Investment Zones: A new government measure aimed at improving local economies

As the intense debate surrounding the mini budget continues, Steven Barclay, Local Trust’s policy officer, reflects on a lesser-known aspect of the government’s new approach to economic policy: Investment Zones, and what they could mean for local communities.

There has been wide debate about the government’s mini budget, which signals a new approach to economic policy – one focused on achieving growth in the production of goods and services – and its changes to tax policy and regulation of the city.

However, the aspect which may be most relevant to local communities and Big Local partnerships, and the resources available to them, is the proposal for new Investment Zones.

What Investment Zones could mean for local growth

The policy of Investment Zones is an important new measure aimed at local growth. The government intends to assign Investment Zone status to places which, subsequently and for a time-limited period, will benefit from:

• business rate relief on new or expanded premises
• capital investment relief
• stamp duty land tax relief
• National Insurance relief
• a simplified or removed planning process.

Investment Zones have a history – and a not-so-distant one. The essentials of the policy were present in Enterprise Zones which were introduced in 2011.

In fact, this term had been used before, in a programme which ran from 1984 to 1995 and is well remembered for transforming London’s Docklands and Salford. The essentials of the policy are also present in Freeports.

The difference with Investment Zones appears to be that there will be more of them and they may cover larger geographical areas.

What will make Investment Zones work for communities?

The government has plenty of research on what works in local growth to inform their plan.

• The Centre for Cities found that Enterprise Zones did best when they were in city centres – but we know that city centres are already doing well and the priority for development should be communities on the fringes of cities.
• Special economic zones like this have historically had a displacement effect, so how can we ensure that new jobs in the Investment Zones are not just jobs moved from elsewhere?
• We also know that the jobs created have been mainly low skilled, which had not been the intention of Enterprise Zones.
• Investment Zones can also include housing developments, but how can we ensure parallel investment in social infrastructure, like places to meet and relax, which turn estates into communities?

Meanwhile, Local Trust’s own research has found that investing in community-led social infrastructure in neighbourhoods where it has declined produces excellent value for money in generating local economic growth.

Questions for the future of Investment Zones

There is a lot that we don’t yet know about Investment Zones, as the policy is still in the planning phase. Combined mayoral authorities and upper tier local authorities have been asked to submit expressions of interest proposing sites for Investment Zones by 14 October 2022.

We don’t know where they will be or how big the zones will be. Most previous Enterprise Zones were relatively small and it seems likely that, if this policy is to offer anything new, Investment Zones will be bigger.

We also don’t know what the changes to the planning process will be. Will taking over an old building and repurposing it for community use count in the government’s classification for new or expanded premises, and therefore qualify for business rate relief?

The 38 areas already named contain many Big Local areas, but how they can best take advantage of this, for example by inputting to the plans which local authorities and combined mayoral authorities submit, is yet to be seen.

The relevant authorities have been asked to consult with district council and stakeholders on which sites to propose, but they have little time to do so.

Renewing ‘Levelling Up’

Interestingly, there has been no specific link yet between the Investment Zones policy, which seems to be driven by the Treasury, and the government’s Levelling Up agenda, as set out in the white paper and bill earlier this year.

• Local Trust has been broadly supportive of aspects of the white paper and we are keen that those elements might have a place in the development of the Investment Zones policy. We would particularly encourage the building of social capital, through investment in social infrastructure, as an essential prerequisite for strong sustainable growth.
• To embed learning from previous attempts at government-sponsored local growth, we would advocate for the creation of a new evidence centre or initiative on community and neighbourhood improvement, in addition to the What Works Centre for Local Growth, given the National Audit Office has suggested that successive governments have not done enough to learn from previous attempts at supporting local economic growth.
• We would also advocate that the effects of the policy should be monitored properly, with outcomes measured and performance of the Investment Zones evaluated according to criteria which include social capital and infrastructure.
• We also continue to press for the creation of a Community Wealth Fund, an ideal way to build social infrastructure and seed new institutions in our most deprived communities, which would serve as the foundation for sustainable growth.

The chancellor’s vision for developing the UK’s economy is nothing if not bold – we need to ensure it is developed and implemented in a way that creates a fairer and more balanced economy which benefits all communities.

This blog was originally published on 3 October. It was updated and republished on 6 October.