23 May 2023

Where is the rural in the UK Government’s new Investment Zone policy?

Refocus towards urban areas

The UK Government’s refocusing of its Investment Zones policy has left many rural local authority areas on the outside looking in towards this new economic development opportunity, writes Simon Pemberton, Professor of Human Geography, Keele University, and David Beel, Senior Lecturer, Manchester Metropolitan University. Initially announced in the Government’s Growth Plan (HM Treasury, September 2022), the Government identified how it was working with 38 upper tier local authorities (including a number of rural areas) and mayoral combined authorities to create new Investment Zones to encourage rapid development and business investment. However, since last September there has been a significant refocussing and reconfiguration of Investment Zones towards urban areas, as initially announced in the Autumn Statement (2022) and confirmed in the March Budget (HM Treasury, 2023). This signals the potential marginalisation of the needs of rural businesses through this new policy construct.

Background and research gap

The use of investment/enterprise zones is not a new economic practice. Orientated around place, it has been in use, in a variety of guises, for around 40 years. Previous iterations of investment/enterprise zone policy very much included rural areas. In the first Enterprise Zone programme (1981-1996), more remote rural areas and a number of rural-urban fringe ‘accessible’ sites on the edge of major cities were encapsulated. In total, at least half of those designated in England had a rural dimension.

The second iteration of Enterprise Zone policy (2011-) equally captured rural concerns, with approximately 15 enterprise zones in England having a rural footprint. Hence the reconfiguration of new Investment Zones around urban-focused mayoral combined authorities raises the spectre of an urban/rural divide in economic development policy moving forward and the question of the viability of investment zone-type approaches for rural areas of England.

To date, there is mixed evidence about the effectiveness of investment/enterprise zone approaches as a policy tool for economic development. This means research on investment zones should move beyond a desire to understand if they create economic growth but to comprehend better, under what conditions are they most effective in delivering success. This is especially applicable to rural locations that potentially lack the density of businesses and people in comparison to urban areas.

In a nutshell, investment zones offer a series of tax breaks to businesses alongside more liberalised planning regulations that aim to support businesses within a specific location to grow. They are to focus on five priority sectors -  Digital and Technology; Green Industries; Life Sciences; Advanced Manufacturing; and Creative Industries - to boost UK competitiveness. To this end, it is noted by the Government how they will be established in places with significant unmet productivity potential to increase opportunities for local communities. However, the specific impact of investment zones on rural locations and the type of growth and investment they may deliver represents a significant research gap.

NICRE-funded study

A key question when considering the impact of investment zones as a state-driven, spatially-orientated economic fix, is their ability to generate new economic growth and development beyond pre-existing economic activity. This includes both within the investment zone itself but also to those businesses located outside it. Hence our project – one of seven commissioned by the National Innovation Centre for Rural Enterprise (NICRE) - will seek to respond to this research gap and other related research questions.

For example, what evidence exists in respect of the successful implementation of rural enterprise zones - and in the context of a broader ongoing emphasis in UK Government policy towards urban areas? How - and to what extent - will benefits accrue from investment zones to rural businesses in combined authority areas which have a substantial rural footprint? What is the potential ‘reach’ - and benefit - of investment zones focused on combined authorities to rural businesses in outlying areas? What equivalent investment/enterprise zone approach - based on our understanding of previous policy iterations - could be developed more specifically to address the needs of rural businesses? Indeed in terms of the latter question, the South Lincolnshire Food Enterprise Zone (pictured right) is a very interesting example of a recent approach which has been set up to increase productivity, bring innovation, and increase skills for the agri-tech, agri food, and food manufacturing sectors.

In order to address these questions, our study will involve a survey of rural local authorities in England to understand in more detail what an equivalent investment zone approach could look like for rural areas, and how the existing approach could be modified and/or tailored to provide benefits to rural businesses. We will also be speaking to policymakers and business support organisations to ascertain their views on such issues. The overall intention is to co-produce a set of recommendations - including a policy briefing - that will outline the ways in which investment zones could work better for businesses in rural England.