Dmitry Sivaev argues that in order for Scotland's Enterprise Areas to succeed there needs to be a clear idea of what they are aiming to achieve
We were hoping that last week’s official briefing on Scotland’s “Enterprise Areas” would shed some light on how they will compare to their English (and soon to be Welsh) Enterprise Zone counterparts. However, despite providing more detail on what the four Areas will focus on, the briefing falls short of addressing the fundamental question – what are they trying to achieve?
Our research on previous Enterprise Zones suggests that clarity on what the Areas are trying to achieve is crucial to designing the right range and mix of incentives. If the objective is job creation, capital allowances that support investment in capital rather than labour will not be the best tool. If the goal is to support greater levels of innovation, then providing R&D allowances and increased access to broadband might work better. If the goal is to support broader regeneration then skills and transportation links should be among the issues targeted.
Whilst further analysis of the policy will have to wait until the Scottish clarifies its objectives for Enterprise Areas, there are a few reflections we can make based on the details released so far:
First, like their English counterparts, it appears that there will be a range of incentives available to businesses in each Area, potentially including business rate discounts, streamlined planning and capital allowances. This is a good thing and should allow each Area to tailor the mix of incentives to its own particular needs.
Second, it appears that the Enterprise Areas will be more focused on supporting selected industries. So far 14 sites have been selected and grouped into four sectoral Enterprise Areas, each focused on one of the targeted industry groups: life science, low carbon and renewables, general manufacturing and growth sectors (aerospace and creative industries). Whilst targeting industries is not in itself bad, explicitly limiting the variety of businesses in any one Area may reduce innovation and spillover effects.
Thirdly, the sites selected at the moment are spread all over Scotland with only 3 out of 14 located within cities. Yet our research has shown that Enterprise Zones located in urban areas or on their fringes are the most successful.
The crucial next step for the Scottish Government is to set out what the goal of their Enterprise Areas policy is. Only then can the important work of designing the right incentives to achieve that goal get underway.
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