Local Multiplier 3 (LM3)

What does the tool measure?

Examining a local economy, or several, Local Multiplier 3 (LM3) is a tool which calculates how much income is generated for the local economy, demonstrating the end figure, with a ratio. Used for measuring economic impact, it can be used as part of public procurement.

Who can use the tool?

LM3 online can be used by the private, public and not-for-profit sectors and is free to the not-for-profit sectors. Developed by New Economics Foundation (NEF), it is in use by at least 20 Local Authorities and 30 private and not-for-profit UK organisations.

How does the tool/approach work?

The LM3 tool firstly looks at the income e.g. the total income, exploring how the income is spent and then ‘redistributed’/spent within the local economy, looking at a maximum of three rounds of spending. Using these three steps, five stages are then conducted as part of the LM3 analysis:

1.- Distinguish what the ‘local area’ is (e.g. using political boundary/radius/neighbourhood)

2.- Pinpoint what the income source is

3.- Breakdown how income spent within local area

4.- Find out how people spend their income (e.g. the people the money is spent on)

5.- Responses gathered, mathematical calculations take place

- The tool displays elements of flexibility as the analysis can be adjusted in order to measure what is appropriate. The LM3 analysis can also be repeated in order to track changes e.g. annually.

Further information:

Further information such as costs can be found at the LM3 Online site. Visit to find out how to get started. An online version of the LM3 tool is available free for not-for-profit organisatons, along with further guidance.