The property market impact of British enterprise zones

Enterprise zones (EZs) were originally set up in the United Kingdom in 1980 as experiments to stimulate free enterprise, and located in areas that had suffered significant employment loss. Unlike their namesakes elsewhere in the world British EZs are essentially property led local economic initiatives providing incentives over their ten-year life in the form of free rates to occupiers of commercial and industrial properties and 100% capital tax allowances which can be set against corporation or income tax. In all 36 EZs have been designated to date in the UK between 1982 and 1996. This paper analyses the detailed impact on local property markets of the three EZs designated in the Clydeside conurbation. It considers their role as incubators of new firms and demonstrations of enterprise, and the potential of spatial competition between zones. The evidence from Clydebank is that zone status expanded its stock of modern industrial space but once its EZ status was terminated it did not prove to be a catalyst for economic growth. The local EZ's potential role as an incubator of new firm formation has not produced long term fruit. Similarly the demonstration effect of the EZ has not led to a sustainable local industrial property market where new development is viable. The Inverclyde zone was smaller and much of it remains undeveloped. The failure of the Inverclyde zone to complete its task can be directly attributed to the spatial competition with the rival EZ in Lanarkshire. The importance of local spatial competition between EZs is demonstrated clearly in this study and is exacerbated by the emphasis on attracting inward investment by the Lanarkshire EZ. Overall the evidence of the property market impact of EZs is that they should be judged on a long term basis and that a short term perspective, even after ten years, exaggerates their significance. The results cast serious doubt on the theoretical underpinning of property led initiatives designed to address market failure.