Insider Media Limited

The government’s hotly-debated Enterprise Zones must not repeat the mistakes of the 1980s, which sent Dudley town centre into “terminal decline”. That’s the view of property consultant GVA, which spoke to Insider. Stephen Hollowood, senior director at GVA’s Birmingham office, said he expects Chancellor George Osborne to pledge £100m towards the Enterprise Zones, but urges the government to steer clear of the “detrimental” mistakes made under Thatcher’s rule.

It is expected that one or more of the up to 20 areas designated for special measures to relax planning restrictions and provide important fiscal incentives - including tax relief - will be located in the West Midlands. The location of the zones will emerge from a local authority bidding process.

John Rider, chairman of the Institute of Directors (IoD) West Midlands, echoed GVA’s caution. He told Insider that any re-introduction of enterprise zones must be firmly based on job creation, adding that those formed during Margaret Thatcher’s time as Prime Minister had produced jobs, but at a very high cost.

He said: “This has to be about focussing on jobs rather than moving existing businesses so they become more efficient in tax terms. Any idea that can give us a way to improve the economy of the West Midlands is to be welcomed. But enterprise zones will need to perform better than in Mrs Thatcher’s day.”

Stephen Hollowood, senior director and head of public sector consultancy at GVA’s Birmingham office, said: “In the 1980’s and 90’s, a total of 38 areas across Britain were awarded Enterprise Zone status, combining tax breaks, lighter regulation and simplified planning rules. However, the success of these areas was mixed. The transformation of the old docks on the Isle of Dogs in East London into the shiny Canary Wharf financial centre has been an obvious success, also benefiting from the construction of the Docklands Light Railway.

“Closer to home, the Merry Hill shopping centre was borne out of a 1980s Enterprise Zone and, in particular, a relaxed planning regime that permitted development of a regional shopping centre on the former Round Oak steel works. This, however, proved to be detrimental to Dudley town centre, which subsequently went into terminal decline.”

Criticism focused largely on the fact that, when the zones were first introduced in the 1980s, jobs and investment were largely shifted from other areas outside the zones. The fact that the growth of each station stalled immediately after the ‘zone’ status was removed also left the government under fire.

Hollowood said: “We anticipate Osborne will pledge £100m to stimulate growth and job creation in the proposed growth zones to be selected by the coalition government. This investment will, however, be a mere drop in the ocean, compared to the money spent a generation ago when over £1bn was waived in business rates and capital allowances alone across the 38 Enterprise Zones.

“To overcome criticisms of the 1980s approach and to align with the Localism agenda, we would encourage Osborne to designate wider growth areas within which local authorities can pick from a range of incentives to stimulate local job creation. These measures can then be tailored to most suit the local economic circumstances affecting the area.”

Lord Kumar Bhattacharyya, head of Warwick Manufacturing Group, said enterprise zones had the potential to be “a brilliant idea”, adding that he hoped several would be established in the Midlands. He said: “Enterprise zones are absolutely essential for growth. It is how to encourage both entrepreneurship and incentivise business.

“It is a win-win. There are no real drawbacks.”