Friday, 19 August 2011


Pfizer's Discovery Park has officially been declared an Enterprise Zone in a move the government hopes will attract more businesses and generate jobs in the local area. In the aftermath of the pharmaceutical giant's departure, I argued yesterday that this news should be welcomed, but there is some controversy surrounding Enterprise Zones, so I felt I should address it. Firstly, it's not a new idea - they were a policy favoured by the Tories in the 1980s but only had varying levels of success.

Secondly, there's also an issue regarding their expediency, with an in-depth study by The Work Foundation entitled 'Do Enterprise Zones Work?' analysing their effectiveness using historical examples. They argue that "evidence suggests that Enterprise Zones - or any policy which offers tax breaks or incentives to businesses in concentrated areas - are likely to be ineffective at stimulating sustainable economic growth in depressed areas." It's also said they "do very little to promote lasting economic prosperity" and that "most Enterprise Zones create a short-term boom, followed by a long-term reversal back into depression."

There are also concerns about whether Enterprise Zones actually end up creating jobs for local people. BBC News covered the Pfizer Enterprise Zone announcement by revealing the government's intention to advertise the area globally, possibly in the hope of attracting businesses based abroad to relocate here. Automatically, this makes me concerned as to whether foreign companies might just move into Pfizer's Discovery Park to take advantage of tax concessions, only to outsource their workforce from overseas and base them here in the UK, meaning that no new jobs actually end up going to local residents at all. As the Work Foundation states, "80% of the jobs" Enterprise Zones "create are taken from other places."

There's also concerns about the overall size of the Sandwich Enterprise Zone being too small to generate a wider impact. David Foley, chief executive of the chamber of commerce, told BBC News that: 

"If it's just the Enterprise Zone established on the Pfizer site, good though that may be for some people, that will have the effect of sucking in businesses from out and about. If it's a wider area, say the Manston corridor, that will certainly throw the spotlight on what is potentially the fastest growth area in East Kent. I'm afraid there isn't the fat on the bone in Thanet and there really isn't in the Dover district."

Similarly, the Work Foundation's study also claims that the government should consider making Enterprise Zones bigger, but that they are extremely expensive and that "evidence from the 1980s suggests that Enterprise Zones cost at least £23,000 per new job they create." George Osborne has insisted that they have learnt from the mistakes of the past, but what is clear is that Enterprise Zones are not as cut-and-dried a solution as many would hope, so it will need a committed focus by our local politicians to ensure that its benefits are consistent and that the site generates a lasting economic impact in the long-term.

In their study, the Work Foundation concludes:

"The media has focused on the impact of public sector cuts, but there is an urgent need for the government to focus on economic growth. The Coalition has stated that rebalancing the economy is an important priority over the next few years, and this rebalancing includes sharing prosperity around the UK.

However, there is a danger that the economic recovery will be weakest in those places which are already most deprived, threatening to perpetuate the cycle of deprivation and worklessness in those places. Any measure that can reverse this trend should be welcomed. 

Unfortunately, Enterprise Zones are not the answer to these problems. Government should focus on the long-term drivers of economic growth: innovation, trade, skills, infrastructure and entrepreneurship. The recovery will be led by innovation, with a small proportion of high growth firms producing the majority of all jobs. The government needs to focus on these long-term issues, rather than short term measures which are likely to move jobs around, and have little sustained impact on economic growth."

Needless to say, the Work Foundation appear to be more opposed to such initiatives as I am, but they do raise some interesting criticisms which the Coalition must learn from if we are to avoid past mistakes from resurfacing. Overall, until such a point comes that we have a reason to criticise the Pfizer site becoming an Enterprise Zone, we should embrace it. Only a fool would say it's not in the best interests of our local economy to lend our support to it, so I can only hope it's successful.

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