Enterprise zones can work again, says top economist

Feb 1 2008 by Peter McCusker, The Journal

ONE of the country’s leading economists has called for the return of enterprise zones as a means of helping the North-East achieve its target of developing more than 20,000 business in the next eight years.

Trevor Williams, chief economist at Lloyds TSB Corporate and a member of the shadow monetary policy committee, believes free trade zones offering lower taxes and rent are needed to stimulate growth.

He also expressed concern over the expansion of the region’s public sector and said the days of large public spending projects, which had fuelled its growth, were over as Government finances slipped further into the red.

Mr Williams, who gave a talk to business leaders in Newcastle yesterday, said: “Creating that level of new business activity is a good challenge for the North-East.

“What is needed are some free trade zones where there is less regulation and low taxes. One of the reasons behind the success of the Irish economy has been the development of such zones.

“They used to be popular in this country and central government now needs to give local government the ability to introduce them in response to local conditions.”

Enterprise zones allowed companies to have 10 years’ exemption from business rates, 100% tax allowances on the costs of industrial buildings and rent-free periods. They ended in 2005, with some of the last in this region covering industrial estates at Peterlee and Seaham in County Durham.

But although development agency One NorthEast is focusing on creating an enterprise culture and has a target to institute thousands of businesses, the organisation was reluctant to express an opinion.

A spokesman said: “Any re-introduction of enterprise zones would be a matter for Government. One NorthEast and its partners are clearly focused on driving forward quality business support, nurturing a new generation of entrepreneurs and attracting inward investment to help the region achieve its target of creating 22,500 new businesses by 2016.”

The Journal recently revealed that the number of North-East businesses, at 46,000, is about 30,000 fewer than it should be. But many feel there is no single answer to catching up with the national average.

CBI regional director Sarah Green said: “While free trade zones may encourage businesses to move to the region in the short term, what we need is long term sustainable conditions for the North-East to remain competitive.

“What business in this region needs is a simplified, consistent, national low tax regime coupled with specific regional investment in transport and skills.”

The number of people employed in the public sector in the region between 2000 and 2006 rose by 47,000,

At the same time, the number employed in the private sector fell by 12,000.

Mr Williams said: “Public sector expansion in the region is above the national average and it’s not a good thing if you want a flexible and durable economy.

“What the North-East needs is a thriving private sector.”