Solving unemployment: are the LEPs pulling the right levers?

Several areas in the UK have established Local Enterprise Partnerships (LEPs), and 21 of those have been handed the ability to designate Enterprise Zones (EZs) by central government. In these zones, qualifying businesses will receive relief on business rates – worth up to £275,000 – over five years. As Birmingham will have an EZ, I organised a Birmingham Fabian discussion on the topic – specifically whether the combination of the Greater Birmingham and Solihull LEP and city centre EZ would deliver what they should – a strengthened local economy and thousands of long-term jobs – and what else we could do as a city to deliver these outcomes.

It’s not just Birmingham that needs this assurance, but living here hits home the urgency. At the meeting, Shabana Mahmood MP said that parts of her constituency simply never recovered from the 1980s, and both unemployment and deprivation have remained stubbornly high, even in times of plenty elsewhere in the city. Low levels of qualification are also part of the mix, with Ladywood and two other Birmingham constituencies in the bottom ten in the UK. Without the resources afforded to the RDAs, can the LEPs pull the required levers to address these sorts of issues – and will they?

I don’t want to be gloomy about what these arrangements can achieve – but nor do I want to just sit back and expect them to just…work. Because these things don’t happen by simply fiddling around with business rates. The Black Country LEP has already received praise for its fast work in designating the i54 site (near Wolverhampton) an Enterprise Zone, which almost certainly contributed to JLR’s decision to locate a new engine plant there – creating 2000 jobs directly, and what is likely to be thousands more in the supply chain. Nonetheless, it is not the only factor – and Professor David Bailey was quick to remind the Birmingham Fabians that this wouldn’t have happened without Advantage West Midlands, the outgoing RDA. From his Birmingham Post blog:

It’s worth remembering that:

1.       It took almost ten years’ of AWM effort in remediating the i54 site, putting in infrastructure and attracting tenants – think MOOG, Eurofins and now JLR.

2.       AWM agreed the deal with JLR for the purchase of the site months ago, and then had to secure BIS approval for the deal.

3.       AWM owned the site until one minute past midnight on 18th September 2011 (i.e. the day before the announcement was made).

History teaches us the same lessons. The last time EZs were established, the most successful of these was the Isle of Dogs, and this is often held up as evidence that EZs work. But as the Work Foundation points out: “Canary Wharf already had high levels of latent demand, and the key obstacles to job creation were contaminated land and a lack of infrastructure. In particular, the creation of the nearby Dockland Light Railway (DLR) at an initial ‘shoestring’ cost of just £90m was a defining factor, linking Canary Wharf to the centre of London.” In Birmingham, those barriers to job creation are also present, compounded further by its level of structural unemployment.

In a separate issue, the generous tax breaks on offer have already led to rash decisions. Birmingham City Council wishes to take advantage of the new EZ, and to progress their own ‘Big Plan’ by demolishing the wholesale markets, and regenerating the site. Given that retail businesses don’t qualify for EZ tax breaks (whoops), the regeneration will be very much office-led…which might make some kind of strangled sense if Birmingham didn’t already have 3.9 million square feet of office space sitting empty.

In summary, a wholesale market that is of historical and practical significance, which employs and supports thousands of jobs across Birmingham, is going to be cleared to make way for (we can only suppose) largely empty offices. If the future of those markets is not resolved quickly, the effect on employment across the city could be disastrous.

Ultimately, we can only judge the LEPs and EZs by results – the number of sustainable jobs they create for citizens in the areas they cover. But as the last of the three speakers, Birmingham councillor John Clancy said, the LEPs are never going to be able to address the real reasons behind persistent unemployment unless they become “big hitters” – finding the resources and ambition to bring economic self-determination. We haven’t seen that yet.