Doug Smith: Should Scotland follow England with enterprize zones?

There have been two policy announcements over the past couple of days that again have brought the topic of enterprise zones (EZ) to the attention of commentators.

Yesterday, the UK government confirmed the location of the final group of EZs in England that will complete the designation of 22 English zones. The responses to this announcement have included two interesting threads. First, comparisons are being drawn to the old EZ model, introduced in the early 1980s and finally withdrawn earlier this year. Second, there is a call from other parts of the UK - including Scotland - for the introduction of similar mechanisms.

There is no doubt that the new English EZs are a far different proposition from the old. In terms of location, they are in areas perceived to offer short-term economic and employment opportunities, with the intention of accelerating success, whereas the old EZs were typically allocated to areas where industrial decline created the need for regeneration.

The new benefits package is also far different and in turn is likely to result in a different response from the private sector. Rates relief to occupiers will be available but will be restricted within European Union limits to a maximum of 55,000 per annum over five years.

There is the proposal to introduce enhanced capital allowances for certain high-value manufacturing activities but this is not yet in place and, in any event, the level of this benefit will have far less of an impact than the 100 per cent first-year allowances that went with the old EZs. Each new zone in England will also benefit from a simplified planning regime designed to accelerate the process of getting development on site.

Whilst helpful, this is not carte blanche to develop for any use without consent but a mechanism to streamline consenting development which is aligned with the wider economic objectives of the zone.

One of the most significant benefits will accrue to the local enterprise partnerships (LEPs) that will be entitled to retain the benefit of net additional business rates growth for a long-term period, perhaps longer than 25 years, and re-invest this revenue stream within its operating area, similar in a way to the tax investment financing (TIF) mechanism that Scotland is leading the UK in putting in place.

So the new EZs will be far different from the old and it would be wrong to look at the old as any template for what the new will deliver. Any support for enterprise and economic growth must be welcomed but as with all new initiatives it will take some time to establish how to leverage maximum benefit from such status. As a single intervention the new EZ regime is unlikely to stimulate speculative development although it will offer welcome, if restricted, support to occupiers and a TIF-style framework to encourage infrastructure provision.Whilst yesterday's announcement related to English EZs, the Chancellor included in the Budget in March encouragement to the devolved administrations to come forward with their own proposals. It appears to be a co-incidence of timing that in Scotland yesterday we saw the launch by the Scottish Government of a discussion paper considering corporation tax - "options for reform".

The discussion paper confirms the Scottish Government is considering the opportunity for introducing EZs in Scotland and, interestingly, poses the additional question of whether, given corporation tax powers, the Scottish Government should use such powers to offer enhanced allowances within Scottish EZs, which would potentially result in a wider benefits package for Scottish EZs than for English equivalents.

Whilst the wider debate on corporation tax is a very important one for the Scottish economy - and the potential to offer enhanced capital allowances in Scottish EZs is attractive - it must be hoped the consideration of introducing new EZs in Scotland will not be delayed because of this wider fiscal debate.

It is clearly the case that new EZs will not look like the old ones. That may be in some minds a good thing but, for the good of the Scottish economy, what is important is to hope that the time lag between the English zones now announced and the Scottish EZs to follow is not too great.

• Doug Smith is chairman of commercial property advisory firm CB Richard Ellis (Scotland).