4 Fraser of Allander Institute
Understanding the results
Diagram 1: Direct, indirect and induced impacts explained
TOTAL IMPACT
Direct impacts
These relate to the College's expenditure on its activities. To provide its services
it purchases from suppliers. The reaction of suppliers to meet this demand
generates GDP and employment.
Indirect impacts
The College's suppliers, in turn, purchase goods and services from their own
suppliers who do the same with their suppliers and so on. This generates
economic activity through the whole supply chain.
Induced impacts
Employment is created in the College's supply chain as a result of the direct and
indirect impacts and these employees receive wages that are spent on goods
and services across the Scottish economy, generating further economic activity.
Source: ONS
This report looks at the economic impacts of the activities of City of Glasgow College on Gross
Domestic Product (GDP) and employment in Scotland.
■ GDP is a measure of the size of a country's economy over a period of time.
■ Employment in this report refers to full-time equivalent (FTE) - that is, one FTE job is
equivalent to one person working full-time for one year and so on.
A study of the impact of City of Glasgow College needs to look further than simply its own
direct spend. It needs to ask: who is supplying goods and services to the College; and on what
do these suppliers spend their resulting revenues from the College's activities? Where do
people spend their wages in the wider economy?
We answer these questions by examining three channels of activity: direct, indirect and
induced impacts.
Direct, indirect and induced impacts
Direct impact measures the contribution from the actual spend underpinning City of Glasgow
College's own day-to-day activities - e.g. heating, lighting, stationary etc.
The second avenue through which the College has an impact is from what are referred to as
indirect and induced effects.
We know for example, that employees do not just hold on to their wages and salaries but
spend them on goods and services (what we call induced effects). We also know that the
College is supported by a complex supply chain from across Scotland and beyond (what we
call indirect effects).
To capture all these impacts we make use of an economic model for Scotland. This model
provides a picture of the flows of goods and services in the economy for a given year.