Some Zones are starting to attract investors, but some have hardly changed since getting EZ status. So far, many of the new EZs don’t have much to brag about. But capital allowances have only been provided in Zones with explicit manufacturing focus and the benefits only apply to businesses that expand into the Zone, which should reduce the number of relocations. For example, most of the new EZs (but not all) are located in urban areas with reasonable growth potential. Locations of the Zones were also a factor – a number were established in areas with poor economic potential.Īre the modern EZs any better than their predecessors? Some of the lessons from the old EZs were taken on board by the Coalition Government. In the report we suggested that the reasons for the relatively poor employment generation within the Zones included mismatch between this target and the incentives that focused on boosting capital investment. On average, one additional job in the EZs cost the public purse £26,000 (in 2010-11 prices), which was significantly more expensive than other policies of the time. This means the total net employment benefits of the EZs were relatively small, and they were expensive as well. The first two rounds of the EZs created 58,000 additional jobs (directly and indirectly), but over 40 per cent of those jobs were created by businesses that had relocated to enjoy the tax cuts. As our report ‘What would Maggie do?’ published in 2011 showed, the 1980’s versions didn’t deliver a high number of additional new jobs either.
So should we be surprised that the current EZs are failing to create jobs? Not really. Whilst the current incarnation of EZs only began in 2011, they largely mimic the original version of the policy introduced by the Thatcher government in 1980.
Just two days before Lady Thatcher’s funeral, the Financial Times reported that the recently-established Enterprise Zones (EZs) are failing to create jobs. The British public will never reach a consensus about the legacy of Baroness Thatcher’s economic policies, but one thing we can do is learn from the successes and failures of her time at Number 10.
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