In the 2022 Autumn Statement, the Chancellor, Jeremy Hunt, announced that the government would launch a refocused Investment Zones programme, targeted at places with the right characteristics to support the objectives of Levelling Up, boosting productivity, and encouraging growth:
- £35 million direct spend, split 40:60 between resource spending (RDEL) and capital spending (CDEL), to use across a portfolio of interventions based on the opportunities from each cluster
- £45 million of tax incentives, which can cover a maximum of 600 hectares across up to three sites, lasting for five years.
Fully realising the benefits of these incentives requires a holistic approach and must be rooted in partnership between central government, local government, research institutions, and the private sector. The support is targeted at five key industries:
- Digital and tech
- Life sciences
- Creative industries
- Green industries
- Advanced manufacturing
All Investment Zones will need to focus on growing clusters aligned with one or more of these sectors.
Places are expected to build on their existing networks of research institutions, businesses, and other local stakeholders, including MPs, to design proposals, aligning with and building on existing local strategies for their areas.
What are business leaders saying about Investment Zones?
Private-sector partnering
Collaboration with partners will be critical to the delivery of Investment Zones. The results from our latest Business Outlook Tracker survey show high levels of engagement from the public sector and good understanding of objectives of the Investment Zones policy, with 66% of respondents agreeing that they understood the plans and 70% agreeing that being located within an Investment Zone would support the local region with skills development and job creation. There was also a clear feeling that more Investment Zones should be created in other areas of the UK.
Where places don't opt for the maximum tax offer these can be exchanged for a greater amount of direct spending.
What is the view in the selected areas?
The response to our trackers shows a highly positive reaction. 72% of our respondents said being located within an Investment Zone would be beneficial to local businesses in the area.
East Midlands MCA (proposed)
Investment Zones provide financial incentives to local businesses in defined areas and a clear majority (62%) of East Midlands business leaders believe that these incentives, such as stamp duty land tax relief and 100% business rates relief, are focused on the right areas to encourage business investment. Additionally, over half (63%) also believe that being located within an Investment Zone would encourage businesses to stay within the local area.
Greater Manchester MCA
A clear majority (66%) of Greater Manchester business leaders believe that these incentives, such as stamp duty land tax relief and 100% business rates relief, have been focused on the right areas to encourage business investment. While almost three quarters (69%) also believe that being located within an Investment Zone would encourage businesses to stay within the local area.
Liverpool City Region MCA
A significant number of respondents citing that being located within one of the Zones would help to support the local region, with factors such as job creation and skills development (80%) and be beneficial to local businesses (78%).
Investment Zones provide a number of financial incentives to local businesses in the area and a clear majority (80%) of Liverpool business leaders believe that these incentives, such as stamp duty land tax relief and 100% business rates relief, have been focused on the right areas to encourage business investment. While almost three quarters (74%) also believe that being located within an Investment Zone would encourage businesses to stay within the local area.
South Yorkshire MCA
Over three quarters of business leaders in Yorkshire (76%) said that the introduction of Investment Zones will help towards the government’s Levelling Up agenda, with a significant number of respondents citing that being located within one of the Zones would help to support the local region, through job creation and skills development (80%) and be beneficial to local businesses (80%)
West Midlands MCA
two thirds of business leaders in the West Midlands (66%) - one of the proposed regions where an Investment Zone will be located - said that their introduction will help towards the government’s Levelling Up agenda.
Investment Zones provide a number of financial incentives to local businesses in the area and a clear majority (60%) of West Midlands business leaders believe that these incentives, such as stamp duty land tax relief and 100% business rates relief, are focused on the right areas to encourage business investment. The same percentage of respondents (60%) also believed that being located within an Investment Zone would encourage businesses to stay within the local area.
West Yorkshire MCA
Over three quarters of business leaders in Yorkshire (76%) said that the introduction of Investment Zones will help towards the government’s Levelling Up agenda, with a significant number of respondents citing that being located within one of the Zones would help to support the local region, through job creation and skills development (80%) and be beneficial to local businesses (80%).
Glasgow, and North East Scotland
There's a general feeling within the Scottish business community that Investment Zones will bring about positive change, with two thirds (66%) believing that being located within one would help to support the local area through resulting benefits such as job creation and skills development. 62% also believe that being located within an Investment Zone would be beneficial to local businesses in the area.
Demonstrating value for money
Evidencing benefits will be key to the success of Investment Zones while ensuring costs are managed given the complexity of the stakeholder landscape – having a clear and robust business case will help support this and the need to stick to a ‘plan’.
It's important that the business case reflects the many voices involved and a clear description of how the funding envelope will be used and how private finance will be leveraged against this to maximise the impact.
Subsidy control requirements
The UK now has its own subsidy rules – these are similar to the EU state aid rules, however there's no need to get EU permission. Instead, the Subsidy Advice Unit at the Competition and Markets Authority (CMA) may provide 'guidance' with a judicial review process if the subsidy is challenged and there's a requirement to consider the impact on competition within the UK as well as with Europe. And it's this within UK impact that will need particular consideration for Investment Zones.
What's the tax offer?
If tax sites are chosen as part of the Investment Zone offer a package of reliefs and incentives will be available to businesses located on specifically designated sites for five years. These sites can cover up to 600 hectares across up to three sites – there would normally be three 200 hectare sites, but one 600 hectare can be approved if a good case is made for it.
It's expected that where the proposal includes tax sites these will form part of the core ‘spatial’ focus of the Investment Zone and located on underdeveloped land – given the tax incentives are designed to encourage new activity and land development.
The package of tax incentives will be available for five years, expected to commence in 24/25.
What should Investment Zones do now?
For those areas that have been shortlisted as an Investment Zone the key next steps will be to collectively develop a robust plan of how to use the range of financial incentives available most effectively and how best to work with private sector partners to secure the additional investment needed to deliver the wider economic regeneration.
The Investment Zones policy provides a helpful framework that could be applied to other areas of the UK and there are a large number of Cities and regions that also have the right combination of characteristics to support the objectives of Levelling Up, boosting productivity and encouraging growth. While currently there are no enhanced financial incentives on offer from government, opportunities through greater devolution powers and an appetite from the private sector to engage there are certainly more opportunities to explore.
For more insight and guidance, get in touch with Wayne Butcher or Andrew Skiggs.
There will be up to 12 new Investment Zones, with ten regions already selected: The proposed East Midlands MCA, Greater Manchester MCA, Liverpool City Region MCA, The proposed North East MCA, South Yorkshire MCA, Tees Valley MCA, West Midlands MCA, West Yorkshire MCA, Glasgow MCA, North East Scotland MCA. The government is also committed to establishing at least one Investment Zone in both Wales and Northern Ireland.
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