Social and economic statement of impacts: guidance for applicants

7. Additional analytical considerations

This section sets out the additional considerations that applicants should apply across the core economic and social themes to account for how impacts may interact, evolve over time, or be influenced by wider development or use.

7.1 Uncertainty and bias

All assessments of future impacts involve uncertainty and bias. Applicants should explain how uncertainty affects the findings of the SESI, particularly where impacts are forecast over a long time period or there is likely to be changing socio-economic conditions over the project lifecycle.

Where applicants are making estimates, they should explain clearly where key biases such as optimism bias and confirmation bias have been acknowledged across the project timeline and mitigated.

Applicants should first identify the main sources of uncertainty and bias relevant to the themes assessed and then explain how these affect the scale, direction, or timing of impacts. The implications of both on the level of confidence placed in the assessments should also be discussed.

Applicants may use scenario, switching and/or sensitivity analysis to illustrate how results vary under different assumptions. For example, this may include different assumptions about workforce size, local labour uptake, costs, multipliers or overlap with other projects and activities. It is important to demonstrate that uncertainty has been carefully considered.

Applicants may use upward adjustments to cost estimates and downward adjustments to benefits or delivery certainty to adjust for bias. These can be based on historical evidence from similar projects. The HM Treasury’s Green Book provides adjustments that should be applied to non-standard infrastructure projects. If there is compelling evidence to demonstrate that risks have already been mitigated, this should be described.

Further information is available in the HM Treasury’s Green Book and Aqua Book.

7.2 Cumulative impacts

Cumulative impacts arise when the economic or social effects of a project interact with those of other activities or projects.

Applicants should consider whether cumulative impacts are likely to arise as a result of interaction between multiple projects or activities affecting the same communities, sectors or services. A project on its own may have a negligible impact, but when considered in light of other projects or activities may lead to a significant impact.

Applicants should first identify relevant projects or activities and describe how the impacts may interact or compound over time. The implications for communities, sectors or services should then be assessed and compared with the counterfactual.

Cumulative impacts can be positive or negative. Where applicants conclude that cumulative effects are not expected to be material, evidence and rationale should be provided.

7.3 Interactions and Distributional Effects

Economic theory suggests that economic activity in rural and coastal communities often have disproportionately large local impacts compared with similar changes in urban areas^[10]. In addition to this, the fishing sector tends to be more concentrated demographically, with less diversity in terms of age^[11] and gender distribution^[12]. As a result, some regions and sectors are often more exposed to shocks due to labour market composition or lower diversity of skills and can be less resilient in responding to them. As a result, projects may strongly influence wages, employment and demographics, and the distributional impacts may be more acute when compared with more urban and diverse sectors.

Applicants should consider how different impacts interact and how they may be unevenly distributed across population groups, communities, sectors or places. This may occur in a number of different situations including when: employment benefits may occur to communities experiencing increased pressure on services or housing; benefits may be concentrated at the national level while impacts are localised; or impacts may differ across age, income, education/skill level or location groups.

Applicants should clearly assess whether these effects are likely to occur and how they impact the anticipated social and economic outcomes.