Thirty-eight Local Authorities across England are said to be interested in the new concept of Investment Zones. But what are Investment Zones? How do they differ from Freeports? And how could they benefit the warehousing sector?
Warehouses are increasingly deployed as processing hubs for added value services like kitting and postponement, so deferred customs duties could help our sector. But although the benefits of Freeports include simplified documentation, duty suspension or inversion and exceptions for re-exports, these are not available in Investment Zones. However, on virtually every other point, the Investment Zone appears to be a Freeport on steroids!
Relief on National Insurance contributions will apply to more people and ostensibly promote more well-paid jobs. Freeport policy set the earnings limit at £25,000, but for Investment Zones it will be just over £50k. On business rates, although the details remain sketchy, it appears that incoming occupiers would be exempt from paying rates on business premises for 10 years in an Investment Zone, where Freeports limited the exemption to 5 years.
The selected locations for Freeports are not only characterised by having marine ports (or in the case of the East Midlands, the largest airport for cargo planes). These areas are also relatively deprived, according to social, economic and health measures. However, this will apparently not be a pre-requisite for Investment Zones. Arrangements for the devolved nations remain unclear, since the 38 Local Authorities referenced in the Government’s recent announcement are all in England, but in principle at least, it sounds as though any area, anywhere in the UK, will be eligible to apply for Investment Zone status.
Considering the reliefs are intended, as least in part, to contribute to Levelling-Up by attracting investment and jobs to hard hit areas, the widespread application of Investment Zones begs the question, if the regulatory environment on offer here is so good, why not ditch the ring-fence and apply it to the whole country? It is a good question.
Freeports’ detractors commonly speculate that the growth they purport to create is overstated. Businesses may simply relocate existing premises into the zone to access its benefits; or divert economic activity to the Freeport which is not truly ‘new’ investment, but a displacement of planned growth, into an area that operates to different – perhaps lower – standards.
At their best, both Freeports and Investment Zones should foster genuine collaboration between local authorities and private business. For warehouse developers, this could be really good news. UKWA has long argued that planning committees block us at their peril, since warehousing underpins supply chain resilience, in turn driving economic prosperity at a national and international level. And from a more local perspective, a warehouse development can be a great way to deliver on employment land targets and create sustainable jobs with good career prospects.
As with so many of the intersections between business and politics, Investment Zones have the potential to be a force for good but might still get bogged down in bureaucracy. If they can avoid that, then warehousing has a great opportunity to benefit. So for now, while so many of the aspects of the new policy remain unclear, it is a cautious welcome from UKWA.
Clare Bottle
UKWA, CEO
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