Current State of Local Economic Development
Scotland’s approach to economic development is undergoing a fundamental transformation through the adoption of Community Wealth Building (CWB) principles. This innovative model seeks to transform local and regional economic systems to enable communities and people to own, have a greater stake in, access and benefit from the wealth generated by their local economies. The approach represents a significant departure from traditional economic development strategies that often prioritised attracting external investment over building local economic capacity.
The current economic landscape in Scotland reveals significant challenges that Community Wealth Building aims to address. Many local economies suffer from “leaky bucket” syndrome, where wealth generated locally flows out to distant shareholders, suppliers, and financial institutions rather than circulating within communities. This pattern is particularly pronounced in areas dominated by large multinational corporations or where public sector procurement favours national or international suppliers over local businesses.
Recent analysis of public sector spending in Scotland reveals the scale of the opportunity for Community Wealth Building. NHS Scotland alone has a budget of over £19 billion for 2023/24, while local authorities collectively spend billions more on goods and services. When combined with spending by universities, colleges, housing associations, and other anchor institutions, the total procurement power represents a massive lever for local economic development that has been historically underutilised.
The introduction of the Community Wealth Building (Scotland) Bill in March 2025 marks a significant milestone in Scotland’s commitment to this approach. The legislation aims to ensure consistent implementation of the CWB model across Scotland while addressing economic and wealth inequality by supporting the generation, circulation, and retention of more wealth in local and regional economies. This represents the first comprehensive legislative framework for Community Wealth Building in the UK.
Progress in implementing Community Wealth Building has been led primarily by local authorities working in partnership with community planning partners. Cities like Glasgow and Preston (which pioneered the model in England) have demonstrated the potential for anchor institutions to redirect spending toward local suppliers, create employment opportunities, and support the development of cooperative and social enterprises. However, implementation has been uneven across Scotland, with some areas making significant progress while others have yet to fully embrace the approach.
The COVID-19 pandemic highlighted both the vulnerabilities of globalised supply chains and the resilience potential of local economic networks. Communities with stronger local business ecosystems and shorter supply chains proved more adaptable during lockdowns and supply disruptions. This experience has reinforced the case for Community Wealth Building as a strategy for building economic resilience alongside social and environmental benefits.
Challenges and Gaps in Local Economic Retention
Despite growing recognition of Community Wealth Building’s potential, significant barriers prevent many Scottish communities from capturing and retaining economic value locally. These challenges operate at multiple levels, from procurement practices and business support systems to financial markets and ownership structures.
Procurement practices represent one of the most significant barriers to local economic development. Traditional public sector procurement often prioritises lowest cost over broader value considerations, making it difficult for local businesses to compete with large national or international suppliers. Complex tendering processes, lengthy payment terms, and risk-averse procurement cultures can exclude smaller local businesses from public sector contracts, even when they could deliver equivalent or superior value.
The dominance of extractive business models in many sectors means that profits generated by local economic activity flow to distant shareholders rather than being reinvested locally. This is particularly evident in retail, where large chains capture local spending but provide limited local employment and no local ownership stake. Similarly, many service sectors are dominated by national companies that extract value from local markets while providing minimal local economic benefit beyond basic employment.
Access to finance remains a critical barrier for local business development and community ownership initiatives. Traditional banking systems often favour established businesses and conventional ownership models over innovative approaches like cooperatives, social enterprises, or community-owned businesses. This bias in financial markets limits the development of the diverse local business ecosystem that Community Wealth Building requires.
Skills and capacity gaps within local businesses can limit their ability to compete for larger contracts or expand their operations. Many small and medium enterprises lack the resources to invest in business development, marketing, or technology upgrades that would enable them to capture larger market shares. This creates a cycle where local businesses remain small and marginal while larger contracts go to external suppliers.
The lack of coordination between anchor institutions represents another significant challenge. While individual organisations may recognise the benefits of local procurement, the absence of systematic collaboration means that opportunities for joint purchasing, shared supply chain development, or coordinated business support are often missed. This fragmentation reduces the collective impact that anchor institutions could achieve through coordinated action.
Property and land ownership patterns also constrain local economic development. In many areas, commercial property is owned by distant landlords or investment funds that extract rental income while providing minimal local investment. This pattern limits local control over economic development and can result in property speculation that prices out local businesses and community initiatives.
The measurement and evaluation of Community Wealth Building impacts remains underdeveloped in many areas. Without robust data on local economic flows, business development outcomes, and community benefits, it is difficult to demonstrate the effectiveness of CWB approaches or to identify areas for improvement. This evidence gap can limit political and institutional support for Community Wealth Building initiatives.
Innovative Approaches to Local Economic Development
Across Scotland and internationally, innovative Community Wealth Building initiatives are demonstrating the potential for anchor institutions and communities to capture and retain economic value locally. These approaches span the five pillars of Community Wealth Building: spending, workforce, land and property, inclusive ownership, and finance.
In the spending pillar, several Scottish local authorities have pioneered progressive procurement practices that prioritise local suppliers and community benefits. South Lanarkshire Council has developed comprehensive Community Wealth Building strategies that include local procurement targets, supplier development programmes, and community benefit requirements for major contracts. These initiatives have resulted in increased spending with local suppliers and the creation of new employment opportunities within the local area.
The NHS in Scotland has begun implementing Community Wealth Building approaches through its anchor institution role. Health boards are increasingly considering local economic impact in their procurement decisions, supporting local food suppliers for hospital catering, and working with local businesses to develop supply chain capacity. This approach recognises that improving local economic conditions can contribute to better health outcomes while providing value for money in public spending.
Universities and colleges across Scotland are embracing their role as anchor institutions through initiatives that support local business development and graduate retention. The University of Glasgow has developed programmes that connect local businesses with student projects, provide business incubation support, and prioritise local suppliers in procurement decisions. These initiatives create pathways for graduates to establish businesses locally while supporting existing local enterprises.
In the workforce pillar, innovative approaches to employment and skills development are creating stronger connections between anchor institutions and local communities. Several councils have implemented local employment targets for major contracts, requiring contractors to recruit a proportion of their workforce from local areas. These initiatives are often combined with skills development programmes that prepare local residents for employment opportunities.
The development of cooperative and employee-owned businesses represents a growing focus within the inclusive ownership pillar. Scotland has seen significant growth in cooperative enterprises, supported by organisations like Cooperative Development Scotland and local authority business support programmes. These businesses retain ownership and decision-making within local communities while often demonstrating higher levels of employee satisfaction and business resilience.
Community ownership of land and property is expanding across Scotland through initiatives supported by the Community Land Scotland network and various funding programmes. Community land trusts, development trusts, and other community ownership models are enabling local control over economic development while ensuring that benefits are retained within communities. These initiatives often combine economic development with environmental and social objectives.
In the finance pillar, innovative approaches to local investment and banking are emerging. Community development finance institutions, local investment funds, and credit unions are providing alternatives to traditional banking that keep financial resources circulating locally. Some areas are exploring local currencies or time banks that strengthen local economic networks while building community resilience.
The Preston Model, developed in partnership with the Centre for Local Economic Strategies (CLES), has provided a template for systematic Community Wealth Building that has influenced practice across Scotland. This approach involves coordinated action by multiple anchor institutions to redirect spending toward local suppliers, support cooperative development, and build local financial capacity. The model demonstrates how systematic implementation can achieve significant economic impact while building political and institutional support.
Recommendations for Strengthening Local Economic Retention
Maximising the potential of Community Wealth Building in Scotland requires coordinated action across multiple levels, from individual anchor institutions to national policy frameworks. The following recommendations provide a roadmap for strengthening local economic retention while building more resilient and equitable local economies.
Transforming Procurement Practices
Anchor institutions across Scotland should adopt progressive procurement practices that prioritise local suppliers and community benefits alongside value for money considerations. This requires moving beyond lowest-cost procurement toward approaches that consider broader social, economic, and environmental value. Procurement frameworks should include local content requirements, community benefit clauses, and support for small and medium enterprises.
The Scottish Government should provide leadership by establishing clear expectations for public sector procurement that support Community Wealth Building objectives. This could include mandatory local procurement targets, standardised community benefit requirements, and simplified tendering processes that enable smaller businesses to compete effectively. Training and support should be provided to procurement professionals to build capacity for implementing these approaches.
Joint procurement initiatives between anchor institutions should be expanded to create larger opportunities for local suppliers while achieving economies of scale. Collaborative purchasing can enable local businesses to compete for larger contracts while reducing administrative burdens for both buyers and suppliers. These initiatives should be supported by shared supplier development programmes that build local business capacity.
Developing Local Business Ecosystems
Comprehensive business support programmes should be developed to strengthen local business capacity and competitiveness. These programmes should include mentoring, training, access to finance, and market development support tailored to local economic opportunities. Particular attention should be paid to supporting businesses that can supply anchor institutions or serve local markets.
Sector development initiatives should focus on building local supply chains in key areas such as food, construction, professional services, and renewable energy. These initiatives should bring together anchor institutions, local businesses, and support organisations to identify opportunities, address barriers, and coordinate development efforts. Success requires long-term commitment and sustained investment in relationship building.
Innovation and technology support should be provided to help local businesses adopt new technologies, develop new products and services, and access new markets. This could include shared technology facilities, digital skills training, and support for research and development collaborations with universities and colleges.
Expanding Cooperative and Community Ownership
Scotland should significantly expand support for cooperative and community ownership models that retain wealth and decision-making within local communities. This includes providing start-up support, business development services, and access to appropriate finance for cooperative enterprises. Legal and regulatory frameworks should be reviewed to ensure they support rather than hinder cooperative development.
Community ownership of land and property should be actively promoted through expanded funding programmes, simplified legal processes, and technical support for community organisations. Community land trusts, development trusts, and other ownership models should be supported to take control of key economic assets and direct their use toward community benefit.
Employee ownership should be promoted as a succession planning option for existing businesses, particularly in rural areas where business closure can have significant local economic impact. Support programmes should help business owners understand employee ownership options while providing technical assistance for ownership transitions.
Building Local Financial Capacity
Local investment and banking initiatives should be expanded to keep financial resources circulating within communities. This includes supporting credit unions, community development finance institutions, and local investment funds that provide alternatives to traditional banking. These institutions should be supported to develop products and services that meet local business and community needs.
Community investment schemes should be developed to enable local residents and businesses to invest in local economic development projects. These could include community shares, local bonds, or investment cooperatives that provide returns to local investors while supporting community priorities.
The development of local currencies or complementary exchange systems should be explored as mechanisms for strengthening local economic networks. While complex to implement, these systems can encourage local spending while building community connections and resilience.
Creating Supportive Policy Frameworks
The Community Wealth Building (Scotland) Bill should be implemented with robust guidance, support, and monitoring systems that ensure effective implementation across all local authority areas. This includes providing training for local authority staff, developing performance indicators, and establishing peer learning networks that share best practice.
National economic development policies should be aligned with Community Wealth Building objectives, ensuring that government investment and support programmes strengthen rather than undermine local economic capacity. This includes reviewing business support programmes, infrastructure investment, and regional development initiatives to ensure they support local wealth retention.
Planning and development policies should be reformed to support Community Wealth Building objectives. This could include requirements for local economic impact assessments, community benefit requirements for major developments, and support for community ownership of development opportunities.
Measuring and Evaluating Impact
Comprehensive monitoring and evaluation systems should be developed to track Community Wealth Building impacts and identify areas for improvement. This includes developing indicators for local economic flows, business development outcomes, employment creation, and community benefits. Regular reporting should be used to build political and public support for Community Wealth Building approaches.
Research and evaluation programmes should be established to assess the effectiveness of different Community Wealth Building approaches and identify best practices. This research should inform policy development and programme design while building the evidence base for Community Wealth Building as an economic development strategy.
Community Wealth Building represents a fundamental shift toward more democratic, sustainable, and equitable economic development. By harnessing the economic leverage of anchor institutions, supporting local business development, and expanding community ownership, Scotland can build local economies that serve community needs while creating resilience against external economic shocks. The current momentum behind Community Wealth Building provides an unprecedented opportunity to transform Scotland’s economic landscape in ways that benefit all communities. Success requires sustained commitment, coordinated action, and recognition that building local wealth is not just an economic strategy but a pathway to stronger, more resilient communities.
