Alcohol in London: A Cost-Benefit Analysis

31 January 2003
By Michael Spackman et al.

Alcohol is a multi-billion pound industry that provides substantial revenues for businesses and government. Alcohol also plays an important role in the lives of Londoners; however, the pleasurable effects of its consumption are countered by a variety of costs to society. Although there have been many studies in the past on the use of alcohol and its associated costs, alcohol's social benefits have largely been ignored. Nor has any such previous research focused specifically on London. The purpose of this study, commissioned by the Greater London Authority (GLA), is to provide a balanced view of the costs and benefits of alcohol in London, as well as help shape the GLA's agenda for action on alcohol.

In the study, the authors identify three primary costs to London associated with alcohol use: costs to health (both to individuals and the NHS), crime (including drunk driving), and workplace productivity. The health cost assessment includes an evaluation of the morbidity and mortality effects of alcohol abuse, as well as alcohol's indirect effect on primary and secondary health care services. Crime costs are obtained by examining three important categories - violent crimes, petty crimes and road accidents - where alcohol is involved. To gauge the impact of alcohol abuse in the workplace, the report focuses on the economic cost of absenteeism encouraged by misuse of alcohol; it is estimated that alcohol abuse results in 1.68 million lost working days in London per year.

On the positive side, the report illustrates how various London stakeholders such as employees, businesses and the government benefit from the city's estimated £4.6 billion annual expenditure on alcohol. The report offers several statistics that help quantify the benefits of consumption -- including the number of jobs created and tax revenue for the city. Based on the point elasticities of various drink categories in the UK, the report suggests that the utility of consumption to users maybe as much as 50% more than the price paid for the alcohol.