Enterprise Zones: Not a quick economic fix

Mike Hedges AM argues that enterprise zones need to be seen as one arm of the government’s economic strategy and not as the only way of developing the Welsh economy.

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In the early 1980s enterprise zones were created, by the then Conservative government at Westminster, in order to stimulate the economy. Wales had three such zones, Milford, Delyn and the largest in Britain in Swansea.  Initially retail was excluded from enterprise zones but in many, including Swansea, it became a significant part of the zone. In Swansea the term enterprise zone is used as an alternative name for an out of town shopping area.

A report from the think tank Centre for Cities and the not for profit organisation The Work Foundation said the following:

“Evidence from previous enterprise zones suggests that up to 80 per cent of the jobs they create are taken from other places; that Enterprise Zones do very little to promote lasting economic prosperity”

Enterprise zones were also tried in the USA , especially in California where according to a report published by the Public Policy Institute of California in 2009 “ that it had failed to achieve its key objective of creating jobs”.

The consistently negative account of the impact of Enterprise Zones in the 1980s took them off the agenda for almost 30 years. Now they have returned and the challenge must be to learn lessons from the 1980s and to not repeat the mistakes made when enterprise zones were created the first time.

The Minister for Economy, Science and Transport said at a meeting of the Finance Committee, when they undertook an investigation into enterprise zones “I think we have learnt some of the lessons from the previous engagement. You cannot have business rate relief if the company is being displaced. We learnt that lesson straight away. Enhanced capital allowances are only for new investment; you cannot have it if you are already in there. It is quite important that that those two safeguards are already there.”

The other major difference is that the new enterprise zones are sector specific.

Anglesey- Energy

Cardiff- Financial and Professional Services

Deeside and Ebbw Vale- Advanced Manufacturing

Havens- Energy and Environment

St Athan- Aerospace

Snowdonia- Energy, Environment and ICT

Whilst it is difficult to criticize any of these zones and the sectors they are focussing on, especially as in most cases they are building on local strengths, I am sure I am not the only person surprised that one of Wales growth sectors, life sciences, is missing completely and that ICT exists only as the third part of the Snowdonia zone.

The other thing to remember is that Enterprise zones are not the only Government regional development policy. In my own constituency of Swansea East there is a major development on the waterfront at SA1. Here we have a development that has a commercial and residential mix and a forecast of nearly 3000 new jobs, approximately 2,000 new apartments and houses and a major development by the University of Wales Trinity Saint David on the site.

It was reported in January 2015 that 2,065 jobs have been created in the seven zones. Figures released by the Welsh Government reveal that from inception to March 2014, 779 jobs were created either through direct financial support or through wider Welsh Government assistance in the Deeside Enterprise Zone, with a further 2,484 safeguarded.

In the Central Cardiff Enterprise Zone, 465 jobs have been created and 51 safeguarded. In the Anglesey zone, 435 jobs have been created and a further 356 safeguarded.

Some 208 positions were created in the Haven Waterway enterprise zone in Pembrokeshire, and 29 safeguarded. The Ebbw Vale zone saw the creation of 172 jobs and 61 safeguarded. And 94 jobs have been created in the St Athan zone, and six jobs created in Snowdonia, with two safeguarded.

Whilst these figures, especially at St Athan and Snowdonia, will be disappointing to those who see enterprise zones as a quick fix, the easy option is to widen the sectors that are being supported and thus show an increase in employment in each zone. In my view that would be a serious mistake, repeating the 1980s error that led to retail being added to enterprise zones in order to boost employment figures. The current sectors chosen are those that include a high number of highly paid jobs and this has the ability to help increase the Welsh GVA. We need to be patient and produce sustainable employment rather than bringing in another LG at substantial cost especially opportunity cost.

Enterprise zones need to be seen as one arm of the government’s economic strategy and not as the only way of developing the Welsh economy. What is needed to increase Welsh GVA is to increase employment in industries such as ICT, Professional services and life sciences. Whilst enterprise zones are one way of helping to develop the economy, working closely with universities and commercially exploiting their research is another. There is not one quick fix for the Welsh economy, if that was true then every other Country in the world would be doing it.

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