The creation of Local Enterprise Zones (LEZs) has failed to produce significant increases in employment in most areas where they have been set up, new research has found.
Local Enterprise Zones were launched in 2012 and sought to improve the economic outlook of an area through direct tax incentives such as business rate discounts and capital allowances and a more relaxed planning regime. They also provide the option for Local Enterprise Partnerships (LEPs) to borrow against future business rate growth to allow them to invest in infrastructure and redevelopment.
However, research by thinktank the Centre for Cities, has found that job creation in the initial 24 zones that became operational in 2012 had been anaemic in most cases and that employment actually fell in two of the them (Humber and Lancashire).
The zones created 13,560 jobs in the five years from 2012-2017 compared with the 54,000 predicted by the Treasury. Moreover, Centre for Cities estimated that 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 and that the nature of the jobs created were overwhelmingly low skilled. 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, it added.
However, in the zones that had proved most successful – Bristol Temple Quarter and Bath, Mersey Waters and Birmingham city centre - the research did conclude that more flexible planning rules and the opportunity to allow local government to borrow against the future increase in business rates as a result of investment had been beneficial.
The thinktank concluded that the cost (estimated by different agencies as being between £100m and £300m) of the scheme would have been better spent on improving workforce skills.
“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 a new activity. And they are unlikely to attract in higher-skilled jobs that would change the fortunes of an economy,” the report concluded.
“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 cannot offer this benefit should focus primarily on improving skills.”
The full report can be downloaded here: https://www.centreforcities.org/publication/in-the-zone-have-enterprise-zones-delivered-the-jobs-they-promised/