Monday, June 13, 2011
ENTERPRISE ZONES FOR WALES?
Some people may have thought that they were watching an episode of “Ashes to Ashes” when George Osborne, in his first full budget, announced that twenty one new enterprise zones would be created across England.
In fact, that has been the knee-jerk reaction of many critics to the new scheme, namely that the enterprise zones created in the 1980s by the then Conservative Government simply did not fulfil expectations.
For example, they point to research that indicates that as much as 80 per cent of jobs created in areas such as The Docklands in London were displaced from other places and that each job cost £23,000 to create.
However, there is one major difference between the old model from thirty years ago and the one proposed by the current Government, namely that the new enterprise zones will be focused on areas of high growth potential, not those that are in industrially declining areas. In addition, the enterprise zones will focus on creating new jobs through key policy interventions including a business rate discount worth up to £275,000 per eligible business over a five year period, simplified planning rules and the roll out of super-fast broadband. The government also announced that companies in some zones would also be given direct financial support through a regional growth fund.
To date, a number of enterprise zones have been created in England, with more to be announced over the next few weeks. Whilst the policy only applies across the border, Wales has received an additional £10 million, under the so-called Barnett consequential, to plan for a similar intervention here. However, there has been no announcement from Cardiff Bay as to whether this policy will be replicated or not.
In isolation, that would not be an issue, but it would seem that a number of areas bordering Wales are lobbying for very hard for enterprise zone status, including Cheshire and Warrington, Gloucestershire, Heart of the South West, Lancashire, Stoke and Staffordshire, the Marches (Shropshire and Herefordshire), and Worcester.
If any of these areas are successful in their bids, then there is a real danger that any businesses looking to invest in Wales may consider these areas instead, especially as grant incentives for industry were abolished by the last Labour-Plaid Government.
In fact, the threat to the attraction of investment to Wales is best exemplified by the decision, last week, to award enterprise zone status to a 70 hectare site near Bristol Meads Railway station, a move which the city council have said will create 4000 new jobs. This has already set alarm bells ringing in Cardiff, with business and civic leaders worried that businesses may consider relocating away from the capital city over the next few years.
Whilst there is, in reality, nothing stopping the Welsh Government from pushing ahead with enterprise zones in Wales, cynics will argue that politics will get in the way of what is a perfectly rational economic development policy. But if Wales, under a government of a different colour, is reluctant to follow England in this respect, then perhaps the way forward is to create something different, something which adds a Welsh devolved flavour a Whitehall policy.
Let’s consider one way forward. As the new Minister for Business has said that she will continue to follow the sectoral approach developed by her predecessor, then why not initially consider six enterprise and innovation zones for Wales based on these sectors?
For example, Swansea could be made the life sciences enterprise zone for Wales whilst Cardiff could lay claim to either the creative industries or financial services. In the North, Flintshire or Wrexham would both have a strong case for the advanced manufacturing and materials enterprise zone whilst the whole island of Anglesey, the poorest county in the whole of the UK, could become the energy enterprise zone for Wales. Over time, special tourism enterprise zones could be added to these six areas which focus on developing the potential of this vital industry.
Whatever the solution, it is clear that the Welsh Government cannot allow English regions to make the most of the funding now available from the UK Government to surround our nation with enterprise zones that will, over time, attract industries away from this economy. Over the next five years, we have an opportunity for devolution to show that we can take the best ideas from all over the World, including England, and make them better through Welsh policy innovation.
Rather than burying its head in the sand, developing enterprise zones that work specifically for the Welsh economy would be a great start for this new government to start delivering for the economy.