Enterprise zones

News

29 April 1989

Established as an experiment to test how far private sector activity could be encouraged by the removal of certain tax burdens and by relaxing or speeding up some statutory or administrative controls, the zones are due to last 10 years from the date of designation. The first were designated in 1981.

The main benefits available in an EZ include: exemption from rates for non-domestic property; 100% capital allowances for industrial and commercial properties; relaxed planning requirements; speedy handling of remaining planning controls; and a reduction in government requests for statistical information.

Between the time of designation and September 1987, employment in the enterprise zones increased by over 59,000 — an increase of almost 200%. Of the employees, 58% were in industry and 42% in the service sector. The number of “establishments” in the zones has increased by over 2,500 since designation.

Just over 5m² of development floorspace were recorded in the EZ. Roughly 40% was used for industry and 40% for warehousing. The zones cover 3,500 hectares. Almost 70% of this land had been developed by October 1987 and 45% since designation.

The total cost of EZ measures is calculated at £354m at 1986-87 prices up to March 1987. This is made up of £230m for capital allowances and £124m for rate revenue foregone. Public sector investment in EZs amounted to at least £197m up to March 1987, comprising £35m land acquisition costs and £162m infrastructure costs.

It is estimated that by 1986, out of £163m of this public investment in the zones, £99m would have been incurred anyway in the absence of EZ designation. Thus the total Exchequer costs directly associated with EZs to March 1986 were of the order of £297m and £431m to March 1987.

The report also includes information provided by the Inland Revenue Valuation Office on land values and the rental and capital values of standing premises inside and outside the enterprise zones. The only conclusion drawn from the figures, however, is that “values tend to be higher in EZs than their surrounding areas”.

There are wide-ranging differences in values. In the Isle of Dogs EZ, for example, off-zone land values were around 10% of values with the EZ; in north-east Lancashire values were higher outside the zone.

Comparing rental values, figures outside the Isle of Dogs EZ were some 5% of those inside (over 90% in Wakefield) and for capital valuations the percentage ranged from some 30% in Scunthorpe to about 90% in Wakefield.

Commenting on the report, Environment Inner Cities Minister David Trippier said that the figures show that the incentives for firms to set up in the enterprise zones can help the local economy and can give a major boost to local confidence.

(*) Enterprise Zone Information 1986-87. HMSO £7.70.

Detailed statistics on the 23 enterprise zones in Britain are provided in a DOE report(*) giving the position in October 1987. It is difficult to draw any conclusions as to the overall success of the EZ experiment from the information given, but the Government decided in December 1987 that there would be no new enterprise zones except in exceptional circumstances — the designation of the Inverclyde EZ in March this year was regarded as such an exception and there is the likelihood of a further EZ in Sunderland. Established as an experiment to test how far private sector activity could be encouraged by the removal of certain tax burdens and by relaxing or speeding up some statutory or administrative controls, the zones are due to last 10 years from the date of designation. The first were designated in 1981. The main benefits available in an EZ include: exemption from rates for non-domestic property; 100% capital allowances for industrial and commercial properties; relaxed planning requirements; speedy handling of remaining planning controls; and a reduction in government requests for statistical information. Between the time of designation and September 1987, employment in the enterprise zones increased by over 59,000 — an increase of almost 200%. Of the employees, 58% were in industry and 42% in the service sector. The number of “establishments” in the zones has increased by over 2,500 since designation. Just over 5m2 of development floorspace were recorded in the EZ. Roughly 40% was used for industry and 40% for warehousing. The zones cover 3,500 hectares. Almost 70% of this land had been developed by October 1987 and 45% since designation. The total cost of EZ measures is calculated at £354m at 1986-87 prices up to March 1987. This is made up of £230m for capital allowances and £124m for rate revenue foregone. Public sector investment in EZs amounted to at least £197m up to March 1987, comprising £35m land acquisition costs and £162m infrastructure costs. It is estimated that by 1986, out of £163m of this public investment in the zones, £99m would have been incurred anyway in the absence of EZ designation. Thus the total Exchequer costs directly associated with EZs to March 1986 were of the order of £297m and £431m to March 1987. The report also includes information provided by the Inland Revenue Valuation Office on land values and the rental and capital values of standing premises inside and outside the enterprise zones. The only conclusion drawn from the figures, however, is that “values tend to be higher in EZs than their surrounding areas”. There are wide-ranging differences in values. In the Isle of Dogs EZ, for example, off-zone land values were around 10% of values with the EZ; in north-east Lancashire values were higher outside the zone. Comparing rental values, figures outside the Isle of Dogs EZ were some 5% of those inside (over 90% in Wakefield) and for capital valuations the percentage ranged from some 30% in Scunthorpe to about 90% in Wakefield. Commenting on the report, Environment Inner Cities Minister David Trippier said that the figures show that the incentives for firms to set up in the enterprise zones can help the local economy and can give a major boost to local confidence. (*) Enterprise Zone Information 1986-87. HMSO £7.70.