Enterprise Zones: When All Else Fails?

The government in London is proposing Enterprise Zones (EZs) as a way of boosting the economy in 21 selected areas of England, and La Gillan is urging us in Wales to follow suit. Yet we already have a perfect example of the pitfalls inherent in these schemes.

The first, and largest, Enterprise Zone in the UK opened in Swansea in 1981 (now known as the Enterprise Park) and provides work for around 25,000 people. It is located on reclaimed industrial land on the east side of the River Tawe below Bonymaen and Llansamlet. When it first opened it was designated for warehousing, manufacturing, light engineering and the like with retailing excluded. However, that restriction on retailing was lifted and the area now functions almost as a rival city centre with inevitable consequences for central Swansea, parts of which now resemble Skid Row.

Lord Crickhowell

It may be significant that the restriction on retailing was lifted by then Secretary of State for Wales, Nicholas Edwards, a man who had a lot riding on the future of Cardiff from the public funding he had arranged for Cardiff docks through the Cardiff Bay Development Corporation. The docks were owned by Associated British Ports, a company known to Edwards through his ship-owning and other interests and which he joined as director when he left the House of Commons in 1987. A cosy arrangement that allowed Edwards – by then Lord Crickhowell – to profit personally from a publicly-funded project he himself had initiated when a government minister.

Numerous surveys have been conducted on EZs and most surveys have come to similar conclusions. Perhaps the findings relevant for this article are: 1/ Most of the ‘new’ employment created is simply relocating from elsewhere, often close by. 2/ Any substantial retail element will have deleterious effects on nearby retail centres. 3/ EZs are often political gimmicks by administrations that have run out of ideas. In fact, the sort of things that a reasonably intelligent seven-year-old could figure out. But of course we are here dealing not with smart kids but with that devious and manipulative but often none-too-bright sub-species of humanity known as politicians.

For EZs to work the following guidelines need to be applied. Tax-breaks and other perks are only given to new companies, existing local companies that cannot expand in their present location, or employers from beyond a radius of, say, 30 miles. (Which only means that some other area loses out.) While retailing should be strictly limited to the the kinds of outlets that are better suited to the EZ environment than to city centres; such as car showrooms, major supermarkets and others needing space and substantial amounts of car parking. The problem is that by sticking to such guidelines most EZs will fail. So from the politicians’ standpoint it’s better to indulge in the sleight-of-hand that suggests it’s a win-win situation with new jobs being created in new companies.

In Wales, the example of Swansea tells us that while EZs can create new jobs (but nothing like the numbers claimed), if retailing is allowed, as in Swansea, then it can ruin the local city centre. Perhaps more importantly, the fact that any new Welsh EZs would be competing with 21 English EZs means that without the Assembly having the power to vary Corporation Tax and use other incentives to give Wales the edge, EZs should be a non-starter for any Welsh government formed after the May 5 elections.

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