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Since they were announced in last year’s Budget, Enterprise Zones have been tipped by some as the magic pill for economic growth. Local Enterprise Partnerships (LEPs), as the ultimately responsible body, have bid in droves for one of the coveted EZs. As the zones ramp up to start offering business rates discounts in the coming months, it’s worth reflecting on progress to date.
The idea is not a new one: Enterprise Zones were first implemented in the UK in the 1980s, and the Centre’s previous study on their success can be found in What Would Maggie Do? The 21st century Enterprise Zones are managed by the LEP, and they benefit from business rates discounts and retention (when the Local Government Finance Bill is passed), simplified planning, superfast broadband, and enhanced capital allowances in some cases.
In England, 11 EZs were initially selected by Government and announced in the 2011 March Budget Statement. A further 11 were chosen via a formal bidding process, and one more EZ and another potential EZ were announced in the 2011 Autumn Statement, bringing the potential total to 24.
Some EZs have already brought forward Local Development Orders to simplify planning procedures and allow for change of use. Tees Valley finalised their LDO, while Bristol, Hereford and Aire Valley are in the process.
But England isn’t the only country to get in on the EZs idea; Wales and Scotland have followed suit. Currently, there are 5 Enterprise Zones designated in Wales, with two more being proposed. The Welsh Government aims to be targeted and bespoke for each Zone, and they are hoping to draw down £100m in capital allowances from Westminster to support businesses in Enterprise Zones.
In Scotland, 14 sites have been selected and grouped into four sectoral Enterprise Areas (EA) so far, each focused on one of the four EA groups: life science, low carbon and renewables, general manufacturing and growth sectors (aerospace and creative industries). A combination of Scottish Government funding and Barnett consequentials brings total funding to around £20m. However, the Scottish Government is still determining how additional funding needed will be provided.
Despite their growing popularity in the policy agenda, Enterprise Zones are only one part of the solution needed for boosting job creation. There are still significant concerns that the Zones will simply move jobs around the country as firms are attracted to the business rates package offered in the Zones.
What is in store next year for EZs? Given that many Zones are still ramping up, it is very unlikely that we’ll see significant jobs or business growth yet. Developers are likely to apply for planning permission, but new developments will take time to come forward. Also, while Zones can offer business rates discounts from this April, it is unclear from the Enterprise Zones Prospectus when they will be able to retain business rates. In effect, this incentivizes Zones to delay development until the rates retention has been confirmed.
All-in-all, 2012/13 should be the year we start to see movement, but EZs are unlikely to have any substantial impact on the economy’s health just yet.
Senior Consultant, City Economics at Arup
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