The Ripple Effect: How Your Pounds Spent Creates Local Growth
Every year, World MSME Day shines a light on the vital role that micro, small and medium enterprises play in our global economy. But the truth is, their impact is most deeply felt closer to home.
From your local café to your neighbourhood florist, every pound you spend at a local MSME sets off a ripple effect, one that supports livelihoods, strengthens communities and fuels long-term growth in your area. So how far does your pound actually go?
Why Supporting Local Really Matters
When you spend money at a local business, significantly more of that money stays within your community. It’s a phenomenon economists call the local multiplier effect, and it’s well documented.
According to the New Economics Foundation, £10 spent at a local business delivers £25 in total economic benefit to the local economy, compared to just £14 when spent at a supermarket.
Similarly, research from CLES (Centre for Local Economic Strategies) found that spending with a local SME delivers 2-4 times more economic benefit than spending with a large chain.
A Tale of Two Pounds
Let’s break it down:
| Where you spend | How much spent | Stays in the local economy | Potential total impact |
| Local MSME | £1 | 63p-70p | £1.80-£2.70+ |
| National chain | £1 | 14p-40p | £0.30-£1.10 |
Real World Ripple Effects
1. Jobs Stay Local
SMEs are the backbone of UK employment. According to the UK Government Business Population Estimates 2023 “SMEs (small and medium-sized enterprises) account for 99.9% of the business population” and employ over 16 million people.
2. Money Circulates
Research using the LM3 (Local Multiplier 3) tool, as seen above, shows that every pound spent on an MSME dramatically increases how much money is put back into the local economy.
3. Communities Thrive
Small businesses are far more likely to support community causes, sponsor events and contribute to the local social fabric. A study by the FSB found that 80% of small businesses supported local charities or sports clubs in 2023.
4. It’s More Sustainable
Shorter supply chains mean fewer carbon emissions, and many local businesses prioritise ethical sourcing. Supporting local also reduces packaging waste and international transport emissions.
What Can You Do?
World MSME Day is a perfect reminder that we all have purchasing power, and where we spend it matters.
- Opt for independent businesses: From boutiques to skilled trades, support those building their dreams.
- Be a local champion: Share and recommend your beloved local spots to your network.
- Discover hidden gems: Frequent markets and community pop-ups to find one-of-a-kind products and services.
- Collaborate with SMEs: Actively seek out partnerships with other local businesses that align with your values.
