1. Strictly confidential How can the wider impacts of transportation assets be assessed? European Transport Conference 2014 Remi Martins-Tonks Consultant 1 October 2014

2. Overview Overview of wider economic impacts Quantifying wider economic impacts Case studies Conclusion 1 October 2014Strictly confidential 2

3. 1 October 2014Strictly confidential Overview of wider economic impacts definition: an impact on welfare that is due to a change in the transport network, and which is additional to user benefits can also benefit the economy as a whole used in transport appraisal arises due to markets being imperfect and the existence of market failure example: labour market improvements 3

4. 1 October 2014Strictly confidential Overview of wider economic impacts Transport appraisal 4 Note: BCR, benefit–cost ratio. Source: Oxera. Environmental impact Benefits Costs Benefits+ WEI Costs Wider economic impact = BCR =BCR (includingWEI) Socialimpact Financial cost of scheme User benefits

5. 1 October 2014Strictly confidential Overview of wider economic impacts Mechanisms 5 Source: Oxera.

6. 1 October 2014Strictly confidential Quantifying wider economic impacts Bottom-up approach quantifies changes to some of the mechanisms agglomeration: change in density of employment increase in competition labour market improvements quantified at the individual or firm level 6

7. 1 October 2014Strictly confidential Quantifying wider economic impacts Top-down approach evaluates the benefits by examining their outcomes productivity investment trade relies on using relationships and parameters derived in the relevant literature issues regarding overlaps and double-counting 7

8. 1 October 2014Strictly confidential Quantifying wider economic impacts Comparison of approaches 8 Bottom-upTop-down Advantages  Avoids double-counting  The calculations are additional  More straightforward, and usually requires less data  No need to know all mechanisms Disadvantages  Not possible to quantify every bottom-up mechanism  More data needed than for top-down approach  May be difficult to find relevant research  Not additive  Less precise—estimation is an order of magnitude only

9. 1 October 2014Strictly confidential Case studies Bottom-up approach: the Port of Dover located in South East England, the Port of Dover is the nearest English port to France estimated the impact of building a new development transport cost savings that could lead to greater output agglomeration structural labour market issues also estimated the overall economic impact of the port included estimating the impact of diverting all of the port’s traffic 9

10. 1 October 2014Strictly confidential 10

11. 1 October 2014Strictly confidential Case studies top-down approach: UK aviation the project looked at the wider contribution of aviation to the UK economy part of analysis evaluated the impact of an increase Air Passenger Duty (APD) increase in tax => increases cost of flying => reduces number of passengers examined the wider impact by looking at effect on three different outcomes connectivity trade investment estimates ranged between £330m and £1.2bn large range and not additive 11

12. 1 October 2014Strictly confidential Case studies Combination of the two approaches: rail freight line in Europe new rail freight line likely to improve connectivity and reduce freight transport costs accounted for bottom-up mechanisms agglomeration labour market improvements top-down approach analysis of similar appraisals assume WEIs represent 25% of total benefits 12

13. Conclusion 1 October 2014Strictly confidential 13 two broad approaches bottom-up and top-down relative advantages and disadvantages possible to combine approaches as sense-checks to improve robustness if data and time are less constrained, it may be beneficial to use bottom-up approach and cross-check with relatively simple top-down approach

14. Contact: Remi Martins-Tonks +44 (0) 20 7776 6628 remi.martins-tonks@oxera.com www.oxera.com Follow us on Twitter @OxeraConsulting Oxera Consulting LLP is a limited liability partnership registered in England No. OC392464, registered office: Park Central, 40/41 Park End Street, Oxford, OX1 1JD, UK. The Brussels office, trading as Oxera Brussels, is registered in Belgium, SETR Oxera Consulting Limited 0883 432 547, registered office: Stephanie Square Centre, Avenue Louise 65, Box 11, 1050 Brussels, Belgium. Oxera Consulting GmbH is registered in Germany, no. HRB 148781 B (Local Court of Charlottenburg), registered office: Torstraße 138, Berlin 10119, Germany. Although every effort has been made to ensure the accuracy of the material and the integrity of the analysis presented herein, the Company accepts no liability for any actions taken on the basis of its contents. No Oxera entity is either authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority. Anyone considering a specific investment should consult their own broker or other investment adviser. We accept no liability for any specific investment decision, which must be at the investor’s own risk. © Oxera, 2014. All rights reserved. Except for the quotation of short passages for the purposes of criticism or review, no part may be used or reproduced without permission. Strictly confidential