Institute for Transport Studies (ITS)

Transport, the economy and project appraisal

A report by the Oxford University, ITS and the London School of Economics is leading to changes in transport appraisal practice.

The Transport Investment and Economic Performance report by Professor Tony Venables (Oxford University), Dr James Laird (ITS) and Professor Henry Overman (London School of Economics) was commissioned by the Department for Transport. The research considered how transport can affect the economy and whether the Department for Transport’s approach to appraisal needs to be adjusted to ensure that these impacts are fully captured.

Transport affects the economy directly through cost reductions, but also by increasing productivity, changing land uses and bringing new resources (land and labour) into production. Venables, Laird and Overman argue that whilst having a good basis in economic principles, current appraisal methods should be enhanced. They say there is a need to develop a narrative which can then inform the methods used to appraise transport schemes – which currently can be too formulaic, lack integration and may not be sufficiently context specific.

Related to that, there can be a disconnect between the Economic and Strategic Cases for investment. For larger projects closer attention to private sector investment decisions (on land and employment) need to be taken into account – that is how land uses change. They recognise that transport-economy forecasting methods are not as developed as in other aspects of transport planning, but the Department for Transport is in a unique position in which it can encourage innovation and disseminate good practice.

Further information

Download the report:

Transport investment and economic performance -Implications for project appraisal

Peer Review / Professor Peter Mackie’s commentary on the report

The Department for Transport’s response to the report

The short course on Transport and the Economy