Friday, April 22, 2011

First fruits of the LEP - the Birmingham Enterprise Zone

The map of the new Birmingham Enterprise zone hit the Birmingham Post today - it was hardly clear along the northern edge because of the clever 3D mapping (sometimes, 2D is just easier to grasp folks), but we are getting a peculiar loop zone, which forms a ring around the city, with the largest chunk of real estate in the Digbeth industrial sector. It takes in New Street Station - a £275,000 sweetener for John Lewis to site a new store there; runs round to Alpha Tower and the Hyatt, then along the outer edge of the Queensway to Snow Hill, with another small industrial quarter just to the east of that, bounded by the canal, then round through the Aston Science Park, Millennium Point - including the proposed HS2 Curzon Street Station, before running back round to Digbeth, encompassing the Beorma island site by the BullRing, a site that the City Council looks likely to compulsorily purchase to assist the developer.

The zone takes in a range of likely business sectors - professional services, retail, transport and light industrial - so that has to be a positive mix, but the overall plan appears rather peculiar. The Department of Communities laid down some guidelines on Enterprise Zones - indicating that
The Government therefore envisages that Enterprise Zones will generally be based on ‘clean’ sites with little or no business occupants. Targeting such sites will reduce the risks of simply favouring incumbent businesses with little added value to the economy of the area.
This certainly does not describe the area laid down - this is a very mixed area including established businesses of a range of different types and can in no way be described as clean. The guidance also clarifies
Evidence suggests that single ownership of land could have had a significant effect on the success of earlier Enterprise Zones.
I can't believe that this ring of land falls under a single common owner - there must be dozens, if not hundreds, who must be persuaded to work together for the common good. The evidence also suggests that Enterprise Zones greatest success lies in relocating jobs rather than attracting new ones and this looks to be Birmingham's greatest hope. If you are an employer occupying premises just outside the zone, the offer of up to £55,000 a year for five years in rebates is a very attractive one, especially if you only have to move your business 50 yards.

You have to wonder why somewhere like Pebble Mill or Longbridge wasn't considered - where you have contiguous parcels of land ripe for redevelopment, often under common ownership. Surely, this was an opportunity to use the land bank in the hands of the former RDA, Advantage West Midlands - and the DCLG suggests exactly that.
Local enterprise partnerships may also wish to consider the potential to use public sector land assets to support Enterprise Zones. This might include former Regional Development Agency or other central Government assets for example...
The barrier to that is the insistence that the RDAs sell their land at commercial rates, not simply transfer them across to their 'successors' in the LEPs, to allow continuation of development plans - something proposed by the RDAs in their asset plans, but denied by DBIS on Treasury instructions. Further, to avoid flooding the market, the land will be sold off in tranches, so we face the prospect of sites remaining derelict or undeveloped for some years to come, waiting for a serious uptick in property values. Ironically, Vince Cable seemed largely unaware of this when questioned in parliament, suggesting that he is not just semi-detached from government, but barely in touch with his own department.
Mr Cable seemed unaware of this position, and told MPs that some assets could still be transferred. “The process is being carefully worked through at departmental level, and it will produce a sensible outcome that remains supportive of local initiatives through the LEPs,” he said. This is not what the department’s statement said - or what the RDAs are now saying too.

You have to wonder if the department is really being run as an arms-length body from the Treasury, rather than by St Vince. AWM recommended retention of the Longbridge development site in public ownership and this would have been a classic Enterprise Zone opportunity - brownfield ripe for redevelopment as a hi-tech business park, with good road links and potential for improved rail links.

There is an exception to this 'fire sale' ruling and that is the London Development Agency, which is gifting all the assets - and liabilities - to the Mayor. It is a key question, particularly since we have a Liberal Democrat/Tory council, which should have good connections to both sides of the coalition government, why they proved singularly unable to negotiate suitable terms for Birmingham to acquire some of the RDA sites. Sion Simon makes a sound point that this is unfair and short-sighted and indicative of the weakness of the civic leadership of our city.

I wish the Enterprise Zone success, but I fear that there are too many obstacles in that path and some have been created by the LEP themselves. It remains to be seen whether the zone will really generate new business or just shift employment from elsewhere in the region. It will also be interesting to see whether the zone meets the requirements to allow it to leverage in support from the European Regional Development Fund, which the government intends to align with the Regional Growth Fund. I have a suspicion that this zone may not be the promised land which others seem to foresee.

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