Guidance

Investment Zones in England

Published 24 September 2022

This guidance was withdrawn on 28 March 2023

This guidance is no longer current, please see the Investment Zones prospectus for the latest guidance.

Applies to England

Introduction

This document sets out the in-principle policy offer from the government to all Mayoral Combined Authorities (MCA) and Upper Tier Local Authorities (UTLA) in England, who will work in partnership with their relevant constituent or district councils, that would like to introduce an Investment Zone in their area. Whilst we expect this offer to be UK-wide, how Investment Zones can operate in Scotland, Wales and Northern Ireland is subject to work with devolved governments.

The government envisages working in partnership with places across the country together to get the United Kingdom working, building and growing. Investment Zones will accelerate the housing and infrastructure the UK needs to drive economic growth. They will cut back unnecessary bureaucratic requirements and processes and red tape that slow down development, cut taxes to back business, and, as a result, attract new investment to create jobs.

The government has progressed conversations with stakeholders ahead of this announcement to shape the policy detail and support rapid delivery. This has helped to identify 38 MCAs and UTLAs who could potentially set up Investment Zones. These MCAs, and UTLAs where there is no MCA, will now have the opportunity to complete a full Expression of Interest to submit to the government. This will launch shortly and will be open to all MCAs, and UTLAs where there is no MCA, across England, regardless of discussions to date. Further detail on the Expression of Interest MCAs and UTLAs will be invited to complete will be set out shortly. Existing Freeports will also be able to apply, should they wish to do so. The government wants to immediately support those who are prepared to deliver now.

The government will look to introduce primary legislation in order to enable the offer on tax and simplified regulations. The final offer will be subject to the passage of that legislation through parliament.

Investment Zones

The government envisages that Investment Zones will be one or more specific sites within an MCA or UTLA where a variety of tax, regulatory innovations and flexibilities, and planning simplifications will apply within those site’s boundaries.

As MCAs and UTLAs consider coming forward to express interest in pursuing Investment Zones with the government, they should consider which sites will best drive a substantial contribution to the UK’s economic growth and a significant acceleration of delivery of additional housing. There is a strong expectation that Investment Zones will bring forward additional development, and that they bring forward a mix of both commercial and residential development. Both of these will be considered in the EOI assessment process.

Sites may be aligned with existing local growth strategies and transport plans. Sites that already have a masterplan, development order or outline permission could be considered by MCAs and UTLAs as a potential Investment Zone, as could sites where planning consents are not yet in place. Development sites where planning simplifications apply may be co-located with, or separate to, tax sites, depending on what makes most sense for the local economy.

The government is committed to tackling barriers to growth across the United Kingdom.

As this is a UK-wide mission, we will work in partnership with devolved governments and other stakeholders to agree how we can use our levers to deliver Investment Zones in Scotland, Wales, and Northern Ireland.

In Scotland, we will work with the Scottish Government to agree the interaction between Investment Zones and the Scottish Green Freeports competition in which we’ve had expressions of interests from 5 areas.

In Wales, a competition is currently underway to deliver the Freeports programme as set out in the Prospectus published jointly with the Welsh Government. This work leaves us well placed for fast-paced discussions Investment Zones.

We welcome investment proposals for Northern Ireland, and will work with the devolved administration and local partners to maximise the significant investment we have made in Northern Ireland’s research and innovation strengths through the city deals across the Belfast Region, Derry-Londonderry & Strabane, Causeway Coast & Glens and Mid South West by identifying suitable sites such as the Belfast Innovation District.

Speeding up planned development and simplifying new opportunities

The government wants to do everything possible to streamline and accelerate delivery of high-quality development for jobs and homes. When proposals come forward for Investment Zones, they will benefit from a liberalised planning process.

For developments in the early stages of planning, and to encourage new development to come forward, there will be a new faster and more streamlined consent to grant planning permission. This consent will reduce many of the burdensome requirements which has made the planning of large sites slower and more complex than it should be, to enable developers to bring forward good quality development which responds to the market. In particular, we will:

• remove burdensome EU requirements which create paperwork and stall development but do not necessarily protect the environment;
• focus developer contributions on essential infrastructure requirements;
• reduce lengthy consultation with statutory bodies; and
• relax key national and local policy requirements.

Key planning policies to ensure developments are well designed, maintain national policy on the Green Belt, protect our heritage, and address flood risk, highway and other public safety matters - along with building regulations - will continue to apply.

For developments which already have permission, we will work with developers and local planning authorities to ensure planning is not a barrier to the accelerated delivery of these sites.  All Investment Zones will have a mandate to boost growth; in Zones, the planning system will not stand in the way of investment and development.

Where relevant, a development corporation or a dedicated delivery vehicle could be established, providing it does not slow down development. We would expect MCAs and UTLAs proposing Investment Zones to fund these. MCAs and UTLAs will also need to demonstrate that they have business sponsors ready to lead and drive investment opportunities. The government will explore the necessary delivery arrangements further with places that come forward.

Time-limited tax incentives

Specified sites in England could benefit from a range of time-limited tax incentives over 10 years. The tax incentives under consideration are:

1. Business Rates – 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites. Councils hosting Investment Zones will receive 100% of the business rates growth in designated sites above an agreed baseline for 25 years.

2. Enhanced Capital Allowance – 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.

3. Enhanced Structures and Buildings Allowance – accelerated relief to allow businesses to reduce their taxable profits by 20% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over 5 years.

4. Employer National Insurance contributions relief – zero-rate Employer NICs on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £50,270 per year, with Employer NICs being charged at the usual rate above this level.

5. Stamp Duty Land Tax– a full SDLT relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for residential developers.

Infrastructure and development

The government wants to back local leaders to ensure that their Zones can innovate, and have the infrastructure and skilled workforce they need. The full offer the government will be able to make will depend on discussions with MCAs and UTLAs about the requirements of their Investment Zone. We want local leaders to be ambitious and use all available tools to unleash the full potential and would consider;

• Wider support for local growth: for example, through greater control over local growth funding for areas with appropriate governance. Subject to demonstrating readiness, Mayoral Combined Authorities hosting Investment Zones will receive a single local growth settlement in the next Spending Review period.
• Strategic direction over affordable housing fund: including how it is used, with flexibility to acquire and regenerate derelict and empty housing consistent with the strategic aims of the fund.
• Prioritised access to infrastructure funding: for example, this could potentially include the remaining circa £1.3 billion Brownfield Infrastructure Fund where additional development can be delivered at pace.

Investment Zones and Freeports

Freeports have established local partnerships, governance, robust business plans and development sites and so are ideally placed to capitalise on the new Investment Zones offer to deliver investment, jobs, and growth if they want to do so. This will not only ensure that those Freeports that want to are able to build on the successes they have had to date by accelerating investment in their areas, but that both programmes complement one another.

The government will work with Freeport Boards and local partners involved in current and prospective Freeports to consider whether and how the Investment Zones offer can help to support their objectives, as part of the wider process for identifying Investment Zones. This will ensure that both programmes complement one another.

Next steps

The government recognises that further detail is required on provisions and mechanisms for delivery. We intend to do this in discussion with MCAs and UTLAs who come forward. The guiding mission is that Investment Zones will get the United Kingdom working, building and growing, and get spades in the ground.

We know that MCAs and UTLAs will have many potential sites in mind that could make up an Investment Zone. We will set out further detailed criteria that sites will need to meet with the launch of the Expression of Interest process under the following broad themes:

• Potential to increase long-term UK economic growth for example through addressing housing need, unlocking commercial sites, or attracting inward investment.
• Local capacity and capability for example (but not limited to) the presence of a Mayoral Combined Authority, willingness to use development corporations, and places which have the ability to trial new policies.
• Readiness to deliver Investment Zones in order to generate economic growth in short order and address the ongoing crisis.
• Alignment with other significant investments such as HS2 rail stations to ensure critical mass and greater growth opportunities.

The government’s expectation for MCAs, and UTLAs where there is no MCA - who will work in partnership with their relevant constituent or district councils - coming forwards with proposals in this Expression of Interest period is that as an absolute minimum they will:

• Agree that Investment Zone benefits will be conditional on MCAs, UTLAs and local partners honouring the commitments made in the EOI and subsequent negotiation and, and on local consent and Parliamentary approval of any legislation.
• Investment Zones will also be conditional on complying with Subsidy Control and the Public Sector Equality Duty.
• Work with the government to agree suitable governance mechanisms for any potential Investment Zone; and for the complementary functions.
• Work with the government to agree suitable accountability and readiness arrangements as part of any potential Investment Zones.
• Demonstrate how an Investment Zone will meet the MCAs and UTLA’s own objectives, including in relation to transport, regeneration, economic growth, and tackling local challenges.
• Provide metrics of success closely aligned with the growth and housing ambitions of the programme to the government.