Businesses optimistic about benefits of investment zones, Grant Thornton says

Businesses are encouraged by the blueprint for what investment zones could mean for local areas and the government’s efforts to ‘Level Up’ the UK economy, according to new research from Grant Thornton.

In Grant Thornton’s latest Business Outlook Tracker survey of 601 mid-sized businesses, two thirds (66%) of respondents said they understand what the government’s investment zone policy is trying to achieve, with 68% also believing that the introduction of the zones will help towards the government’s Levelling Up agenda.

The survey found that businesses can see benefits to local areas from the introduction of investment zones. A significant number of respondents agreed that being located within one of the zones would help to support the local region, with factors such as job creation and skills development (70%), whilst also being beneficial to local businesses (71%). The positive impact of being in a zone would also encourage many businesses (72%) to stay within the local area.  

Despite not currently being in the running for an investment zone, the East of England was the most positive region about the policy. Almost all (94%) believe that being located within a zone would help to support the area and be beneficial to local businesses (86%). 

In contrast, despite being shortlisted for a zone, businesses in the West Midlands currently need more convincing about the positives of the policy. Only 50% believe that a zone would be helpful for local businesses and just over half (54%) understand what the policy is trying to achieve.  

Despite the positive reactions, the survey also found that there are mixed views on whether they have been chosen correctly. Just over two thirds (68%) believe that these incentives, such as Stamp Duty Land Tax relief and 100% Business Rates relief, have been focused on the right areas to encourage business investment.  

Along with tax incentives for businesses, investment zones will receive direct funding for the local region. The funding identified by businesses as likely to have the greatest impact in encouraging business investment are funding for planning and development, for local infrastructure and for local enterprise and business support. 

However, Grant Thornton noted the needs of local areas in the UK differ and the funding prioritised was found to vary across the nation.  

Over half (54%) of businesses in Liverpool City Region and Yorkshire and Humber prioritised support for local businesses. This was less important for businesses in the East Midlands (34%) who instead favoured funding for planning and development (62%). 

In addition, the survey also revealed that business leaders across the UK believe that the 12 proposed locations are not sufficient, with 70% agreeing there should be more investment zones located in other areas in the UK. 

Currently, eight of the 12 proposed investment zones will be in England, with Glasgow City Region and the North East of Scotland recently selected as the sites for the first investment zones north of the border. 

Wayne Butcher, director, Public Services Advisory, Grant Thornton UK LLP, said: “Our research shows that there is a generally positive view from businesses, at a national level, on the intended purpose and potential benefits of Investment Zones. 

“But it’s also clear that the level of confidence and understanding of the policy differs across the UK, and amongst those already in line for a zone. While still a relatively new initiative, if this mixed level of understanding is not addressed, there is a risk that it could become a barrier to truly maximising the benefits, for the whole nation, of the new zones.”