Analysis and assessment of SWC good practice across Europe – The Social and Economic return on Investment

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This report was commissioned by Nièvre Numérique (FR) and the Province of Drenthe (NL) on behalf of the MICROPOL partnership

Financed by the INTERREG IVC Programme over its three year lifespan 2012 – 2014), MICROPOL is a transnational partnership project which focused on improving the sustainability and growth of rural areas through the development of Smart Work Centres (SWCs). Focused on research and knowledge exchange, the project soughtto build and share an evidence base to inform the development of policy and practice to ensure that more and better SWCs are established to bring social, economic and environmental benefits to non-metropolitan or rural areas across Europe. Author: Marco Forzati, marco.forzati@acreo.se With support from Nièvre Numérique and the Province of Drenthe

Stockholm, December 2014

Acreo Swedish ICT AB Electrum 236 16440 Stockholm

Acreo Report: acr058798

The report can be cited as:

M. Forzati, Analysis and assessment of SWC good practices across Europe, Acreo Rapport acr0 58798, Stockholm, december 2014.

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Contents

1 Introduction and background.......................................................................... 4 1.1 Smart Work Centres ............................................................................................4 1.2 The Micropol project ..........................................................................................4 1.3 About this study ...................................................................................................4

2 Study methodology ........................................................................................... 5 2.1 Bottom-up vs. Macroeconomic approach .......................................................5 2.2 The ACES methodology ....................................................................................6 2.2.1 Area indicators (A) ..............................................................................................7 2.2.2 SWC indicators (C) ..............................................................................................7 2.2.3 Socio-economic return indicators (E and S) ...................................................8 2.3 SEROI Calculation model .................................................................................8 2.3.1 Estimating the investment .................................................................................9 2.3.2 Employment .........................................................................................................9 2.3.3 Business effects ....................................................................................................9 2.3.4 Economic growth (GDP) ............................................................................... 10 2.3.5 Other economic effects ................................................................................... 10 2.3.6 Social effects ...................................................................................................... 10

3 SEROI of selected Smart Work Centres across Europe ........................... 11 3.1 Nivernais Morvan (F) ...................................................................................... 11 3.1.1 Investment ......................................................................................................... 12 3.1.2 Employment ...................................................................................................... 12 3.1.3 Business effects ................................................................................................. 12 3.1.4 Economic growth (GDP) ............................................................................... 12 3.1.5 Other social and economic effects ................................................................ 13 3.2 Brønderslev (DK) ............................................................................................. 13 3.2.1 Investment ......................................................................................................... 13 3.2.2 Employment ...................................................................................................... 14 3.2.3 Business effects ................................................................................................. 14 3.2.4 Economic growth (GDP) ............................................................................... 14 3.3 Wooler (UK) ..................................................................................................... 15 3.3.1 Investment ......................................................................................................... 15 3.3.2 Employment ...................................................................................................... 15 3.3.3 Business effects ................................................................................................. 16 3.3.4 Economic growth (GDP) ............................................................................... 16 3.4 Zuidoost-Drenthe (NL) .................................................................................. 17 3.4.1 Investment ......................................................................................................... 17 3.4.2 Employment ...................................................................................................... 17 3.4.3 Business effects ................................................................................................. 17 3.4.4 Economic growth (GDP) ............................................................................... 18 3.4.5 Other social and economic effects ................................................................ 18

4 Conclusions and future work ........................................................................ 19

A. Appendix – questionnaire for online survey ............................................... 20

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Introduction and background

This study aims at providing the Micropol project with a methodological tool for the quantitative analysis of the socio-economic analysis of Smart Work Centre (SWC) in Europe, as well as the application of the tool to one of the SWC participating in the Micropol project.

Smart Work Centres SWCs can be defined as business spaces that help knowledge based workers have a flexible base, allowing for interaction and collaboration and providing high level ICT infrastructure and capabilities. SWCs also operate in a very flexible way, with opportunities for short term and shared use and provide a variety of working spaces ranging from flexible desk, office and meeting spaces to shared facilities and informal social spaces. SWCs offer a support infrastructure providing a range of managerial, administrative, technical and social support services.

By providing an environment to facilitate on and offline collaboration between enterprises and entrepreneurs through ‘co-working’1, SWCs are not simply physical spaces but should be understood as ‘human spaces’ which facilitate collaboration between individuals and organisations.

The Micropol project Financed by the INTERREG IVC Programme, MICPROPOL2 is a transnational project aiming to support the sustainability and growth of rural areas through the development of Smart Work Centres (SWCs). Focused on research and knowledge exchange, the project seeks to build and share an evidence base to inform the development of policy and practice to ensure that more and better SWCs are established to bring social, economic and environmental benefits to non-metropolitan or rural areas across Europe, many of which are experiencing ageing and declining populations.

About this study This study aims at providing the Micropol project with a methodological tool for the quantitative analysis of the socio-economic analysis of Smart Work Centre (SWC) in Europe, as well as the application of the tool to one of the SWC participating in the Micropol project.

The study is the result of a number of study visits to identify relevant factors, a methodology development, data collection and processing. Data was mainly collected by means of a survey among the project partners.

1 http://www.deskmag.com/en/coworking-spaces/3

2 http://MICROPOL-interreg.eu/

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Study methodology The method is summarised in Figure 1. The goal is to evaluate the Socio-economic return on Investment (SEROI) for SWC x, in order to on one hand be able to evaluate and benchmark its success, and on the other hand to learn what makes a SWC successful (the potential success factors). As is illustrated in the figure, a certain SWC x is characterised and shaped by a number of characteristics: we call these the potential success factors. These can be services provided, ownership type and structure, finance and business models, types of users, location, as well as other factors that are specific to the area in which the SWC is being set up (see section 2).

Depending on the characteristics (potential success factors) of the SWC, a specific investment into the SWC (quantified in euros) will impact a number of socio-economic factors. These factors can be quantified using some indicators, and potentially summarised into one or more success index(es).

Where possible, these success indices can be expressed as socio-economic return, to be quantified in euros, in which case a classic-definition of a socio-economic return can be obtained. It may be difficult or undesirable to quantify or present some of the indicators in monetary terms, in which case, indices can be preferable.

Figure 1 – Methodology proposed for the SEROI of a SWC.

Bottom-up vs. Macroeconomic approach There are essentially two approaches to calculate the socio-economic return:

o Bottom-up approach: a limited number of SWC is identified and analysed at a case study level, and data is collected by means of database consultation, interviews with users (companies and employees), key people in the initiation and running of the SWC project, local political representatives, private citizens.

o Macroeconomic approach: few easy-to-measures factors to be evaluated as well as control variables (e.g. entrepreneurial index) are defined and measured for a number regions/municipalities where SWC of different types (as well as control regions with no SWC); one catch-all success index (e.g. total socio-economic return, or number of jobs created) and measured for such regions; and a correlation analysis is run using multivariate analysis with time shift to control for backward causality.

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The latter implies data collection through time, and statistical analysis. In essence, what is sought is how the establishment of the SWC impacts the current trend (which in many cases is probably negative). This method has the advantage of building on independently collected data removing some of the subjectivity in the evaluation of the SWC impact. Moreover, it draws general conclusions based on a large sample, rather than on specific few cases. In order for this methodology to be viable, however, a large number of samples (regions with and without SWC) is needed, and a number of factors possibly impacting the indicators need to be measured and included in the model. This renders this method impractical in most cases.

The first method collects direct data from specific examples, often by interviewing people on specific effects, or by running surveys. It is often difficult to estimate specific effects, and the answers may be not completely objective.

For this study, the statistical study was not a viable solution due to the limited number of existing SWC experiences; we relied upon the bottom-up approach.

Data was collected by means of:

o Survey results and other data and case studies collected by Micropol

o Collection of other case studies published elsewhere

o Interviews with key persons involved in each SWC.

The ACES methodology Given the generic model described above, we defined a number of indicators to measure potential success factors (to define the type of SWC) and the socio-economic indicators and impact.

Hence, four types of indicators are identified: two of which describe the geographic area and the centre, and two which describe the impact that the centre has had on the area:

A. Area: indicators about the rural area in which the smart work centre operates

C. Centre: indicators about the smart work centre itself

E. Economic impact: Indicators about the economic impact of the centre

S. Social impact: Indicators about the social, demographic and environmental impact of the centre

This structure was used to collect data.

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Area indicators (A) By area, we mean the territory that the SWC operates in and which it is supposed to serve. This could be a region, a county, province, département, municipality or other.

Figure 2 – Area indicators

The area indicators contain demographic indicators (A2), such as the total population of the region, the age-structure composition of the population; and macroeconomic indicators (A3), such as unemployment rate, average net monthly salary, gross regional product, sector distribution of working population (agriculture, industry, services).

SWC indicators (C) The C indicators contain information about the ownership structure (C1), meaning the proportion of the centre owned by public, private and community stakeholders, about the quality of broadband connectivity (C5), services and amenities available (C6), as well as the usage of the centre such as number available office spaces (in private offices or as dedicated desks in open space configuration), occupancy rate, places are available in a co-working space, daily visitors and average time spent. Included here, are also some financial figures characterising the actual investment, such as initial investment (C2) and operational cost (C3), over which we want to measure the socio-economic return.

Figure 3 – Smart work centre indicators

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Socio-economic return indicators (E and S) The last set of indicators to collect is the indicators measuring the actual socio-economic return. These are divided in social (S) and economic (E) indicators. The social indicators are those that are hard to turn into monetary terms, while the economic indicators include a social dimension, but are more easily quantifiable in terms of euros.

Figure 4 – Socio-economic return indicators

SEROI Calculation model Starting from the data collected through the ACES survey, a number of indices can be identified to evaluate and benchmark the success of a SWC, defined primarily in terms of:

o Number of enterprises started in the area as a direct or indirect effect of the SWC;

o Number of jobs created as a direct or indirect effect of the SWC;

o Improved population development as an effect of the improved economic situations according to the points above;

o Improved local authority cash flow as an effect of the improved economic situations according to the points above; (following methodology used in reference project 1, 2, 4 and 6 described in section;

o Improved quality of life to be quantified in terms of e.g. reduced hours spent travelling, improved service offers for citizens etc.;

o Environmental impact, to be quantified in e.g. reduced CO2 emission.

The relevance of each factor will vary from centre to centre. In the following sections, we propose a number of quantifiable effects, and propose a model to calculate their values starting from available data. It is suggested that the model be used in future case-specific studies, and be accompanied by a rigorous data collection.

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Estimating the investment The investment in the centre consists broadly in two parts: a capital expenditure (CAPEX) to set up the centre, and an operational cost. Assuming the capital expenditure mainly consists in an investment I0 done at one point in time, Y years ago, its net present value is:

CAPEX = I0 ∙ (1+rd) Y, (3)

where rd is the discount rate (expressing the opportunity cost of money).

The operational cost, or operational expenditure (OPEX) is per definition a recurring investment that accumulates over the years, and

OPEX = ∑y=1 :Y Cy ∙ (1+rd)y, (4)

where Cy is the net yearly operational cost for year y (i.e. reduced with possible revenues which therefore may also be negative).

The net present value (NPV) of the total investment over the Y years then becomes:

INV = CAPEX + OPEX.

Employment One of the objectives for SWCs is often to create or save jobs that would otherwise go lost in the area. These (Jc) are the sum of jobs created at SWC, or outside as a direct or direct effect of the SWC. We can then identify a change in employment as:

re = Jc / (Pwa ∙ rlp,wa), (5)

where Pwa is the total working-age population (age 18-64 years) and rlp,wa is the labour participation rate in that age group.

Business effects Business effects are of two main characters:

The business creation effect

The business hub effect

The first effect is obvious to measure how many businesses have been created at SWC, or outside as a direct or direct effect of the SWC: Bc = Bc,int + Bc,ext . (6)

The latter effect takes place when local and external businesses, employees, entrepreneurs or freelancers are attracted to the SWC, which then functions as sort of a business hub. This is a positive effect per se because it leads to the exchange of experiences and competence and the creation of new business networks, which in turn can generate new business, new ideas and ultimately value added. Two indicators are used here:

BSWC ; (7)

WSWC ; (8)

3 Referring to the ACES nomenclature, I0 = C2a; Y = current year – C2b. See appendix.

4 ∑y=1 :Y indicates sum for year y from 1 to Y; if Cy is constant, then OPEX = Y ∙ Cy and Cy = C3a – C3b.

5 Jc = E1a + E1b; Pwa = A2a ∙ (1 – A2b – A2c).

6 Bc = E3a + E3b; note that this includes businesses created or retained (i.e. businesses that would otherwise move elsewhere or close).

7 BSWC = E2a; note that this includes all businesses operating at the centre, even those who would otherwise be operate elsewhere in the area.

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Economic growth (GDP) One the most explicit measures of economic impact is the change in gross output in the area (a local GDP). There are different ways to estimate this. If the gross value added (GVA) of the jobs and businesses created by the centre (internally & externally) is known, then the GDP increase is

GDPc = GVAc,int + GVAc,ext . (9)

If that is not the case, the number of full-time jobs created can be used as a proxy, and the yearly GDP growth generated by the centre can be calculated as

GDPc = Jc ∙ pl,h ∙ hw, (10)

where pl,h and hw are the hourly labour productivity per (€/h) and the average number of hours, respectively for the jobs created (this is seldom available and values at regional/country and sector/education level will be used instead). If we are interested in the accumulated value of the GDP increase, we have to sum the formula above over the years:

GDPc,acc = ∑y=1 :Y Jc,y ∙ pl,h,y ∙ hw,y ∙ (1+rd) y, (11)

where the index y indicates that the value refers to year y.

Other economic effects Other indicators that were interesting to evaluate and collected in the survey (see appendix) are:

Amount of investment spent locally12

Improved local government finances13

Other local economy savings/revenues14

Social effects The survey collected a number of indicators that measure the impact on different social aspects:

Demographic impact15

Commuting16

Digital growth17

Environmental impact18

Cultural, social and sports life19

8 WSWC = E2b; note that this includes all workers (employees, entrepreneurs or freelancers) operating at the centre, even those who would otherwise be operate elsewhere in the area.

9 GVAc,int = E4a; GVAc,ext = E4b.

10 Jc = E1a + E1b; pw,h and hw available e.g. from Eurostat, http://stats.oecd.org/index.aspx?DataSetCode=ANHRS and http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=tec00117

11 Jc,y provided for each year in interviews, or Jc,y = E1a + E1b considered constant over years

12 CAPEX (E5a) and OPEX (E5b)

13 E5c

14 E5d

15 S1a, S1b, S1c.

16 S2a, S2b, S2c, S2d, S2e.

17 S3a, S3b.

18 S4a, S4b.

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SEROI of selected Smart Work Centres across Europe

We here apply the methodology described above to four European SWC cases, from four different countries: France, Denmark, the United Kingdom and the Netherlands. These are among the few centres that have gained experience, and for which we were able to collect data (the Dutch centre is only opening now, but the centre has produced a detailed forecast, so it is included here as requested by Micropol).

Unless otherwise specified, the data is collected from the ACES survey (see appendix). Due to the limited number of centres who were able to provide data, it is not possible to draw any statistical conclusions. However, they represent four different approaches and are driven each by different motivations, so this chapter gives a good overview of the different models and an idea of the type of socio-economic effects that can be expected.

Table 1 – Smart work centres analysed

Country Area Pop.

France District of Nivernais Morvan (120 municipalities in the Nievre departement)

3,811

Denmark Municipality of Brønderslev 35,694

United Kingdom Wooler town (Northern Northumberland) 4,226

Netherlands Municipalities of Coverden and Emmen (Southeastern Zuidoost-Drenthe)

144,000

1. ‘Portes du Morvan’ SWC (F)

The canton of in Lormes (10 municipalities, or communes) is one of the local authority associations in the Pays Nivernais Morvan a geographical grouping of local authorities covering 120 communes, one third of the département or county of the Nièvre.

The area has a population of 3,800, of which 16% is below 18 years of age, and 35% is above 6420. The unemployment rate is around 12%, with 63% of population in employment, and the average net monthly salary is €130021. The population economic activity distribution is roughly 10% in agriculture, 8% in industry and 82% in services.

The first Smart Work Centre ‘Portes du Morvan’ opened in September 2008. It is situated in the town of Lormes in the North/East of the department of the Nievre, in the middle of France. An extension to the Centre will open in 2015. The Smart Work Centre ‘Portes du Morvan’ currently offers 8 individual offices equipped with suitable furniture plus connection to the high speed broadband network (100 Mb/s).

Since 2003, thanks to innovative initiatives such as the digital passport for all, the Nivernais Morvan district was one of the first territories to take advantage of ICT to ensure social and economic development via the internet. This pro-active policy continues through labelling the district “Centre of digital rural excellence” and by the creation of a County 2.0 plan, which implies inclusion of the internet in all projects such as economic development, tourism, welcoming of newcomers and of course new ways of managing the working environment.

19 S5a, S5b, S5c.

20 These are estimates, the data from the national statistics office gives it in groups of 10 years.

21 Average income per person (including income from capital, etc.)

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Services offered by the centre include technical support, meeting room, videoconferencing facilities, cleaning service, loan of equipment, VoIP telephone, network server. Typical current users are IT companies, import/export companies, defence sector companies, paying an average of €200 per month including internet connection.

In the following, we estimate the centre’s SEROI over the years.

Investment The centre has been active for six years (Y=6), and a capital investment of €600,000 upon opening; hence the net present value of the CAPEX is

CAPEX = I0 ∙ (1+rd) Y = €804,000

using a discount rate rd = 5%.

No data is available for the OPEX.

Employment According to the survey, 8 jobs have been created over the years internally at the centre; and potentially more outside, but hard to quantify. Restricting the analysis to the jobs at the SWC, this corresponds to an increase in employment in the area:

re = Jc / (Pwa ∙ rlp,wa) = 0.6%,

given an estimated total working-age population (age 18-64 years) Pwa = 1867 and a labour participation rate in that age group rlp,wa = 70%.

Business effects The number of businesses created at SWC is:

Bc = 5.

No no businesses outside the centre were identified as being established or “saved” thanks to the centre, although the SWC businesses bring important additional revenue which has positive impact.

The centre has attracted a number of local and external businesses, and people to work at the SWC, which then functions as sort of a business hub. Specifically, the number of businesses active at the centre is:

BSWC = 5;

and the number of people working at the centre is

WSWC = 8.

Economic growth (GDP) One the most explicit measures of economic impact is the change in gross output in the area (a local GDP). There are different ways to estimate this. If the gross value added (GVA) of the jobs and businesses created by the centre (internally and externally) is known, then the GDP increase is

GDPc = GVAc,int + GVAc,ext .

Those figures are not directly available for this case, so the number of full-time jobs created can be used as a proxy, and the GDP growth generated by the centre can is calculated as

GDPc = Jc ∙ pl,h ∙ hw = €476,500 per year

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where the hourly labour productivity per is estimated as the French national average of pl,h = €40/h (2010) as well as the average number of hours worked hw = 1489 h for France (2013). Assuming constant Jc,y = E1a + E1b in formula (11), then the accumulated GDP increase over the years has been

GDPc,acc = Jc,y ∙ pl,h,y ∙ ∑y=1 :Y hw,y ∙ (1+rd) y = €3,400,000.

Other social and economic effects We were able to gain data for some other indicators, specifically:

Amount of investment spent locally: 20% of CAPEX and 80% of OPEX (data not available): or an equivalent €160,000

Demographic impact: the centre contributed to a positive demographic development over its six-year life time of 25 people, of which 13 children.

Digital growth: with the arrival of FTTH to the town of Lormes in 2015 the SWC may play an important role in promoting broadband take-up and generate digital growth

Cultural, social and sports life: there are events organised every week, and while the number of people attending is not recorded, annually the number runs into hundreds; also, in associations is not known but most of the Smart workers are active in at least one association.

Table 2 – SEROI figures for Nivernais Morvan

Inve

stm

en

t

Em

plo

yme

nt

gro

wth

Bu

sin

ess

es

cre

ate

d

Peo

ple

wo

rkin

g a

t

cen

tre

GD

P

gro

wth

Po

pu

lati

on

gro

wth

po

pu

lati

on

gro

wth

<18

6 years €0.8m 0.6% 5 8 €3.4m 0.7% 2.1%

2. Brønderslev (DK)

The Brønderslev Municipality has a population of 35,700, of which 22% is below 18 years of age, and 20% is above 64. The unemployment rate is 4.2% and the average net monthly salary is €130022. The population economic activity distribution is roughly 8% in agriculture, 13% in industry and 73% in services.

A Smart Work Centre has been established in Brønderslev in 2013 to enhance the ability to attract highly qualified people as well as “born global” entrepreneurs. The building is situated in Brønderslev, which is in the heart of the North Denmark region and 25 km from the airport and from Aalborg, which is the main city in the region. There are 12 work stations in the building as well as meeting facilities, access to symmetric a 100 Mb/s broadband connection, video conferencing, fitness room, etc. The building is brand new (April 2013). The SWC is funded by ERDF as well as the local Municipality of Brønderslev but currently looking into possible sustainable business plans.

In the following, we estimate the centre’s SEROI over the years.

22 Based on a gross annual income of 320,000 DKK for Brønderslev (source: Statistics Denmark, www.dst.dk), and an average income tax of 45%.

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Investment

The centre has been active for one and a half years (Y=1.5), and a capital investment of €73,000 upon opening; hence the net present value of the CAPEX is

CAPEX = I0 ∙ (1+rd) Y = €78,500

using a discount rate rd = 5%.

The centre has an average operational cost of €37,000, or a total of €55,000 over the roughly 1.5 years of operation. The net-present value (NPV) of the total investment then becomes €115,500.

Employment According to the survey, 4 jobs have been created over the years internally at the centre; and potentially more outside, but hard to quantify. Restricting the analysis to the jobs at the SWC, this corresponds to a negligible increase in employment in the municipality:

re = Jc / (Pwa ∙ rlp,wa) = 0.03%,

given an estimated total working-age population (age 18-64 years) Pwa = 20,700 and a labour participation rate in that age group rlp,wa = 70%.

Business effects The number of businesses created at SWC, or outside as a direct or indirect effect of the SWC is estimated to be:

Bc = Bc,int + Bc,ext = 4 + 2 = 6.

Besides business creation itself, the centre is contributing with a positive business hub effect, by pulling together people and businesses in the same physical space. While there is no sensible way to measure such effect itself, we can expect that the social and economic interactions made possible by the SWC among businesses and people, will lead to increased productivity. The number of business and people currently working at the centre are respectively:

BSWC = 8,

WSWC = 12.

Economic growth (GDP) One the most explicit measures of economic impact is the change in area gross output (a local GDP). There are different ways to estimate this. According to the centre itself, the gross value added (GVA) of jobs and businesses created by the centre (internally and externally) has been23

GDPc = GVAc,int + GVAc,ext = €4m + €1m = €5,000,000.

For comparison, using Equation (11) with indicative values for labour productivity and average number of hours worked would give a gross added value from labour alone of roughly €2m.

Table 3 – SEROI figures for Brønderslev

Inve

stm

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nt

Em

plo

y

men

t g

row

th

Bu

sin

ess

es

cre

ate

d

Bu

sin

ess

es

acti

ve

at

cen

tre

Peo

ple

wo

rkin

g

at

cen

tre

GD

P

gro

wth

1.5 years €115,000 0.03% 6 8 12 €5m

23 Rough estimate, based on aggregated orders (wooden floors, graphic solutions, etc.).

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3. The Cheviot Centre, Wooler (UK)

Wooler is a small English market town in rural north Northumberland at the foothills of the Cheviot hill range in Northumberland National Park and close to the Scottish border. It is sited within the wider Glendale area, one of the most sparsely populated areas of the country. The area served by the centre has a population of 4,226, of which 15% is below 18 years of age, and 26% is above 6424. The unemployment rate is around 3.5%, with 63% of population in employment, and the average gross monthly salary is €2600. The population economic activity distribution is roughly 15% in agriculture, 17% in industry and 68% in services.

The area is served by the Glendale Gateway Trust, an independent, charitable community Development Trust set up to support the community of Glendale and help regenerate the local economy. Since 1996 the Trust has worked in partnership with organisations, including Northumberland County Council, to attract investment in the local area.

The Trust bought a derelict town centre property (a former Victorian workhouse) in Wooler in 1999 converted the building to a community resource centre. The Cheviot Centre was opened in 2001 by HRH Prince Charles. The centre houses community rooms for hire, offices for local businesses and was recently extended to incorporate Tourist Information services and the local library service which was under threat of closure. This means Wooler now has a library and Tourist information service open throughout the year and for longer opening hours. The Trusts offices are located within The Cheviot Centre.

The Cheviot Centre functions as a ‘community hub’. Alongside the office space it is in the process of developing as a community and enterprise hub. The new facilities will incorporate Smart Work Centre characteristics, creating a model of how differing local services can be co-located in the heart of the community. In recent years the centre provided services as part of the Northumberland Rural Employability project.

The Wooler Work Web offered services to local unemployed people to refer them to training and skills provision and to help their job search. As part of this service, local employers were able to advertise their vacancies and get recruitment support. The project helped partnerships of service providers and employers develop around the hub. On conclusion of this project, one recommendation was to stimulate micro enterprise business growth through testing ‘workpods’.

We here apply the methodology described above to give a rough estimate of the centre’s SEROI.

Investment The centre has been active for 13 years (Y=13), with a capital investment of €937,000 upon opening, entirely provided by the Trust; hence the net present value of the CAPEX is

CAPEX = I0 ∙ (1+rd) Y = €1,767,000

using a discount rate rd = 5%.

The centre has an operational cost of €58,500, which is entirely covered by revenues from the centre’s users, so the net present value of the investment over the 13 years is €1,767,000.

Employment According to previous interviews, 15 jobs have been created over the years by the centre, but hard to quantify. Restricting the analysis to the jobs at the SWC, this corresponds to an increase in employment in the area:

24 These are estimates, the data from the national statistics office gives it in groups of 10 years.

16

re = Jc / (Pwa ∙ rlp,wa) = 0.9%,

given an estimated total working-age population (age 18-64 years) Pwa = 2493 and a labour participation rate in that age group rlp,wa = 70%.

Business effects There is no data on the number of businesses created by the centre, but in a previous interview, we gathered that the number of businesses active at the centre is

WSWC = 28,

making the centre a true business hub. In fact the social and business networking is very lively and many companies at the centre do business with each-other.

Economic growth (GDP) One the most explicit measures of economic impact is the change in gross output in the area (a local GDP). There are different ways to estimate this. If the gross value added (GVA) of the jobs and businesses created by the centre (internally and externally) is not explicitly known, the number of full-time jobs created can be used as a proxy, and the GDP growth generated by the centre can be calculated as

GDPc = Jc ∙ pl,h ∙ hw = €759,400 per year

where the hourly labour productivity per is estimated as the French national average of pl,h = €30/h (2010) as well as the average number of hours worked hw = 1669 h for the UK (2013). Assuming constant Jc,y = E1a + E1b in formula (11), then the accumulated GDP increase over the years has been

GDPc,acc = Jc,y ∙ pl,h,y ∙ ∑y=1 :Y hw,y ∙ (1+rd) y = €14,120,000.

Table 4 – SEROI figures for Wooler

Inve

stm

en

t

Em

plo

yme

nt

gro

wth

Bu

sin

ess

es

acti

ve a

t

cen

tre

GD

P

gro

wth

13 years €1.77m 0.9% 28 €14.1m

17

4. Coervorden SWC, Zuidoost-Drenthe (NL)

Zuidoost-Drenthe is an area in the Southeastern part of the Drenthe province, composed of the municipalities of Coeverden and Emmen. The area has a population of 144,000, of which 25% is below 18 years of age, and 25% is above 6425. The unemployment rate is around 20%, and the average net monthly salary is €120026. The population economic activity distribution is roughly 20% in agriculture, 40% in industry and 40% in services.

The public sector in the area is now developing a smart work centre, as part of the redevelopment an old warehouse of “Van Gend & Loos” which is part of the town’s cultural heritage. The building is being renovated and turned into a multi-purpose Smart Work Centre that includes offices, free work space, meeting rooms, etc. The entire project should be completed during 2015. The investment in the restoration and renovation is approximately €635,000, funded by the municipality of Coevorden, the European Agricultural Fund, the Province of Drenthe. The actual building was previously owned by the municipality of Coevorden. After building the SWC, ownership is going to be transferred to a private party.

The project has worked on a business case and done a forecast on a number of indicators, so we are able to apply the methodology described above to forecast what SEROI can be expected from this SWC.

Investment The centre will open soon, approximately one year after the start of the work (Y=1), with a capital investment of €635,000; hence the net present value of the CAPEX during the first year will be

CAPEX = I0 ∙ (1+rd) Y = €667,000

using a discount rate rd = 5%.

The centre is forecast to have an operational cost of €100,000, which is going to be entirely covered by revenues from the centre’s users, so the value of the at the conclusion of year 1 will indeed be €667,000.

Employment According to the survey, the centre is estimated to generate 10 jobs, which however corresponds to a negligible increase in employment in the area of

re = Jc / (Pwa ∙ rlp,wa) = 0.01%,

given an estimated total working-age population (age 18-64 years) Pwa = 72,000 and a labour participation rate in that age group rlp,wa = 70%.

Business effects The number of businesses created by the SWC is estimated to:

Bc = 3,

All internal at the centre. The centre is also expected to attract a number of local and external businesses, and people to work at the SWC, which then functions as sort of a business hub. Specifically, the number of businesses active at the centre is expected to be:

25 Extrapolation from the national statistics office’s data, given it in groups of 10 years.

26 Average income per person (including income from capital, etc.)

18

BSWC = 5;

and the number of people working at the centre is

WSWC = 10.

Economic growth (GDP) The gross value added (GVA) expected from the jobs and businesses created by the centre was not estimated, so we use the number of full-time jobs to be created as a proxy, and the GDP growth generated by the centre can is calculated as

GDPc = Jc ∙ pl,h ∙ hw = €554,000 per year

where the hourly labour productivity per is estimated as the French national average of pl,h = €40/h (2010) as well as the average number of hours worked hw = 1380h for the Netherlands (2013).

Other social and economic effects The SWC does not have specific social development goals. But other economic and environmental effects expected are:

It is estimated that about of €40,000 of recurring costs for owning the building will be saved for the municipality, as well perhaps €10,000 in local taxes.

Around 1,000 hours of travel time could be saved per year.

Table 5 – SEROI expected for Southeastern Drenthe

Inve

stm

en

t

Em

plo

ymen

t

gro

wth

Bu

sin

ess

es

cre

ate

d

Bu

sin

ess

es

at

cen

tre

Peo

ple

wo

rkin

g

at

cen

tre

GD

P g

row

th

Savi

ng

s fo

r

mu

nic

ip.

Tra

vel

tim

e

save

d

in 1 year €0.67m 0.01% 3 5 10 €0.55m €0.05m 1000h

19

Conclusions and future work

This study has developed a methodology to define and assess the socio-economic return (SEROI) of smart work centres (SWC). During the study, we have also performed a number of interviews with different centres, designed a survey to collect data, and performed the survey itself.

This study has set the basis for the quantification of the socio-economic return on investment of smart work centres. With this tool in place, the next step would be to evaluate what policies and instruments lead to better returns. These policies and instruments can be described by means of a number of factors that may make a SWC successful:

o Capacity and use (C4)

o Ownership structure (C1)

o Broadband connectivity (C5)

o Services and amenities (C6)

o Location, demography etc. (A1, A2, A3)

as well as other factors that are specific to the area in which the SWC is being set up (to be specified during the initial phase) for instance:

o Area type (A1)

o Demographic situation (A2)

o Econmic situation (A3)

o Local authority involvement and ICT policy in the area

o Entrepreneurial and work culture environment in the area

These will also serve as control factors in the identification of success factors and determine whether a SWC can be successful in different countries and regions. They may also suggest broader policies to be implemented to improve the success of a SWC. The survey (see appendix) includes these factors, which are referred to by the letter-number code in brackets).

Due to the limited number of active SWCs, and to the low response frequence, the data collected was rather limited. However, we were able to test run the tool, and to obtain some indicative figures. A common denominator is that the centres generally lead to increased gross added value to the area (regional or local GDP increase), tends to equal or exceed the investment into the centre (especially when it accumulates over the years). Each centre does then receive benefits that are often specific to their situation and the goals that the centre has set up for itself.

It would be of great interest to run a thorough statistic studyin which SEROI is correlated to different potential success factors (Cx), using area factors (Ax). The number of SWC experiences and the amount of data available is for the moment limited to test for the success of different models and to evaluate the efficiency of different potential success factors.

A lesson learnt, while processing the data and running the calculation is that data collected in a survey has a tendency to need further clarification, as it can easily happen that either the questions, or the answers, or both are misunderstood. We suggest that in future studies the data is collected using the survey tool, but that this is done during a dedicated interview in which the interviewer can fill in the survey itself. That will allow a higher degree of reliability and of standardisation.

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Appendix – questionnaire for online survey to gauge Social and

Economic Return on Investment for Smart Work Centres

This questionnaire was organised in four sections, two describing the area and the centre being established or planned, and two about the impact that the Centre has or is expected to have on the area: it is also designed to be a tool to support the business plan for a future SWC A (Area) - Questions about the rural area in which the smart work centre operates C (Centre) - Questions about the smart work centre itself E (Economy) - Questions about the expected economic impact of the centre S (Society) - Questions about the expected social, demographic and environmental impact of the centre

Questionnaire: About the rural Area - [A1] Name and type by rural area, we mean the territory that the SWC operates in and which it is supposed to serve (could be a region, a county, province, departement, municipality or other). 1. What is the name of the rural area [A1a] __________________________________

2. What type of area is it [A1b] if other, explain its relation to the proposed entities

Mark only one oval.

Region/county Province/department Municipality Other:

3. Comments [A1z] ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

21

About the rural Area - [A2] Demographic data

4. What is the total population? [A2a] ___________________________________________________________________________

__

5. What is the percentage of the population below 18 years of age? [A2b] ___________________________________________________________________ 6. What is the percentage of the population above 64 years of age? [A2c] ___________________________________________________________________ 7. Comments [A2z] ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

About the rural Area - [A3] Economic situation

8. What is the area's unemployment rate? [A3a] a rough estimation works ___________________________________________________________________ 9. What is the area's average net monthly salary ? [A3b] among people with a job: a rough estimation works ___________________________________________________________________ 10. What is the area's "GDP" in million euros (M€)? [A3c] if known ___________________________________________________________________ 11. What is the percentage of the active population working in agriculture? [A3c] ___________________________________________________________________ 12. What is the percentage of the active population working in industry? [A3e] ___________________________________________________________________ 13. What is the percentage of the active population working in services? [A3f] (A3a+A3b+A3c must be 100%) ___________________________________________________________________ 14. Comments [A3z] ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

22

Section C - About the SWC About the SWC - [C1] Ownership structure

15. What the percentage of the centre is publicly owned? [C1a] meaning owned by the local, regional, or national government, directly or indirectly (e.g. via publicly owned organisations) ___________________________________________________________________ 16. What the percentage of the centre is privately owned? [C1b] meaning owned by a private company or individual ___________________________________________________________________ 17. What the percentage of the centre is community owned? [C1c] meaning owned by an association of private citizens for the benefit of the community (C1a+C1b+C1c must be 100%) ___________________________________________________________________ About the SWC - [C2] Initial investment the investment necessary to set up the SWC, in Euros 18. What will the total initial investment be ? [C2a] if the investment was split in different years, explain this in the comment below ___________________________________________________________________ 19. In which year was that investment made? [C2b] if the investment is split in different years, give the year where the largest investment was/is going made and explain in the comment below ___________________________________________________________________ 20. What the percentage of the investment came from public sources? [C2c] from local, regional, or national government, directly or indirectly (e.g. via publicly owned organisations) _____________________________________________________________________________ 21. What the percentage of the investment came from private sources? [C2d] from a private company or individual _____________________________________________________________________________ 22. What the percentage of the investment came from community sources? [C2e] from an association of private citizens for the benefit of the community (C2c+C2d+C2e must be 100%) _____________________________________________________________________________

23

23. Nonfinancial investment [C2f] Explain to which extent the centre has received other assets (e.g. property, equipment or consumables) free of charge. Are these assets quantifiable? _____________________________________________________________________________ 24. Comments [C2z] ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

About the SWC [C3] Annual operational costs and revenues all numbers in Euros 25. How much is the total annual operational cost? [C3a] i.e. excluding possible interest paid on invested capital (C2) ___________________________________________________________________ 26. How much is the centre's total annual revenue? [C3b] if any ___________________________________________________________________ 27. How much public money does the centre receive annually? [C3c] grants or other types of injection from local, regional, or national government, directly or indirectly (e.g. via publicly owned organisations) ___________________________________________________________________ 28. How much private money does the centre receive annually? [C3d] meaning from a private company or individual ___________________________________________________________________ 29. How much community money does the centre receive annually? [C3e] meaning from an association of private citizens for the benefit of the community (C1a+C1b+C1c must be 100%) ___________________________________________________________________ 30. What is the current economic result? [C3f] should be C3b + C3c + C3d + C3e C3b; please comment below otherwise ___________________________________________________________________ 31. Comments [C3z] ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

24

About the SWC [C4] Usage of the SWC

32. How many office spaces are available at the centre? [C4a] in private offices or as dedicated desks in open space configuration ___________________________________________________________________ 33. What is the current occupancy rate? [C4b] occupied office spaces as percentage of available ones ___________________________________________________________________ 34. How many places are available in the coworking space? [C4c] if relevant ___________________________________________________________________ 35. How many daily visitors in the coworking space are there on average? [C4d] ___________________________________________________________________ 36. How much time does the average coworking space visitor spend? [C4e] in hours ___________________________________________________________________ 37. What are the rates for the use of the office spaces and the coworking space? [C4f] Feel free to explain how it works ___________________________________________________________________ 38. Comments [C4z] ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

About the SWC [C5] Broadband connectivity

39. What is the (actual, measured) download speed (in Mb/s) per user on a typical day? [C5a] Can be tested at http://www.speedtest.net/ ___________________________________________________________________ 40. What is the (actual, measured) upload speed (in Mb/s) per user on a typical day? [C5b] Can be tested at http://www.speedtest.net/ ___________________________________________________________________ 41. What is the (actual, measured) response time, or ping time (in ms) per user on a typical day? [C5c] Can be tested at http://www.speedtest.net/ ___________________________________________________________________ 42. What is the connection's downtime per year? [C5d] E.g. how many hours per year do you experience malfunctioning or interrupted connectivity? ___________________________________________________________________ 43. Comments [C5z] ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

25

About the SWC [C6] Services and amenities available

44. What of these business services are offered by the SWC [C6a] (it is assumed that printing, coffee and Internet access are available) Tick all that apply.

Reception Meeting rooms

Business and administration consulting/coaching

None of the above

Other : ___________________________________________________________

45. What of these social services are available at or in the vicinity of the SWC [C6b] Tick all that apply.

Library Canteens, restaurants, cafés Daycare/kindergarten School Train or bus station City hall or local government offices Employment centre None of the above Other :_____________________________________________________________

46. Comments [C6z] ______________________________________________________________________________________________________________________________________ ___________________________________________________________________

26

Section E Economic impact of the SWC (section 3 of 4)

Economic impact of the SWC [E1] How many jobs have been created (or saved)...

47. ...at the SWC? [E1a] number of jobs at the SWC who would otherwise not exist today ___________________________________________________________________

48. ...outside the SWC, but directly or indirectly as a result of the SWC? [E1b] for instance in suppliers, cafés/restaurants, etc. ___________________________________________________________________ 49. Comments [E1z] if you feel the numbers above need clarification

Economic impact of the SWC [E2] Business hub effect

50. How many businesses businesses operate in the SWC? [E2a] ___________________________________________________________________ 51. How many people base their work in the SWC? [E2b] either running their business or as employees ___________________________________________________________________ 52. In which industries do the businesses and jobs present at the hub operate? [E2c] Tick all that apply.

ICT services and products Research and development Engineering and industrial goods and services Architecture and construction Finance and business services Entertainment and arts Consumer goods Healthcare Raw materials Agriculture

27

Other :_________________________________________________________________

53. Comments [E2z]

___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

Economic impact of the SWC [E3] What is number of business created or "retained" in the area...

54. ...which are based at the SWC? [E3a] who would otherwise not exist in the area today ___________________________________________________________________ 55. ...outside the SWC, but directly or indirectly created by the SWC? [E3b] for instance in suppliers, cafés/restaurants, etc. ___________________________________________________________________ 56. Comments [E3z] explain how you got the numbers above ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Economic impact of the SWC [E4] What is the increase in the area's gross added value generated by...

57. ...jobs and businesses based at the SWC? [E4a] calculated as the sum of the annual income before tax of all the jobs or businesses at the SWC who would otherwise not exist in the area today (or the amount by their income has increased) ___________________________________________________________________ 58. ...jobs and businesses outside the SWC, but directly or indirectly created by the SWC? [E4b] for instance in suppliers, cafés/restaurants, etc. ___________________________________________________________________ 59. Comments [E4z] explain how you got the numbers above

___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

28

Economic impact of the SWC [E5] Positive cash flow for the local economy...

60. What percentage of the total initial investment was spent locally? [E5a] ___________________________________________________________________ 61. What percentage of the annual operational cost is spent locally? [E5b] ___________________________________________________________________ 62. By what amount has the SWC directly or indirectly improved the local government finances (annually)? [E5c] if relevant (e.g. increased tax revenue, reduced expenditures when using videoconferencing or any other); please explain further in comments ___________________________________________________________________ 63. Can you think of any other savings, or revenues for the local economy? If so, please specify the annual amount and explain in comments below [E5d] if relevant ___________________________________________________________________ 64. Comments [E5z] explain how you got the numbers above

___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Section S Social impact of SWC (section 4 of 4)

Social impact of the SWC [S1] Demographics

65. How many people have moved into the area thanks to the SWC [S1a] directly or indirectly (including family members) ___________________________________________________________________ 66. How many of those above are children [S1b] ___________________________________________________________________ 67. How many of those above are retirees [S1c] ___________________________________________________________________ 68. Comments [S1z] if you feel the numbers above need clarification ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

29

Social impact of the SWC [S2] Commuting

69. How many total travelling hours are saved per year, in total? [S2a] because people do not need to commute equally far and/or often ___________________________________________________________________ 70. How many fewer kilometres are driven per year, in total? [S2b] because people do not need to commute equally far and/or often ___________________________________________________________________ 71. How many fewer kilometres are travelled by bus/coach per year, in total? [S2c] because people do not need to commute equally far and/or often ___________________________________________________________________ 72. How many fewer kilometres are travelled by train per year, in total? [S2d] because people do not need to commute equally far and/or often ___________________________________________________________________ 73. How many fewer kilometres are travelled by plane per year, in total? [S2e] because people do not need to commute equally far and/or often ___________________________________________________________________ 74. Comments [S2z] Explain how you obtained the figures above ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Social impact of the SWC [S3] Digital growth if relevant for your area/SWC 75. How many fast broadband connections (20 Mb/s or above) were activated in the area thanks to the presence of the SWC? [S3a] because of infrastructure and services being introduced in the area and/or because of training and awareness activities by the SWC ___________________________________________________________________ 76. How many total broadband connections (including S3a) were activated in the area thanks to the presence of the SWC? [S3b] because of infrastructure and services being introduced in the area and/or because of training and awareness activities by the SWC ___________________________________________________________________ 77. Comments [S3z] Explain how you obtained the figures above ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

30

Social impact of the SWC [S4] Environmental impact if relevant for your area/SWC

78. How environmentally sustainable was the setup of the centre, and how about its current operation? [S4a] ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ 79. What positive environmental effects were generated by the SWC? [S4b] Beyond the reduced CO2 emission from reduced travelling (which we will calculate separately using commuting data) ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ 80. Comments [S4z] ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________

Social impact of the SWC [S5] Cultural, social and sports life if relevant for your area/SWC

81. How many events have been held by or thanks to the presence of the SWC? [S5a] ___________________________________________________________________ 82. What has the total attendance been at all of those events? [S5b] ___________________________________________________________________ 83. How many memberships in associations have been started thanks to the presence of the SWC? [S5c] ___________________________________________________________________ 84. Comments [S5z] Explain the nature of these events and associations ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________