Localisation leads to increased pollution and other social costs in the area. It also leads to regional imbalance in development since. Some areas with concentration of industries develop faster than others.

Rural - Urban migration increases as most industries tend to localise in urban areas. It leads to unequal distribution of income because people in areas of industrial localization earn more than those in areas without. In the long run, localization increases costs of production like wages, rent and interest due to competition among the many firms.

Localisation makes an area to be dependent on a particular industry which could lead to acute unemployment in case such an industry collapses. There is increased strain on roads and transport facilities causing traffic congestion and associated problems. It is risky to concentrate many industries in one area because incase of accidents like fire wars etc, all industries may be destroyed. It leads to over exploitation of resources and environmental degradation in an area. Over crowding may lead to housing shortages, development of slums and associated problems like high crime rate, prostitution etc.