3 February 2017
Local spending is worth four times more to a neighbourhood than cash paid to a multinational. Brixton and Bristol offer lessons for success.
The idea of supporting local businesses over multinationals has gained so much traction in recent years that several neighbourhoods have gone as far as launching their own local currency. The likes of Bristol, Brixton, Totnes, Exeter, Kingston and Lewes were joined, just in time for Christmas, by the Liverpool Local Pound. Glasgow and Birmingham are expected to follow suit within the next few months.
The economics are simple, according to The Guild of Independent Currencies, an umbrella movement, which links many of the schemes. It cites research by LM3, which powers an online tool for measuring the effectiveness of local spending. The researchers’ number-crunching suggests the local jobs and tax created by shopping nearby means £1 spent locally can benefit the neighbourhood’s economy to the tune of £1.76. Of every £1 spent locally, only 36p will leave the area, making local spending worth four times more to a neighbourhood than cash handed over at a multinational.
Local business owner, Candice Fonseca, says although it is early days for the Liverpool Pound, it is already starting to drive additional footfall at her restaurant, Fonseca’s. This is good for revenue as well as building closer ties with new diners who want to make a difference to their community.
“We’re already getting new customers coming in wanting to pay with new currency partly out of curiosity as well as a belief it’s the right thing to do,” she says.
“It’s a great conversation starter because when you pay, you see each other’s name and picture on your device, so you’re already building a relationship. From the chats we’re having, it seems people understand you can’t moan about your high street being packed with charity shops unless you do something about it and support local, independent businesses.”
Amos Meiri, the CEO of tech startup, Colu, which powers the Liverpool Pound, claims the idea is catching on. More than 3,000 users in Liverpool already signed up to its app, which stores the local currency. It was launched with 25 participating merchants and, he claims, the rate of sign ups looks to be seeing a steady growth of around 25 new merchants each month.
The Liverpool Pound charges these companies £20 per month to accept the currency and will charge 5% in the future if they take money out into a sterling bank account, once business-to-business transactions are made available on the platform. The idea, Meiri states, is to ensure the money keeps flowing around the city and to keep people engaged with the notion of shopping locally.
Empower businesses to spend
If Liverpool is looking for lessons on how local currencies fare over the years, it would do well to look at the Bristol Pound, the first city-wide electronic and paper currency in the UK, launched four and a half years ago. Graham Woodruff, chief technology officer at the Bristol Pound and coordinator at the Guild of Independent Currencies, reveals the scheme has 2,000 registered users who can choose from 700 small, independent businesses who accept electronic payments via its app. Half of the merchants also accept the city’s bank notes. To date, the scheme has been responsible for two million Bristol Pounds being spent, and retained, in the area.
A crucial factor in running a successful local currency scheme is helping businesses spend the currency they receive. “Unless they’re lucky enough to have local suppliers, a lot of businesses struggle to spend a local currency, and that’s always one of the biggest challenges with any project,” says Woodruff.
“Our local council has been great. It accepts Bristol Pounds for business rates and for any individual paying council tax. We’ve also got an energy company which is fairly local, Good Energy, which accepts the currency. Being able to pay your business tax and utility bills with the local pound is a huge attraction for businesses.”
Another major challenge facing a local currency can be keeping the momentum going. The Brixton Pound has had a lot of success in getting small businesses to sign up and, in so doing, the not-for-profit organisation funds community projects and a “pay what you think it’s worth” cafe.
Liam Brown, co-owner of restaurant and bar Seven at Brixton, is a huge fan of the currency, which he uses to buy supplies, where possible, and to pay for staff entertainment nearby. However, the main point he would stress to towns and cities launching a local currency is that it needs continued support to be kept relevant in ever-changing communities.
“In the early years, the Brixton Pound certainly brought a lot of custom in,” he says. “Brixton is now a location with a lot of people from all around London, so the proportion of our revenue made up by Brixton pounds has dropped. So, the challenge is remaining an important part of the locality during these changes. New businesses and customers need to feel a desire to be a part of this currency and I believe Lambeth council need to get behind the scheme and help give it the exposure it needs on the high street.”
Tom Shaklhi, general manager at the Brixton Pound points out that Lambeth Council is, he believes, the only local authority that both accepts local currency for tax payments and offers to pay staff a proportion of their salary in Brixton Pounds.
Perhaps the ultimate argument for how established local currencies are better for the region’s economy comes from Andy Keith-Smith who co-runs Beast Clothing and Hey JoJo fashion and accessories stalls in Bristol. He says the Bristol Pound brings in new customers who are younger than his usual customers.
“We’re getting a lot more young people shopping with us because they’re fine with electronic payments and they get the importance of supporting local businesses and employers,” he says.
“Older people can be a little more cynical and some even ask if it’s a tax dodge. The irony is, it’s the exact opposite. If you think about spending your cash in a multinational with offshore accounting structures or spending the Bristol Pound with a local business, which one is the more likely to be paying more UK tax?”