The UK Government has recently made investment zones the centre of its economic plan for growth. We believe these investment zones can be a powerful way for local leaders to support regeneration, business investment and growth. At a time when there is such an acute shortage of modern, suitable and sustainable office, manufacturing and lab space in many parts of the UK, and when we need a step change in home building, investment zones could be the new mechanism to respond to these longstanding regional priorities.
Investment zones can drive growth and unlock housing, with sites benefiting from tax incentives, planning liberalisation, and wider support for the local economy. However, simply designating an area as an investment zone, will not be sufficient; the impact of tax breaks and planning flexibilities alone are likely to be limited. A proactive, plan-led approach will be needed.
In our experience certain key factors are likely to determine local, and national, success.
1. Set out the case for change
Investment zones will require objectives that are clear and specific, providing a clear decision-making strategy for assessing options and investment priorities. This strategy for realising and maximising the benefits, will help stakeholders to evaluate the effectiveness of the investment zone interventions. It will provide a golden thread for sound local regeneration as the investment zone develops.
Local and combined authorities should begin by defining how investment zones will fit with other economic growth initiatives. Places should set out a compelling and cogent strategic case for change in their investment zone. This should start with considering the long-run structural trends, drivers for change, and evidence on preferred growth sectors. There should be an ambitious and realistic plan around which a broad-based coalition for change can be built – this has been a major part of successful regeneration projects that we have been involved in for places as diverse as Grimsby, Goole, Tees Valley, East London, Leeds, and the East Midlands.
Places should be aware and consider impacts of development on surrounding areas. As highlighted by the What Works Centre for Local Economic Growth, concerns about potential displacement need to be taken seriously. They should work with partners to set out clear, long-term investment plans for their areas cutting across different funding streams. A place-based plan can consider the role and areas of focus (for example sectors, type of development) of investment zones in relation to other projects, how investments can create positive ripple effects, and how they all join.
2. Develop a clear spatial vision to attract investment
A clear and compelling spatial framework, or high-level masterplan, which is also flexible, will be needed to guide investment. This clarity provides comfort to private capital – especially at a time when there is economic uncertainty. Spatial frameworks can also usefully set the right level of ambition in terms of the type and quality of development. Places will need to strike the right balance between providing certainty and flexibility here. Long-term legacy successes like the regeneration of East London around the Queen Elizabeth Olympic Park demonstrate what’s possible.
Robust design codes can also provide clarity and certainty and send the right signals to the market on the nature of ambition, the economically productive uses, and quality of development being targeted.
Improving quality of place will enhance the attractiveness of Investment Zones for businesses and as places to live. Spatial frameworks or high-level masterplans should set out proposals for enhanced public spaces and landscapes, bio-diversity net gain, and for protecting significant natural assets.
3. Have a plan for investing in communities and social value
Investment zones should be seen as an opportunity for areas to invest in people, communities and skills, not just new physical infrastructure. As Centre for Cities has argued, skills will need to be built and local pride needs to be embedded to drive real economic value and attractiveness to communities and investors in the longer term. The planning process can also assist with consultation with the community. It will be important that communities are given clear information and understand the changes and the reasons – even in a streamlined context, this process is vital to long term place resilience.
Plans for investment in communities should be rooted in long-term partnerships. The private sector has an important role to play through its own investment in skills. Local Skills Improvement Plans, under development now, can provide an opportunity for partners, led by employers, to set out local priorities for training. Collaboration with colleges and universities can help ensure that talented students can find employment and stay in the area. Clear technical pathways, including T Levels and apprenticeship routes can help address skills gaps and connect people to jobs. Consideration should also be given to related practical needs, for example public transport to work.
4. Embed innovation and net zero at the heart of the strategy
Investment zones have the potential not only to accelerate growth but also to increase productivity. There is scope to create investment zones that are innovation districts, science parks and areas of city centre expansion which can be home to highly productive, research-intensive businesses, aligned with spending on R&D and innovation hubs. There are opportunities to create testbeds in the zones to enable innovators and entrepreneurs to test new technologies and their use cases in real-world conditions. Smart regulation can have a role to play here, where innovations require relevant regulatory change to develop and thrive.
For instance, the transition to net zero is creating significant economic opportunities around renewable energy and clean tech. With the need to improve energy security and reduce costs, interventions around energy efficiency, renewables and transport decarbonisation should be prioritised. These sectors were the areas of focus for the East Midlands Development Corporation proposals that we helped develop. Places should consider how they can support entrepreneurs in investment zones, by providing start-up and grow-on space, accelerator programmes, and connecting them to investors.
5. Create investable propositions in collaboration
Investment zones should be underpinned by strategic partnerships between the public sector and long-term, ‘patient capital’ private sector investors. Public bodies should take a lead in developing investible propositions, based on a sound approach to sharing risk and reward between the public and private sectors. Arup is working with a wide range of investors that are actively seeking opportunities to invest locally and regionally, across the UK. Our role is to connect and convene partnerships between private capital and local public sector leadership.
Local and combined authorities should also be realistic about the prospects of sites and schemes to come forward, informed by a good understanding of physical and market constraints. In investment zones, 100% of business rates growth is retained locally, over a long-term period, so there will be benefits to identifying places with scope to generate significant new business rates within the short to medium term. Sound analysis of the potentials and constraints will be important here.
Maximising benefits for the long-term
As a policy, UK investment zones are being developed at a time of major economic change and against the backdrop of parallel priorities like levelling up and reaching net zero goals. As the investment zones take shape in this complex and competitive environment, the role of public and private sector collaboration combined with thoughtful, locally tailored and community supported planning will be key to maximise the benefits long-term.