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What Evidence Is There Of Economic Effects?

Evidence on the economic effects of road pricing comes from three main sources: predictive studies, attitudinal research and the limited empirical evidence from implemented schemes.



Predictive studies





Model-based predictions typically suggest small impacts. An analysis of the impacts of congestion charging in London was carried out using the MEPLAN model of London and the South East, which reflects the effects of changes in accessibility on location (May et al, 1996). For a £4 charge to enter central London , the predictions were:

  • Central London employment would rise by 1.0%;
  • Inner and outer London employment would fall by around 0.5%;
  • Household numbers would fall by 0.2% in central London and 0.1% in outer London ;
  • Household numbers would rise slightly in inner London ; and
  • Higher income household numbers would increase in central London .




A study in Edinburgh , using the START/DELTA model, which includes responses to both accessibility and environment (Bristow et al, 1998), indicated that a £1.50 charge to enter or leave the city centre would increase the city centre population by 2.2%. An earlier study with a similar model, but with different parameters, (Still et al, 1998) had suggested a 1.8% reduction in city centre population, and a 3.1% reduction in city centre employment.  Both studies suggested that the impacts of changes in accessibility were larger than, but opposite in sign to those of changes in environmental quality.


The report (Scottish Executive Development Department, 2004) from the Inquiry into Proposed Edinburgh Congestion Charging Scheme recognised that other methods were required to support the modelling work that had been undertaken. A major scenario planning exercise and qualitative analysis of key sectors of the local economy are referred to in the Inquiry report.


The Inquiry report also highlighted that for technical reasons the modelling used might not be able to fully identify some of the changes resulting from a complex package of measures over a long period of time where other structural changes were likely to take place in the local economy. The report cites the example of London where the overall economic impacts were likely to be positive and larger than anticipated through the modelling.


The Inquiry recommended that some further work be carried out to overcome the array of perceived deficiencies. In particular, some more detailed analysis of the tourism and retailing sectors was advocated, outside the modelling structure, to serve as a reality check, and as a means of refining some of the assumptions and parameters.




At a more generic level, in simulation studies, Eliasson and Lundberg (2002) estimated that congestion pricing would result in the redistribution of two percent of households and a slightly higher redistribution for businesses in a typical European city.


Stockholmsförsöket (2006a) also reported that if urban road user charging was introduced in the city the model calculated that whilst the inner city would become a less attractive place to live, compared with other areas of Stockholm, it would gain appeal as a place to work. A final conclusion of the model calculations was that these effects on location over a 20 to 30 year period would be very small.  


Attitudinal research




The early study of Area Licensing in (Holland and Watson, 1978) did not attempt to assess the impacts on land use. It did ask business people for their assessment of the scheme, which was largely positive, but this may well have reflected a general view in at the time that government was making the right decisions.




A traffic demand management study concentrating on businesses in three historical cities in the UK (Cambridge, Norwich and York) investigated what were expected to be the impacts of a hypothetical urban road user charging scheme which would charge £3 per day to enter the city centre in the morning peak (Gerrard, 2000).


The majority of respondents anticipated positive impacts on the environment and congestion, but negative effects on the economy and tourism, and on their own staffing and profitability.


When asked whether urban road user charging would influence their next location decision, 53% said it would, and 26% that it might.




Rome experienced a small shift in business attitudes after the implementation of the electronic access points within the Limited Traffic Zone. There was a 5% reduction of retailers’ negative perception of the access control system. In summary, there has been an increase in the percentage of respondents believing that the electronic access system has positively affected both air quality and modal split (Schade et al, 2004).




Business acceptance of urban road user charging schemes may well increase after their introduction, in line with public opinion. For example, in Stockholm between 2005 and 2006 there was a change in attitude towards the Stockholm Trial as a whole Stockholmsförsöket (2006a) reported that the proportion of companies that were negative fell from about 65% to 45%. The proportion of those who were positive rose from about 20% to approximately 35%.

Empirical evidence



In analysing the economic implications of ’s Area Licence Scheme, Holland  and Watson (1978) did not report extensively on the economic impacts. They did however note that the number of goods vehicles entering the Central Business District during the charging period had increased. The argument is that operators were rescheduling trips to take into account reduced congestion.


This supports the argument that there is a positive impact on the economy due to time saved to businesses.  However it should also be borne in mind that the implementation of the pricing scheme coincided with the period of the oil shocks (1970s) and hence it might not have been possible to distinguish between the two impacts on the economy.


Ten years later another attempt was made to assess the impacts retrospectively. It was concluded that there was no evidence of adverse impacts on economic activity in the city centre (Armstrong-Wright, 1986). However, this assessment was made difficult, both because parking restrictions had been introduced at the same time, about which businesses were much more critical, and because the Singapore economy had expanded rapidly in the intervening period, masking any impact of urban road user charging.



Evaluation work completed in Trondheim by the Chamber of Commerce between 1991 and 1992 (Tretvik, 1999) indicated that there was some evidence of businesses located within the toll ring having lost trade during the early part of 1992. However, from the summer period of 1992, no significant negative impact on business trade could be read from the figures and hence the Chamber of Commerce concluded that there was no significant effect of the toll ring on trade at all.


Tretvik (1999) reports an analysis of the impacts on turnover within and outside the Trondheim toll ring.  Before implementation, a shopping survey concluded that 25% of shoppers were likely to change the location or timing of their shopping activity in response to the toll ring.  A second survey in 1992, a year after implementation, recorded that 10% had in fact changed the destination or timing of their shopping trips.  However, the impact on retail turnover did not reflect this downturn in activity.  In 1992 the Chamber of Commerce concluded that there had been hardly any effect on trade as a result of the toll ring.  Longer-term time series data from 1987 to 1997 on Trondheim’s share of county retail sales and on annual turnover in different parts of Trondheim showed that Trondheim as a whole, and the Central Business District in particular, had been losing market share between 1987 and 1990, but that the city’s market share within the county grew in most years from 1991 to 1997, and that the toll ring’s share was maintained throughout that period.  While turnover will be affected by a wide range of factors, there is thus no evidence to suggest that the toll ring adversely affected trade within the ring.



In London, work looking at monitoring the impacts of congestion charging has been completed by Transport for London , which made the following conclusions:


  • The introduction of charging in February 2003 coincided with a temporary economic slowdown, as well as a wider set of local, national and international conditions that were not favourable to general economic performance.
  • Analysis of several different indicators of economic performance, including measures of business population and turnover, did not reveal evidence of a significant congestion charging impact.
  • Shops within the inner core of the charging zone found that their rental values increased.
  • TfL’s business surveys conducted in 2004 showed a continued recognition of the transport benefits associated with congestion charging.


Other work conducted during 2005 found that trends in business registrations for VAT remained strong and that within the charging zone, the retail sector has increased its share of enterprises and employment since 2003.


A majority of businesses in the congestion charging zone recognised that ‘decongestion’ has created a more pleasant working environment and easier journeys for employees using public transport for work. Ernst and Young were commissioned to undertake an independent review of the monitoring of the business impacts (Ernst and Young, 2006). Their work concluded that the (then) £5 charge had had a broadly neutral impact on the central London economy. However, as charging had only been in place for 2½ years (the date of the review), this had made it difficult to draw definitive conclusions on the long-term impact.


A more recent evaluation by TfL in 2008, using key indicators such as sales, profitability and business start-up figures, has shown that there has been no discernable impact – positive or negative – on overall business performance as a result of congestion charging in central London . This does not rule out the possibility that some businesses in certain sectors may have been affected. However, any cumulative impacts from the introduction of charging have not been evident in terms of business and economic output. (TfL, 2008).


TfL’s view that ‘concerns over the detrimental impact of charging on economic activity appear to be misplaced’ is not shared by all business organisations. London Chamber of Commerce and Industry’s two surveys found that 85% of the retailers who took part considered the charge had ‘failed to improve their productivity’. John Lewis conducted some of their own research and concluded that the effects of charging had led to an estimated sales reduction of 7.3% at their

Oxford Street


Quddus, Carmel and Bell (2007) also undertook research to assess the impact of the London congestion charge on retail sales. The modelling work showed the association of sales from John Lewis on

Oxford Street
with the congestion charge, the (then) closure of the London Underground Central Line, the state of the economy, the consumer price index, the number of overseas visitors to London , trend and seasonality. Using this model, the congestion charge was considered to have a negative impact on the weekly sales of
John Lewis Oxford Street



Whilst there is a degree of support amongst the business community for congestion charging (London First, 2006), it is also believed that many smaller businesses may have experienced a drop in custom which could have a likely impact on reducing future investment decisions.


TfL also reported (TfL, 2008) that there is a concern among some businesses, particularly small businesses, that congestion charging imposes additional regulatory burdens on businesses, which may hinder business start-ups or contribute to business closures. Analysis of time series data on VAT registrations, within and outside the charging zone, both before and after charging, may reveal whether charging has affected business start-up or de-registration (resulting from closures, relocations or mergers). TfL state that the overall stock of VAT registered businesses in the central charging zone has risen since the mid 1990s. Total business stock in the central zone has grown by 1,200 per annum since the introduction of congestion charging, compared to a growth of 780 per annum in the three years prior to congestion charging.





Stockholmsförsöket (2006a) reported that the effects and impact on the local economy are dependent in both the short and long term on how the surplus revenue is returned to the region. What is apparent from the trial is that the business community is dependent on a well functioning road transport system. The ‘major winners’ from the trial were professional and service road users, who made substantial time savings that were worth more than congestion tax paid. The short term impact of introducing a scheme on commerce and other business sectors studied showed only minor impacts.


The turnover surveys that were done indicated that the Stockholm trial had little effect on retail trade in the region. Furthermore the report concluded that the trial did not have a negative influence on small businesses as a whole in the charging zone. This conclusion was also reached in Daunfeldt et al (2009). This is not to say that individual companies were not adversely affected. Congestion taxes do have both positive and negative effects on costs for businesses. It is the balance of these costs against the net gains that will influence whether or not urban road user charging is acceptable to the business community.