Enterprise zone policy: developing sustainable economies through area-based fiscal incentives

Abstract

The reintroduction of enterprise zone policy in the UK and less explicit forms of zones found in area-based fiscal incentives used in Europe, North America and India offers much to the policy discourse on economic growth. The use of enterprise zones previously to generate economic activity in depressed areas and among disadvantaged has a mixed success. However, the use of current enterprise zone policy in the UK as a tool for promoting high-growth sectors with potential – digital industries, niche engineering, biotechnology and green sectors – represents a departure from the enterprise zone model as an urban welfare tool. It draws greater parallels with the use of fiscal incentives used in North America, on which this article reflects. Drawing on the experiences of the digital media, arts and green sectors in Vancouver, British Columbia, this article notes the vulnerabilities created in an economy based on fiscal incentives that lure transient inward investors, as opposed to sticky growth and added value, and local employment and wealth produced by indigenous investment. Indeed, it is argued that a fiscal-led economic policy lies in contradistinction to the workings of genuine knowledge-intensive sectors, which operate on the basis of spatial proximity and agglomerations, rather than the principles of lowest cost. Together these might offer some salutary warnings about what is possible from the reintroduction of enterprise zone policy in the UK.