News release
Businesses bullish about the benefits of Investment Zones
13 Jul 2023
As we approach one year since Investment Zones were first announced in the Autumn ‘mini-budget’, businesses are encouraged by the blueprint for what it could mean for local areas and the government’s efforts to ‘Level Up’ the UK economy. But views and priorities on what is on offer from the policy are found to differ across the country.
In Grant Thornton’s latest Business Outlook Tracker* survey of 601 mid-sized businesses, two thirds (66%) of respondents said they understand what the government’s Investment Zone policy is trying to achieve, with 68% also believing that the introduction of the Zones will help towards the government’s Levelling Up agenda.
Businesses see potential in Investment Zones
The survey found that businesses can see benefits to local areas from the introduction of Investment Zones. A significant number of respondents agreed that being located within one of the Zones would help to support the local region, with factors such as job creation and skills development (70%), whilst also being beneficial to local businesses (71%). The positive impact of being in a Zone would also encourage many businesses (72%)** to stay within the local area.
Despite not currently being in the running for an Investment Zone, the East of England was the most positive region about the policy. Almost all (94%) believe that being located within a Zone would help to support the area and be beneficial to local businesses (86%).
In contrast, despite being shortlisted for a Zone, businesses in the West Midlands currently need more convincing about the positives of the policy. Only 50% believe that a Zone would be helpful for local businesses and just over half (54%) understand what the policy is trying to achieve.
Mixed views on the financial incentives on offer
Investment Zones provide a number of financial incentives to local businesses in the area and the survey finds that there are mixed views on whether they have been chosen correctly. Just over two thirds (68%) 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.
Businesses in Liverpool City Region were significantly above the national average, with 80% agreeing they’re focused on the right areas, while other areas also in line for a Zone - West Midlands (60%), East Midlands (62%) and Greater Manchester (66%) – were less convinced and below the national average.
Funding priorities vary across the country
Along with tax incentives for businesses, Investment Zones will receive direct funding for the local region. The funding identified by businesses as likely to have the greatest impact in encouraging business investment are:
- funding for planning and development
- funding for local infrastructure
- funding for local enterprise and business support.
However, the needs of local areas in the UK differ and the funding prioritised was found to vary across the country.
Over half (54%) of businesses in Liverpool City Region and Yorkshire and Humber prioritised support for local businesses. This was less important for businesses in the East Midlands (34%) who instead favoured funding for planning and development (62%).
While funding for local infrastructure was prioritised by businesses in the East (60%), London (58%) Scotland (52%) and Wales (50%).
The survey also revealed that business leaders across the country believe that the 12 proposed locations are not sufficient, with 70% agreeing there should be more Investment Zones located in other areas in the UK. Currently, eight of the 12 proposed Investment Zones will be in England, with Glasgow City Region and the North East of Scotland recently selected as the sites for the first Investment Zones north of the border.
Wayne Butcher, Director, Public Services Advisory, Grant Thornton UK LLP, said:
“Our research shows that there is a generally positive view from businesses, at a national level, on the intended purpose and potential benefits of Investment Zones. You would expect that those chosen for a Zone would be relatively positive about the policy, but it’s clear that there is already a good level of engagement nationally from the business community.
“Businesses can clearly see merit in the approach and view Investment Zones as a useful mechanism to unlock further investment and bolster the economy. But it’s also clear that the level of confidence and understanding of the policy differs across the country, and amongst those already in line for a Zone. While still a relatively new initiative, if this mixed level of understanding is not addressed, there is a risk that it could become a barrier to truly maximising the benefits, for the whole nation, of the new Zones.
“We identified the three core national priorities for business from the direct funding which will be made available to Investment Zones. But how these are specifically prioritised within different regions will differ according to the existing business presence and socio-economic make-up of the area. Areas such as the East of England, for example, prioritised funding for better infrastructure while businesses in Wales prioritised funding for skills. This demonstrates the crucial need for each individual Zone to be fully customised, to ensure it is supporting the area and local businesses in the right way and making meaningful impact that will help to stimulate sustainable growth in the economy.”
Notes
*The Grant Thornton Business Outlook Tracker is a bi-monthly survey of mid-market businesses. Censuswide (on behalf of Grant Thornton UK LLP) surveyed 601 senior decision makers in UK mid-market businesses between 6 June – 15 June 2023. The UK mid-market is defined as companies with an annual turnover between £50 million - £500 million.
**516 respondents to this question
