Risk & Economy » Regulation » English enterprise zones leave FDs cold

English enterprise zones leave FDs cold

Finance directors are not won over by the government’s plans to boost growth

Government plans to create new “enterprise zones” across England have been presented as a way to boost growth, but finance directors are unimpressed.

The 21 enterprise zones, announced in the March Budget, will try to boost investment through tax incentives, reduced planning regulations and very fast broadband. The first 10 zones will be in Birmingham and Solihull, Leeds, Sheffield, Liverpool, Manchester, the west of England, Tees Valley, north-eastern England, Derbyshire and Nottinghamshire, and the Black Country.

The zones will offer a business rate discount worth up to £275,000 per eligible business over a five-year period, simplified planning approaches for the zone – for example, using existing local powers to grant automatic planning permission – government support to ensure that super-fast broadband is rolled out throughout the zone, to be achieved by guaranteeing the most supportive regulatory environment and, if necessary, public funding.

Other options to suit local circumstances may include consideration of enhanced capital allowances (instead of business rate discounts) for plant and machinery.

The government hopes that the measures will encourage private-sector expansion, particularly among small and medium-sized enterprises (SMEs) helping the economic recovery.

The enterprise zones, an idea first tried by the Conservative government in the 1980s, are part of a drive to make the UK one of the best places in Europe to do business. It is also hoped the zones will encourage a more balanced economy regionally by encouraging private-sector employment outside London and the south east.

Short-term gain

But will the enterprise zones work? And will they even be a useful resource for finance directors?

Financial Director asked FDs across England for their views on enterprise zones. Most like the idea of enterprise zones but predict that their impact is likely to be modest.

Bob Eastoe, finance director of Hypnos, a bed manufacturer based in Princes Risborough, Buckinghamshire, says he likes the idea of redistributing jobs and rolling out fast broadband across England.

However, he doubts whether the perks offered by enterprise zones will be enough to tempt established businesses to relocate to one of the zones.

“I do not see established businesses moving en masse to them,” he says. “They ought to be areas where embryonic businesses are able to grow and create the new jobs in the economy necessary for a recovery with the best chance of survival and success.”



Pat Cobham, head of finance at Cobhams, a Merseyside-based accountant near the Liverpool enterprise zone, doubts whether the zone will attract many new businesses because of high rents in the city centre. “Most people I speak to are pretty sceptical about the benefits of the new enterprise zones,” she says.

She also doubts whether more generous capital allowances will be of much use to SMEs. “Enhanced capital allowances is just tinkering with things. Generally, SMEs will disregard increased capital allowances once they speak to an accountant because it just accelerates tax relief that they would get anyway. So it is a short-term gain, which does not really assist businesses in the long run,” she adds.

SME scepticism

Tony Wilson, finance director at Kimal, a medical devices manufacturer based in Droitwich, West Midlands, says that enterprise zones need to provide good training to succeed. “Enterprise zones can fail if there is not a sufficiently educated work force in the area,” he says.

“The zones must invest in training centres that benefit all businesses coming to the zone; otherwise you just get businesses drawing staff from miles away through higher wages that are affordable due to the tax and rate subsidies.”

Small business experts are also sceptical about the value of new enterprise zones.

“From a business perspective, the benefits of the newly announced enterprise zones do not, as yet, make a compelling case for locating a new business or even for relocating an existing business,” says Clive Lewis, head of enterprise at the Institute of Chartered Accountants in England and Wales (ICAEW).

“The benefits so far announced are vague. So businesses will want to see much greater detail on the business benefits before committing to locating in an enterprise zone.”

A spokesman for the Forum of Private Business welcomes the incentives offered by enterprise zones, but cautions that they could create a “two-tier system” between businesses inside and outside the 21 areas.

Comments are closed.