic policies he is advocating – known as “Corbynomics” – and the local leadership of the city of Preston also fully backed this model.
Former Labour leader Ed Miliband, shadow chancellor of the exchequer John McDonnell, and the actor Martin Sheen have all visited Preston to learn about the Preston model. Ed Miliband said at the time that: “Preston has been a trailblazer for innovative ways to build prosperity in local communities. There is increasing recognition of the Preston Model around the country and I was here to learn more about it.” The opposition Labour Party officially adopted community wealth building into their economic policy proposal in 2018. Yet, major support from the central Conservative government is missing. They criticise Jeremy Corbyn and have a broadly critical stance towards his economic policies, although with no direct reference to the Preston Model.
The individual leadership of Matthew Brown was arguably a more important driving force behind the initiative’s success. “He believes that as a result of the financial crisis and its aftermath, people are ready to hear a radically different way of thinking about politics and that Corbyn can win a Labour Party victory in 2020. Until then, Preston [aims for] what Brown believes are the foundations of a new economy away from the City and Westminster.” He was already familiar with the model of community wealth building and the success it has had in Cleveland (see Evidence below). He formed the connection between The Democracy Collaborative, CLES and the city council, and his enthusiasm is largely credited with taking this initiative forward.
Public Confidence Good
While there is no direct public opinion survey on community wealth building in Preston, public confidence in the working conditions and “liveability” of the city seem to have increased.
In 2011, Preston was poised to refurbish its city centre with a GBP700 million project, but it fell through and no refurbishments were completed, thus losing a much-needed economic stimulus. Subsequently, in 2015 the Royal Society for Public Health’s announced that it was home to the “unhealthiest city centre in the UK”. Furthermore, Preston was infamously named the “suicide capital of the UK”, as it had the highest suicide rate in the country: “18.6 suicides a year in the city for every 100,000 population between 2012-2014”.
However, in 2016 Preston was ranked as the best city in north-west England to live and work in, beating both Manchester and Liverpool. “The city ranked 19th overall in the 2016 Good Growth for Cities index, which measures the performance of 42 UK cities against 10 categories including jobs, income, work-life balance, transport, skills, environment and the house price to earnings ratio.” Moreover, the impact of public procurement flowing back into the local economy in Preston assisted local owners of small businesses. For example, “Conlon Construction, a family-run company, has hired five local staff and three graduate apprentices since it was awarded public sector contracts, including one to build a new covered market hall. Local farmers profited when the council divided up its GBP1.6m food budget for canteen sandwich fillings, yoghurts and fruit and simplified the tender process. A local artist collective called the Birley was given an ex-council building as studio space, saving it from moving to Manchester or Liverpool.” Taken together, these trends suggest an increase in public confidence on living and working in Preston.
Clear Objectives Strong
The overall goal of the Preston community wealth building model was to stop internal spending from flowing out of the local economy by changing the procurement behaviour of anchor institutions. To achieve this, the six anchor institutions (see also The Initiative above) agreed to the following vision: “A long term collaborative commitment to community wealth building in Lancashire for influenceable spend”.The vision has the following objectives:
- “To simplify the process of procurement, in order to encourage a diversity of organisations to bid for opportunities;
- To actively reduce levels of spend leaking out of the Preston and Lancashire economies, with consideration given on an anchor to anchor basis as to the scale of this reduction;
- To understand the Preston and wider Lancashire business base in more detail, and collectively encourage businesses and social enterprises to bid for opportunities;
- To develop the capacity of Preston and Lancashire based businesses to bid for opportunities;
- To collectively raise awareness of procurement opportunities amongst Preston and Lancashire based businesses;
- To identify services where there is potential for cooperative models of delivery”.
CLES based the community wealth building efforts in Preston on a mixture of their own experience from similar projects in Manchester and elsewhere and on the experience of The Democracy Collaborative, which had first employed the model in Cleveland.
The concept of community wealth building is considered to have started with the Mondragon Cooperation in the Basque country, where a federation of worker cooperatives was set up in 1956. It was further developed by the American scholar Ted Howard in the late 2000s, and was applied in practice in Cleveland by The Democracy Collaborative. Worker-owned cooperative laundry services and an energy company were set up to supply the local hospitals. They managed to become profitable, and these enterprises now employ over 150 people. “The plan is to increase the number of employees to at least 1,000.”
Council leader Peter Ranking and Councillor Matthew Brown were aware of the success of community wealth building in Cleveland and wanted to trial the model in Preston. They invited Ted Howard and The Democracy Collaborative to give a talk in Preston in 2012 to present their ideas, and both also attended an event on community wealth building in London, together with CLES.
CLES, in turn, relied heavily on the theoretical and practical approaches applied in Cleveland, but had already modified the concept of community wealth building to fit the UK context. It had created and trialled this approach in Manchester and Birmingham before entering into an official strategic partnership with Preston City Council in 2013. “Preston City Council acknowledged the pioneering work previously undertaken by CLES in Manchester and other localities, around progressive procurement processes and practices, and wanted to think through how similar benefits could be realised in Preston and Lancashire”.
Based on their long-standing relationship, CLES and Preston City Council had well-established HR capabilities and a sound method of working together. Before their strategic partnership on community wealth building, CLES had already provided several research and training services to the council, including addressing the challenges involved in paying the minimum wage in Preston, while Matthew Brown became a fellow at the thinktank.
There were no legal challenges to the initiative in Preston, as the city council and CLES fully complied with EU rules on public procurement. These laws aim to prevent favouritism and encourage non-discrimination among bidders from all over Europe when public bodies award procurement contracts, especially those above GBP180,000. This could have been a feasibility challenge for the community wealth building model, as the model favours bidders that have a positive impact on the local economy, not those that necessarily provide the most economic bid.
However, EU Law allows for discretion in interpreting the procurement process, but it could have led to a successful legal challenge if any large procurement contracts awarded by anchor institutions to local businesses were found to be discriminatory. To overcome this potential obstacle, Preston actively sought to define more concrete EU-wide rules and practices that worked within the EU legal system, to incorporate community wealth building and ensure long-term feasibility. “Preston has been working, through [the] Procure (URBACT) project over the past three years with the European Commission and ten other cities across Europe on how to develop best practice on procurement which works for local residents and local businesses as well as for those anchor institutions letting the contracts.”
For this project, the CLES project team located itself in Preston rather than their usual headquarters in Manchester. Their management style was very inclusive, and they invited anchor institutions to events and meetings to raise awareness with them and help make procurement processes work for them, rather than impose regulations top down. They stated that the first events they facilitated “sought to create a common and agreed statement of intent across the institutions around how procurement spend could be maximised for the benefit of the local economy and residents”. Their step-by-step approach (see Clear Objectives above) meant that the management team was able to rebalance the project as a result of any new research findings, to include as many anchor institutions as were willing to participate, and to work out the exact needs of the local supply chains.
The model’s critics have warned, however, that there is a balance to be struck between effective procurement rules and economic planning based on the location of prospective suppliers. In a free market economy, they argue, procurement should transcend party politics and be based on providing the best value goods and services. Yet the Preston Model favours businesses located in a specific area, reducing the incentive to innovate and provide the best goods and services from any supplier.
If the model were adopted by all UK councils, critics argued, net economic growth would decline. Therefore, “to some critics, [the Preston Model] sounds like a damaging form of town hall protectionism – the municipal equivalent of a siege economy”. Preston City Council has recognised these concerns, and has countered them by arguing that the model “would only be ‘protectionist’ if an institution offered a contract to an inferior local contractor to shield them from competition of better performing and more keenly priced competitors. That isn’t the case here. Under a community wealth building approach, a local contractor will only be awarded a contract if they can show that they can credibly compete on price, performance and quality.”
Progress on most of the objectives of Preston community building model (outlined in the Clear objectives section) was evaluated by CLES in a report that outlined the context, achievements and next steps, three years after the start of the collaboration with Preston City Council. CLES published the statistics of their spending analysis on their website, and the results indicated that Preston’s organisations were spending 18.2 percent of their investments in 2016, up from 5.2 percent in 2013. In addition, several newspaper reports, analyses and interviews helped promote the success of community wealth building in the city.
Furthermore, CLES was also to contribute to community wealth building by enhancing the supply chain activities of anchor institutions. To this end, CLES developed a “measurement framework which sought to explore the impact of existing activities (supplier behaviour, Living Wage campaign, physical developments) and potential scope of other community wealth building activities and their possible impact (complementary currencies, pension funds, community land trusts)”
Lastly, to contribute to the research already available and include key environmental goals, “CLES undertook survey and case study work with a sample of Preston-based businesses to understand the contribution they made to the local economy and [to] addressing social and environmental issues.”
There was a clear alignment of interests between CLES, Preston City Council, and the anchor institutions involved in the policy, because CLES made sure that all the participants supported and understood the aim of community wealth building. The initial face-to-face meetings between lead politicians and officers at the anchor institutions meant that the initiative began on a sound footing.
Under CLES’s management, everyone was involved in finding their own best practice for procurement, based on an in-depth analysis of each institution. Subsequently, these were discussed with the council and the procurement officer to align on a procurement spending pattern that benefited the local economy, while also making the procurement process more efficient.