by Laura Dobie
In this article we look at past and present incarnations of Enterprise Zones, their potential to create jobs and growth, and issues to address in policy approaches.
Past experiences and lessons learned
The Enterprise Zone concept emerged in the UK in the 1970s. They were conceived by the planning academic Peter Hall, with the idea that removing all obstacles faced by businesses, such as regulation and bureaucracy, would allow enterprise to prosper, prompting a surge in the number of companies, employment levels and incomes in areas which had been ravaged by industrial decline and restructuring.
Enterprise Zones were created in the UK between 1981 and 1996 and were mostly concentrated in areas of post-industrial decline on the outskirts of towns and cities. The policy, as it was implemented, departed somewhat from the original, free-for-all vision: the zones concentrated on built environment challenges and the use of capital-based grants and rebates to drive growth.
The incentives offered included:
- 100 percent tax allowances for capital expenditure on constructing, improving or extending commercial or industrial buildings;
- Exemption from Business Rates for industrial and commercial premises;
- Simplified planning procedures;
- Exemption from industrial training levies;
- Faster processing of applications for firms requiring warehousing free of Customs duties;
- A reduction in government requests for statistical information.
The Department for Environment’s final evaluation found that approximately 126,000 jobs were created, of which up to 58,000 were additional, and that additionality was highest for manufacturing and lowest for retailing and distribution activity. It estimated that the cost per additional job created was around £17,000 (£26,000 at current prices), assuming a ten year job life, and that over than £2 billion (1994/95 prices) of private capital was invested in property on the Enterprise Zones, a public to private leverage ratio of about 1 to 2.3.
However, Enterprise Zones have been subject to much criticism, and it has been argued that, overall, they did not produce a lasting recovery in investment and employment. (Danson, 2013, p17). Critics have highlighted the displacement effects of Enterprise Zones, i.e. that many jobs created in Enterprise Zones were displaced from other areas (Sissons and Brown, 2011), and the expensiveness of the policy (Larkin and Wilcox, 2011).