In the Autumn Statement, Chancellor Jeremy Hunt said that the government will ‘refocus’ the investment zones programme
The Investment Zones programme will be refocused on a limited number of the ‘highest potential knowledge-intensive growth clusters’, leveraging local research in a small number of locations.
These clusters will focus on universities in ‘left behind areas’ to help build growth and expand research. The first clusters are set to be announced ‘in the coming months’.
Introduced in the mini Budget by then Chancellor Kwasi Kwarteng, the programme aimed at attracting businesses with tax cuts and relaxed planning rules. It also looked to accelerate housing and infrastructure in the UK to drive economic growth.
The initial scheme planned to have as many as 40 investment zones across the country to provide businesses with tax breaks and encourage housebuilding in areas of high economic growth.
It also promised to divert half of all business rates paid to the government and retain them locally to reinvest in economic-boosting projects.
Businesses would also have been able to claim 100% rates relief on newly occupied and expanded premises, full stamp duty land tax relief on land bought for commercial or residential development and a zero rate for employer NICs on new employees earning up to £50,270 per year.
The Treasury, however, had calculated the zones could cost the public purse up to £12bn in lost tax revenues each year.
In official papers, it said that the approaches to investment zones would be changed, with a focus on ‘leveraging research strengths’ to help build clusters for new growth industries.
The Treasury said: ‘The government will refocus the investment zones programme to catalyse a limited number of high potential clusters, working with local stakeholders, to be announced in the coming months.
'The existing expressions of interest will therefore not be taken forward.'
The shift will see the Department for Levelling Up, Housing and Communities (DLUHC) working closely with ‘mayors, devolved administrators, local authorities, businesses and other local partners’ to consider how best to ‘identify and support these clusters’.
Charlotte Sallabank, partner at Katten UK LLP, said: ‘Investment zones will be introduced that centre around universities in areas that have been left behind. When the previous Chancellor spoke about investment zones in the mini Budget, the proposed zones seemed somewhat similar to the existing freeports in operation which offered a number of tax incentives.
‘Whereas the investment zones announced in the statement today do seem different from the freeports regime.’
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