A number of disadvantages arise from the excessive localisation of industry. This includes:
(i) Increase in Social Cost and Industrial Population:
There are increases in social cost arising from localisation and urban concentration. For instance, telephone cost, post office, banks services, hospitals, etc., arise from the concentration of population in a particular area. Also industrial pollution and waste disposal problems are common to such cities. If the waste products are harmful, they cause ill-health and constitute environmental hazards.
(ii) Increase in Cost of Living:
Concentration of industries in an area increases land values and accommodation problems, as a result of population increase. The demand for goods and services leads to an increase in price of goods, thereby increasing the cost of living.
(iii) Problem of Over-crowding and Congestion:
Concentration of many industries in a particular area as a result of availability of social amenities will encourage the movement of very many people to the area. Consequently, population will increase within the area and this will result in over-crowding, traffic congestion, and crimes.
(iv) Highly Localised industries are Usually Targets for Enemy Attack:
During wars, areas where industries are highly concentrated, are good targets for bombing by enemies in times of war. An economic effect is that, if such an industry which produces an essential services is destroyed, it would bring a great hardship to the people.