22 Mar 2011

Budget: Enterprise Zones on the way back

Business Editor

It was a flagship policy of the 1980s – and now that the Conservatives are back in government, they’re bringing back the Enterprise Zone.

Take a run-down area of a poor city. Offer firms tax incentives to move there, by promising not to charge business rates for ten years. Relax planning laws so new buildings can be put up quickly. Put some public cash into cleaning derelict land and improving transport links. And you have an enterprise zone, which should encourage firms to move to run-down areas where they wouldn’t normally venture.

Middlesbrough was one of the first towns to put its hand up and ask for an enterprise zone. And few towns are more in need of new investment.

It’s one of the most deprived in England. On the outskirts, rusting chemical works belch steam among the weeds – but many of the factories lie empty. Its population has shrunk as the industry has declined, and those who remain struggle with poverty and deprivation.

The Tees transporter bridge in Middlesbrough (Getty)

So it’s a surprising place to find Boho One. With lurid red walls, open catwalks and whirring wind turbines, it’s a glaring post-modern contrast to the decaying Victorian civic architecture around it.

But it’s already hatched one glaring success – Graphic.ly, a beautifully-designed application which lets you read comics on the new generation of touch-screen computers like Apple’s iPad.

The founder, Kevin Mann, is as unlikely as the building he works in. In hoodie and khaki trousers, he wears the uniform of the Californian tech wizard. But he delivers his dot.com buzzwords with a distinct Teeside accent.

“Bring it on, we want an enterprise zone.” Middlesbrough Mayor Ray Mallon

While Graphic.ly moved to Colorado to be nearer the big tech firms and comics publishers, he stayed in Middlesbrough to build a new business. And, he hopes, a miniature Silicon Valley beside the Tees.

“We’ve got the right types of people and the right companies here to create this cluster of companies doing a similar business, and really driving jobs,” he says – and he hopes that the enterprise zone will be a part of that.

So does the Mayor. In his red braces, Ray Mallon could be a character from an American cop show. A former policeman, known for his experiments with US-style “zero tolerance” policing, he is champion of the enterprize zone philosophy.

“Bring it on, we want an enterprise zone,” he says with a knowing smile. “It will give an area like this a step change in its fortunes. And let’s face it an area like Middlesbrough where its economy is fragile, we need something like this.

“The government has just announced that we will lose £50m as a council over the next four years. If they were to give us an enterprise zone that would go a long way to balancing things.”

First enterprise zones

The idea dates back to an earlier period of cuts and economic woe. The first enterprise zones opened in 1981 – and a total of 38 zones were designated across the UK over the next fifteen years. Canary Wharf, the office development in London’s docklands, was built in an enterprise zone.

But opponents of the policy have argued that the schemes don’t offer good value for money. One assessment of the scheme totalled the up-front costs at £1.6bn in today’s money, and – creating just 58,000 jobs – poorer value for money than other job creation schemes like Labour’s New Deal.

Further up the coast from Middlesbrough is an enterprise zone which no-one could call a success. The site of the former Dawdon colliery, the sea here was once black with mining waste. It’s now a clean-enough beach, and the clifftops now boast a cluster of gleaming office blocks. They gleam because they are untouched by human visitors.

Most stand empty – and have remained empty for more than a decade. One vast empty barrack of 40,000 square feet, has just been sold for a mere £300,000 – less than a one-bedroom flat in some parts of London.

“The reason why it’s failed is that there is no demand, because there is no core population on which to build,” says Bill Naylor, a local surveyor. Nearby, he says, factory units are mostly fully-occupied.

And the town has a depressed feel to it. Groups of folorn ex-miners gather in the shopping centre, and unemployed young men drink the day away.

Still further north, at Gateshead, is the shopping hub of the Metro Centre. It has also been built on an enterprise zone. And visiting the acres of busy, clean shopping malls, it’s hard to argue that it hasn’t been a success.

But it has come at a cost. A few miles away, the centre of Gateshead has the opposite feel. The area is run-down, and many shops are empty. Some are gradually being replaced – but local businesses complain that the process of regeneration is painfully slow.

John Tomaney, a professor at Newcastle University, says that the success of the Metro Centre came partly at the cost of surrounding town centres like Gateshead and Byker.

“There’s a great deal of evidence that firms moved really short distances into the enterprise zones from nearby,” he told Channel 4 News. “Enterprise zones were much more effective at moving jobs around, often over very short distances, than they were at creating new jobs.”

“Whether you create new jobs, or move jobs that would have been created anyway and locate them where you want them, is open to question.” Lord Heseltine

Even their most ardent supporters wouldn’t argue that enterprise zones were universally effective. Lord Heseltine, who as Secretary of State for the Environment announced the first generation of enterprise zones, still believes in them. “Whether you create new jobs, or move jobs that would have been created anyway and locate them where you want them, is open to question.”

But he still defends the policy. “What we did in 1979 was revolutionary,” he says. “It triggered the largest renaissance of the English cities since Victoria was on the British throne. And the lessons that we learned, though very controversial at the time, are now orthodox.”

He would have gone faster, he says – but there wasn’t enough money. And that may be a problem now. The most sucessful enterprise zone is probably Canary Wharf, but it was a combination of an enterprise zone and masses of public investment. That will be hard to come by now.

But many English cities, particularly in the North, do look very different now. Look at the centre of Newcastle, and the history of the North-East is all around you. The great Victorian iron bridge that spans the Tyne was built down the coast in Middlesbrough, at the Dorman Long works which now lies dormant.

But further down, the Tyne is spanned by a sweeping white footbridge which looks much more futuristic. Both are reflected in the space-age curves of The Sage music venue in Gateshead. It’s an impressive demonstration of what the past thirty years of regeneration policy achieved.

But this area hasn’t been transformed by an enterprise zone. The Sage was built with money from Europe, the National Lottery, the local council and the regional development authority, One North East.

The RDA is being abolished and the council squeezed by government cuts. Enterprise zones or not, any regeneration over the next few years will have to be achieved with far less public money.