Investment Zones: the IPM View
After a summer of uncertainty, we enter the autumn with a new political mantra - levelling up gets left behind, overtaken by the drive for growth. Out with the old and in with the new.
As The BID Foundation Members heard last week from Lucy Wilkins, Deputy Director of DLUHC responsible for regeneration and local economies, the growth agenda comes with the priorities of deregulation, delivery and acceleration.
An immediate policy initiative has been launched which encapsulates all of these - Investment Zones.
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By Kevin Parkes, AIPM, Paul Wright, SFIPM and Prof Cathy Parker, SFIPM
Announced in the 'mini-budget', investment zones are all about growth and investment, and they include deregulation. That expressions of interest had to be submitted within a 2-week deadline, with a requirement for zones to be coterminous with one landowner and a master developer, implies these will be delivered ‘at pace’.
For an administration focusing on growth, investment zones are a natural policy of choice. HM Treasury may be concerning itself filling holes in government spending but the expectation is that Investment Zones should generate additional investment from the private sector. If Investment Zones are designed and implemented well, they could generate this new income as opposed to displacing investment from other areas, or investment that would have occurred irrespectively.
Impact on places
As usual, at IPM we are concerned with the impact of policy on neighbourhoods, towns, and cities.
The use of the word zone equates to a defined geographical area - but reading the guidance it is unlikely that the zones are places. They may have a name, and they can be in urban or rural areas, but in town and city centres they are likely to be sites, not even zones.
Speaking to local authorities at the recent Institute of Economic Development conference, some saw a great opportunity to use Investment Zones as a way of bringing problematic sites (e.g. empty/poorly performing shopping centres) into productive use – especially in situations where the council had bought the site. In these instances, we hope Investment Zones can be used to stimulate investment in town centres, helping to fuel SME growth and to improve the whole arena around place-making, health and well-being etc.
Challenge in ex-industrial areas
In contrast, hearing from other local authorities at the recent Conservative conference there was frustration that the policy would not help them with larger ex-industrial areas, where there are likely to be multiple landowners, and where the tight timelines and lack of financial resource for developing proposals are additional barriers.
From a place management perspective, these challenges are very common.
It’s clear that Government wants to launch this policy quickly, with zones that are ready to go. The policy embodies the ideological shift, away from providing grants from the public purse, towards enabling the private sector to fund regeneration through tax incentives. At present, the policy seems unsuited to the larger, problematic sites in town and city centres that are most in need of regeneration.
Nevertheless, we believe there will be later calls for Investment Zones, so it is important to understand the opportunities and threats associated with them, and think about what our ask of Government might be, to ensure they have a positive impact on places, as well as the wider economy,
Lessons from history
Early Enterprise Zones (EZs) were (rightfully) accused of displacing activity and investment from surrounding areas. Investment Zones therefore need to be designed to stimulate new property investment. More recent EZs, such as in the Tees Valley, have focused on supporting specific business sectors.
Avoiding displacement is critical. Therefore, providing incentives targeting business sectors and based on well-considered strategies is important, such as the use of Advanced Manufacturing Parks. The guidance asks applicants to consider displacement – however the very short application window has meant that unless an impact assessment had already been undertaken, there is considerable risk of displacement occurring.
Short-termism
The pressure to express interest in the policy and on fast delivery reinforces one of the major criticisms of UK regeneration; its short-termism.
Investment Zones are seeking to stimulate property investment. However, property development requires a long-term approach and therefore we would encourage such Zones to be given a 10-year minimum duration (with appropriate governance and ‘checks and balances’ – in other words Government should retain the right to ‘de-zone’ if the development does not deliver as expected and/or if serious displacement occurs).
If in a town, it’s important that Investment Zones align to the new, successful, approaches to town centre regeneration, namely multifunctionality and partnership working. However, we believe the present the one landlord, one master developer, and one applicant does not guarantee good place-based outcomes.
Governance
A major criticism of EZs has been poor governance and ‘behind-closed-doors’ decision making. At our recent BID Foundation Leadership Network Meeting, we asked that, at the very least, if an Investment Zone is proposed within a BID boundary, the BID is consulted and brought into the governance/delivery structure.
The same should apply to Town Councils or any other level of council, if they have an Investment Zone in their administrative area but are not the planning authority (who will automatically be included). These are all place management organisations with a legal mandate to improve their places. They can’t be shut out of the plans. They have in-depth knowledge of the location, and this is very important as any deregulation should address constraints that are specific to an area, rather than adopting a blanket approach.
Simplified Planning Zones
Not all areas / regions face the same challenges. In some areas planning may be a constraint (but not all). In such cases Simplified Planning Zones (SPZ’s) should be adopted that reduce the need for applications to be submitted. SPZ’s should ascribe a strong place making / design template to ensure that the investment made is sustainable and long term. They should also mandate the type of partnership working we have described above, so that key local stakeholders have a role in governance.
Sustainability
That also leads us to consider sustainability and how incentives might play into that arena. Investment Zones based on tax incentives are intended to fill viability gaps, giving investors the required returns. Incentives can also therefore be used to attract “ green “ cheaper funding from banks looking to grow their own ESG portfolios.
This accelerates a strong ESG agenda and encourages best practice when it comes to amenity space, place-making, accessibility through walking, cycling, public transport and education ( and how that helps other agendas, not just economic growth).
In summary, we see potential for Investment Zones in town and city centres, but providing incentives is only one part of the equation. To unlock potential in the more challenging sites, more is needed e.g. capital allowances, training allowances for SMEs etc. In addition, governance is an important detail that urgently needs more attention and guidance if Investment Zones are going to lead to better places, as well as create jobs, and bring investment etc. Currently, any Investment Zones in places that come through this first call are likely to be small single sites.
Of more concern to us is development of edge-of or out-of town Investment Zones that displace town centre activity. Our research has shown the damaging impact certain out of town development has had, when it includes typical town centre uses (e.g. retail, leisure, public services etc.). A science or business park is a very different proposition to a mixed-used Investment Zone that may have residential, commercial, and other town centre-type occupiers.
In the words of the What Works Centre for Local Economic Development “(d)ecision makers need to take concerns over displacement in EZs seriously. If much of the growth within the zone comes at the expense of nearby local areas, then this will mean less (or even no) overall growth at the wider area level.”
About the author
Cathy is Professor of Retail and Marketing Enterprise at Manchester Metropolitan University, Co-Chair of IPM and Research Lead for the Government's High Streets Task Force.