Enterprise Zones – a few answers, but questions remain.

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Earlier today BIS announced the first four of the government's new enterprise zones. These will be the Boots campus in Nottingham, Liverpool Waters, Manchester Airport, and the Royal Docks, in London.

These areas are well connected to growing cities which addresses one of the problems with the 1980s Enterprise Zones, where for some a lack of infrastructure held back growth.

Experience from the 1980s showed that lower tax levels and a simplified planning regime did boost employment and inward investment within some Enterprise Zones. The new zones should expect a similar uplift. However experience also suggests that the benefits from Enterprise Zone designation do not always last for very long, and there are high deadweight costs associated with activity simply moving from one area into an Enterprise Zone.

Not only are there potential deadweight costs associated with Enterprise Zones, but having different regimes in different areas could add to the very distortions in the business environment that the government has said it seeks to address.

And Enterprise Zones are only the beginning. The structure of local governance is in the process of substantial change. LEPs are only in their formative stages and further complexity could be added to the business environment by upcoming sub-national reviews and policy changes. Businesses will be waiting to see what the whole picture looks like.

The government has said that Enterprise Zones will be “unashamedly pro-growth” but also “unashamedly localist”. How these two – sometimes contradictory – ideals will be reconciled it remains to be seen.

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