Regional authorities in England will have their say on how to spend £80m in incentives
Budget 2023: chancellor Jeremy Hunt announced his Spring Budget to parliament on March 15. Image via Getty Images
The 12 investment zones announced by chancellor Jeremy Hunt as part of the Spring Budget on March 15 have emboldened regional policymakers and property developers, who now hope local communities can have more control over the incentives to be designed to unlock investment in high-growth sectors.
“If we’re able to shape [the details of investment zones] ourselves, we will get the opportunity to look at things around planning, around tax breaks, around incentives, around capital investment from central government,” Steve Rotheram, metro mayor of the Liverpool City Region, tells fDi Intelligence. “That can create thousands of really high-quality jobs.”
The investment zones will have a specific focus on innovation and high growth sectors.
“To be chosen, each area must identify a location where they can offer a bold and imaginative partnership between local government and a university or research institute in a way that catalyses new innovation clusters,” Mr Hunt told parliament as he unveiled the latest measures.
His predecessor, Kwasi Kwarteng, had already introduced investment zones in his infamous Autumn Budget, although the details of the plan — or the dearth thereof — confounded many at the time, sinking both his strategy as then prime minister Liz Truss’s, who proved to be the shortest-serving prime minister in UK history.
“We have a smaller number of investment zones that will be invited to collaborate with the government over their development, rather than having an open-ended competition [like Mr Kwarteng’s proposal],” says Eamon Boylan, CEO of the Greater Manchester Combined Authority. Ths is one of the English designated areas for future investment zones — the other being the West Midlands, the North-East, South Yorkshire, West Yorkshire, the East Midlands, Teesside and Liverpool. Scotland, Wales and Northern Ireland will have one zone each.
Each one of the eight English investment zone will have access to interventions worth £80m over five years, including tax reliefs and grant funding. To access this offer, plans must credibly set out how local partners will use the levers available to propel growth in priority sectors, identify private-sector match funding and use the local planning system to support growth.
“What I like about this policy is that they’re allowing local places to design how they use those £80m,” Jessica Bowles, strategy director of Bruntwood, a property company focusing on Birmingham and the north of England. “It could be for tax credits, tax reliefs, it could be for infrastructure investment … and that seems to me a sensible approach because the cities have a really clear understanding of what their strengths are and what the opportunity is.”
Planning around land use has traditionally been a sticking point for local authorities and property developers around the country, and the investment zones strategy creates new hopes that can now be addressed.
“One thing that is slowing down property development is finding available land and actually getting that land through planning and construction,” Sean Keyes, managing director of structural and engineering consultancy Sutcliffe, says. “If we can speed that process up, it means that innovation will happen quicker, and the money will flow around the UK quicker.”
Investment zones come at a time where authorities across the UK and Europe face the daunting prospect of losing investors to the US, where the Inflation Reduction Act is proving a compelling proposition for manufacturing and cleantech companies to move capital and assets overseas.
“Investment zones means we can be globally competitive [and] offer the same incentives as the other locations we are competing for foreign investment with,” Jennifer Hartley, the director of Invest Newcastle, says.
Full expenses deduction
While Mr Hunt went ahead with plans to raise the UK’s corporate tax rate from 19% to 25%, he offered a significant new investment incentive package. The super-deduction, which was due to expire on 31 March 2023, has been replaced with a three-year “full expenses” scheme, allowing companies to write off the full cost of investments into plants and equipment from their tax bill until March 2026. The scheme will cost the government £9bn per year.