Andrew Jack: Devil is in the detail to ensure enterprise zones’ success

DETAILS are emerging on the introduction of four Scottish enterprise zones. As in England, where plans for 21 zones were announced this year, it is hoped that such measures will help to promote investment, reduce unemployment, revive the economy and promote sustainability.

However, many observers consider this proposal/solution to be inadequate in the current market. There are tough challenges ahead that will need to be addressed to ensure the success of the enterprise zone proposals. The Scottish Government will have to select carefully the proposed sites and ensure it is clear in the objectives and benefits that can be achieved by investing in businesses.

The reintroduction of enterprise zones should be welcomed as a boost for a private sector operating under very difficult market conditions. There is limited development activity currently in Scotland. There are, of course, exceptions to this and some very large projects are either under way or planned, such as the Forth replacement crossing.

However, with regard to the general lack of activity across the market, there will always be a risk in downturns that construction skills are not developed or, worse, lost. If this is the case, there may well be a shortage of such skills, when matters do improve.

This, coupled with the recent forecast of the Auditor General for Scotland that public spending on capital projects in Scotland will fall by £1.2 billion (36 per cent) in 2014-15, would suggest the reintroduction of enterprise zones, and all other schemes seeking to promote private sector investment, should be welcomed.

This is not to say, however, that enterprise zones will provide a quick-fix to the current difficulties. Indeed, history would confirm that there are good and bad aspects of enterprise zones. On the plus side, anything that attracts long-term investment and regeneration has to be viewed as positive.

But spare a thought for property owners just outside the designated areas. Past experience of enterprise zones would suggest a possible reduction in value in such properties, albeit it remains to be seen how this may be addressed in the structure of the new zones. Furthermore, it the zones must promote long-term investment. Consideration will be required, in the structure and foundation of the zones, regarding the types and aims of businesses intended to be attracted in order to secure long-term investment.

With regard to location, the task of selecting only four sites is an unenviable task for the Scottish Government. Each site/area will require to have an existing or achievable infrastructure in place, and the skills available, to promote the intended investment.

Deprived areas across Scotland’s major cities will be the obvious choice, though deprivation may not be the deciding factor when considered against potential development and renewable energy opportunities.

In any event, care will need to be taken to ensure the creation of the selected zones will not adversely impact on other areas. For example, concerns over “boundary hopping” will need to be addressed to prevent nearby, existing businesses from moving around, simply to achieve the incentives offered under the enterprise zone scheme. The Institute for Public Policy Research has been quoted as suggesting that enterprise zones are “simply likely to move jobs around”.

In seeking to address concerns, there will need to be clear guidelines regarding qualification for enterprise zone incentives. The Scottish Government will also require to look specifically at the types of businesses intended to be attracted. For instance, it is clear there will be some focus on “low-carbon manufacturing”.

There remain many questions regarding the incentives that will be available. Whether these are by way of planning rule relaxations, capital allowances or other tax incentives, these will need to be clearly set out to ensure there is limited scope for abuse.

Enterprise zones are not a panacea. However, it is hoped that lessons are learned from the failings in the 1980s, in ensuring that the new proposals will secure the maximum, long-term, sustainable, investment intended and required in Scotland, without adversely impacting on other already deprived areas that happen to fall outside the selected zones.

• Andrew Jack is an associate in the engineering and construction division in the Edinburgh office of international law firm DLA Piper