Businesses keen on UK’s planned investment zones; sceptics see administrative challenges

[LONDON] Local and foreign businesses operating in the United Kingdom are enthusiastic about the recent green light for 12 new investment zones in the country.

It is early days, but the British government has announced the intention to launch devolved low-tax economic development areas to attract local and foreign investment. The UK Treasury will be allocating £960 million (S$1.6 billion), working out to £80 million grants and tax reliefs to each zone, over the next five years.

The English zones will be in West Midlands, East Midlands, Greater Manchester, Liverpool, South Yorkshire, West Yorkshire, Northumberland, Tyne and Wear and County Durham in the north-east, and Tees Valley near Newcastle.

Glasgow and Dunbar in Scotland may host zones, and Wales and Northern Ireland will have one each.

“The general response from local business owners is positive,” said Louis Coke, a senior manager responsible for direct investment advice at brokerage Charles Stanley. Coke, who travels around the UK to discuss potential investments for clients, added: “If local authorities get on board, there’s a multiplier effect. It means more business is coming to your area, more people can buy properties close to where they live, and it gets the local economy going.”

According to a prospectus from the government’s Department for Levelling Up, the zones will focus on digital and tech; green industries; life sciences; advanced manufacturing; and creative industries. All investment zones will need to focus on business clusters that are aligned with one or more of the sectors. The aim is to boost UK innovation and competitiveness, and help stagnant or depressed regions to grow.

“Our digital and tech sector is worth £143 billion and has created more unicorns than France and Germany combined,” said the prospectus. The “thriving life science sector”, meanwhile, employs 268,00 people and includes 25 major global biopharmaceuticals and 30 leading global medtech organisations.

The prospectus highlighted considerable scope for innovators seeking opportunities in green energy and other industries. Meanwhile, the creative industries are growing at over twice the rate of the economy.

“New investment zones focused on economic clusters will drive growth across the country,” said Matthew Fell, policy director at the Confederation of British Industry, which represents 190,000 UK businesses. “It is a further step towards making the UK a science and technology superpower. The go-ahead to carbon capture and nuclear are important steps to keep the UK’s green growth story on track.”

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More details should be forthcoming later in the summer, but the aim is for the chosen cities and other devolved areas to propose where science parks, manufacturing units, offices and housing will be situated. To back up the zones’ needs, they will have to provide plans for transport, roads, electricity, energy, infrastructure and environment.

The zones will lean on research and know-how from nearby leading universities including Manchester, Liverpool, Leeds, Durham, Newcastle, Glasgow and Cardiff. These institutions will supplement extensive scientific, technical and medical research and data from Oxford and Cambridge.

The timing of this announcement may well suit Singaporean and other Asian businesses. Kemi Badenoch, Secretary of State for Business and Trade, announced in April that the government would shortly commence negotiations with Singapore, to deliver a new investment treaty.

The stock of Singapore investment in the UK totalled £12 billion in 2021, up from £4 billion in 2012. UK investment in Singapore amounted to £11.4 billion, according to official statistics. UK trade department officials believe there is scope for a considerable rise in cross-border trade and investment.

Asian and other members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) may also be encouraged to invest in the UK, its latest member. The new agreement contains provisions to limit barriers and encourage more investment. Inward investment stocks to the UK from CPTPP countries were already worth £182 billion in 2021, according to official statistics.

Documents from the UK Treasury suggest the chosen zones will be able to control up to three specific sites, with a combined size of no more than 600 hectares. The UK Treasury said the goal was to raise productivity and wages, and help ensure public investment in research and development outside south-east England would increase by at least 40 per cent by 2030.

Jeremy Hunt, Chancellor of the Exchequer, said soon after the UK’s recent 2023 Budget that the zones could be likened to the regeneration of the London and Liverpool docklands in the 1980s.

But sceptics flagged that the investment zone system could face a shortage of planning officers, among other challenges.

Rebecca Hyrslova, a policy adviser for the UK Federation of Small Businesses (FSB), said local authorities in charge of the zones would need to appoint accountable senior managers to engage businesses and assess funding applications.

In an informal survey, the FSB found several small business owners experienced poor communication from their local authorities.

“Some councils make you jump through hoops to access grants,” said a specialist in accommodation services, who did not want to be named.

An investment consultant said: “It would be great if local authorities could commission some business champions who were business owners themselves, to host information sessions.”