Thursday, 31 March 2011

Enterprise Zones - Part 2

In fact, the EZ's established in Geoffrey Howe's 1980 Budget were not all in Inner City Areas.
In fact, EZ's became essentially an extension of existing Regional Policy, and a number of them were established on existing renewal sites. The benefits firms on the zones enjoyed included:

* Exemption from rates on industrial and commercial property

* Exemption from Development Land Tax

* 100% allowances for Corporation and Income tax purposes for capital expenditure on industrial and commercial buildings

* Employers exempt from industrial training levies and from requirement to supply information to Industrial Training Boards

* A greatly simplified planning regime;developments that conformed with the published scheme for each zone did not require individual planning permission
Remaining controls to be administered more speedily

* Applications from firms in zones for certain customs facilities were to be processed as a priority and criteria relaxed

* Government requests for statistical information reduced

But, most of the sites presented considerable problems. Shutt quotes one local planner in Dudley where one zone was to be sited as saying, the site was like a bar of aero

“including land exposed to previous shallow unmarked mining, steep slopes and uncontrolled tipping.”

All the land was privately owned, and for years both Tory and Labour Councils had tried in vain to get them to bring it into productive use. But, the reality was that such land could only be brought into productive use, if first huge amounts of public money was invested in it to make it suitable for development. Shutt refers to the analysis of the zones done by Roger Tym and Partners 1983 “Monitoring The Enterprise Zones, in which these and other contradictions for the Thatcher Government were elaborated.

“They point to the limits of a Monetarist strategy which claims that capital in the UK can be resuscitated with less state interference. The two zones locate in Greater Manchester provide a typical illustration of these contradictions.”

These two Zones were established alongside the Manchester Ship Canal, an area which had developed both due to the docks in Salford, and due to the industrial development that occurred in Trafford Park at the end of the 19th Century and into the 20th Century, based upon large industrial complexes.
By the 1980's the area was suffering massively both from the decline of the docks as containerisation started to come in, and as a result of the de-industrialisation that arose as large industrial companies found that they could make higher profits by locating production in low-wage economies in Asia, with abundant supplies of the type of unskilled labour required for mass production, assembly work, with increasing levels of infrastructure needed for efficient transport of inputs and finished goods, and with Capitalist States in place, prepared to ensure the reproduction of the Capital-Labour relation.

The zones covered 3 districts in Salford and 3 in Trafford Park, covering 780 acres. 435 acres were available immediately for immediate use. The purpose of the EZ's was to stimulate NEW enterprises and new employment, so the Councils sought to include as much land as possible that did not include existing businesses. It may have been by design, or not, but some of the main beneficiaries were Big Capital. The biggest beneficiary was the Manchester Ship Canal Company itself. 200 acres of its dock area were included in the scheme. But, prior to the scheme there had been some development in Trafford Park via speculative developments backed by major institutional investors. Some of these estates too were included in the boundary of the zones.

If it was large companies as landowners who benefited from the zones, as their land now became more valuable, it was the small firms of around a dozen employees that were characteristic of those who set up on them. And as I set out in my blog The Small Business Myth, although it may be true that these small businesses at times account for the majority of new jobs, they also account for the majority of jobs lost, for the same reason reason.
The firms involved had generally low profitability, which is why they could only exist if they were given these kinds of support, and allowed to impose even worse conditions on their employees than normal, and consequently the security of employment for those working in them was tenuous, as the failure rate of these companies was high.

Unlike the Science Parks that have developed mostly on University Campuses, there was little evidence that there was anything innovative in any of the firms established in the Zones, which is not surprising for the reasons I have given above about the nature of their location.
Even before the zone was formally announced, some of the small firms in the area managed to move location, so that they came within its bounds. Shutt says,

“Hospital Engineering Ltd, who employed twelve workers moved from the United Trading Estate just outside the zone to the Monarch Trading Estate inside the enterprise zone, in October 1980. This resulted in a saving of £3,350 on the firm's 1981 rates bill following the formal declaration of the EX. International marine Ltd., chandlers and yacht brokers employing twelve staff, moved rom Ordsall Lane in Salford, to the Salford Zone and saved £11,000 on their rates. Yet, by mid 1982, only thirteen firms had moved into the Salford Zone, whilst in Trafford, twenty four firms employed only 212 people.”

According to the Tym Report they all employed fewer than 50 people, and most employed fewer than ten. This movement of firms from outside the zones to units within them was typical. But, as Shutt comments,

“The movement of this 'local' concern did not generate 'new' employment in the conurbation, although many enterprise zone officials throughout the country, backed by the Government, find little difficulty in presenting such shifts as job creation.”

But, it was obvious why such an approach was bound to create problems. As Shutt sets out, many of the small business organisations OPPOSED the establishment of the zones, despite the fact that it appeared that it was precisely these kinds of firms that had most to gain. But, the reason for the opposition was precisely because the role of the Capitalist State is supposed to provide some kind of level playing field for Capital. What the EZ's did was to create a very unlevel playing field, in which those small firms able to locate within them, had significant benefits over other firms outside them! Shutt comments,

“In practice, however, many of the institutions representing small scale indigenous capital have opposed the zones, recognising the damage to capitalist competition caused by subsidising the production costs of a minority of firms, who compete with others, in relatively confined geographical locations. In the early round of zone declarations, many small entrepreneurs established their own action groups to campaign against zone declarations. In Trafford, the Enterprise Zone Action Group was spearheaded by the managing director of a warehousing and distribution company located just outside the zone boundaries. The fact that one of the company's major competitors was, by coincidence, located inside the Wakefield EZ no doubt provided a poweful impetus to the campaign! The Action Group argued that 'Many companies on the outside have suffered a severe and serious loss of property outside the zone. Some 2,000,000 square feet of empty premises are unable to secure occupation even with offers of new units at 99p per square foot. Established owner-occupiers are imprisoned in their premises while their competitors in the zone enjoy a rate-free holiday for ten years. In fact, they are paying rates and taxes in order to subsidise those inside.'(Guardian 31st September 1981)”

In Dudley an Industrial Ratepayers Action Group was set up. In Wellingborough, the Secretary of the Chamber of Trade and Commerce proposed a ban on all small firms moving to the Park Farm Estate EZ. The West Midlands regional group of the Chambers and Commerce made loud criticisms of the EZ policy along with Tory MP's and Councillors from Birmingham. Asked if more EZ's should come to the area, the Chairman of the West Midlands Regional Group of Chambers of Commerce told the Birmingham Post according to Shutt,

“The answer is a clear no. The zones have so far failed to attract new industry from outside their regions, merely the transfer of factories across their boundaries.”

Back To Part 1

Forward To Part 3

No comments: