As with the original round of enterprise zones, the number of jobs created in the first five years of the existing round of zones has underperformed expectations:
- By 2017, the total new jobs were only around one-quarter of the estimates produced by the Treasury in 2011.
- At least one-third of the jobs created have come as a result of the move of businesses from elsewhere, rather than the creation of new posts in new businesses.
- The nature of the jobs created has also been overwhelmingly low skilled, meaning that the zones have done little to attract in higher-skilled economic activity that would help to change the economic make-up of the economies into which they have been placed.
Even if the goal had been to redistribute jobs, rather than grow the total number of them, then the zones have struggled on this measure. The zones that were created in Lancashire and the Humber in response to large job losses have seen job losses. Meanwhile, the top-performing zones have been in the already successful city centres of Bristol, Birmingham and Liverpool.
On a more positive note, the more flexible planning rules within zones, and the opportunity to use TIF, allowing local government to borrow against the future increase in business rates as a result of investment today, does seem to have brought benefit, particularly in Birmingham city centre’s ongoing redevelopment. But neither of these policies is exclusive to enterprise zone status. It is within the power of local authorities to remove planning restrictions, while central government could allow any authority to use TIF if it so chose. Reflecting on the success or otherwise of how this tool has been used in the zones, the Government should consider extending its use to other parts of the country.
These findings should lead to greater caution over the creation of enterprise zones or any other area-based initiative, such as the free ports that have been suggested after the UK leaves the EU. Zones offering tax incentives or tariff reductions to relocate are likely to move activity around the locality or in from elsewhere in the country, rather than create new activity. And they are unlikely to attract in higher-skilled jobs that would change the fortunes of an economy.
Instead, those places that have struggled to attract higher-skilled businesses into their economies should address the barriers as to why this is the case. The availability of skilled workers is likely to be a key reason. A high-skilled business is going to invest in a place where it can employ the workers it needs, and areas that can not offer this benefit should focus primarily on improving skills.