Key economic policy had 'minimal' impact, report says
- 23 March 2016
- From the section Highlands & Islands
One of the Scottish government's key economic policies has had hardly any impact, a report has found.
The report by one of the government's own agencies, Highlands and Islands Enterprise (HIE), found the creation of Enterprise Areas has had a "minimal" effect on employment since 2012.
Even within the areas, there has been only a '"small" growth in employment, and that displaced jobs from elsewhere.
Deputy First Minister John Swinney said the policy "continued to evolve".
The report authors found that in nine out of 15 Enterprise Areas, no new employers had moved in and in others, new employers had already been planning to move in anyway.
Many companies moved into Enterprise Areas without knowing they had that designation.
There was no evidence of any inward investment into an Enterprise Area.
Having heard from other public sector agencies and companies in the sectors targeted, HIE's report concluded: "There is a general impression that the financial incentives are lightweight, and would not be significant in larger companies' location decision".
Enterprise Areas were a key element of the Scottish government economic strategy published in 2011. Fourteen areas were chosen the following year, and a 15th in 2013.
In life sciences, these included sites in Edinburgh, Midlothian, Forres, Inverness and Irvine.
In renewable energy, the areas were specific sites in Lewis, Orkney, Easter Ross and Caithness, as well as the ports of Dundee and Leith.
In growth sectors of manufacturing, the policy drew in part of Glasgow and Prestwick, with Broxburn and Livingston in West Lothian.
As they were based on important growing sectors of the economy, it was found that the designation of Enterprise Areas had a merely "limited" effect beyond existing work.
The HIE review of the policy, covering all of Scotland, said that Enterprise Areas barely changed existing strategies for the sector or area.
Promotion of the opportunities brought by the policy was found to be "minimal".
About £300m of public sector investment had already been committed ahead of the choice of the 15 areas.
Once designated, some areas - including Nigg in Easter Ross, and Scrabster in Caithness - got no further public sector funding.
Eighteen companies together saved only about £100,000 per year from their business rates bills as a result of the policy, which was a "windfall" for some of them rather than an aid to investment.
There was one example of a capital allowance being claimed, and that was for only £90,000.
Skills Development Scotland, another Scottish government agency, should have helped with training and recruitment. But the review found no evidence of that happening, and some participating companies were unaware that it was meant to.
On a more positive note, streamlining of planning decisions in Enterprise Areas was found to have been "successful".
The report explains that constraints are placed on government support for industry by European state aid rules. The initiative also struggled due to a low appetite for private investment in the years following deep recession and constrained access to bank finance.
There was also a big shortfall in the expected development of offshore renewable energy. The Enterprise Areas had been seen as one of the ways to build up Scotland as "the Saudi Arabia of renewable energy". But there has been only a low level of investment in on-shore manufacturing.
HIE recommended that the Enterprise Areas be given a chance to continue for five more years, particularly to give more time for the marine energy sector to develop. It said there could be a change of focus to other sectors.
Enterprise Areas did not feature in the updated Scottish government economic strategy, which was published earlier this year. Yet last September, the first minister visited BioCity in Lanarkshire, announcing it should be added to the areas covered.
At the time, Ms Sturgeon was quoted saying: "Enterprise areas in Scotland at sites like Irvine and Edinburgh's Bioquarter are already doing a terrific job creating new economic opportunities, new partnerships with education and - most importantly - new jobs across the country."
Following publication of the HIE report, Deputy First Minister John Swinney sought to find some positive messages, stressing that it was "a mid-term evaluation", showing how Enterprise Area status "complements wider support".
He cited figures showing 48 companies that are located in Enterprise Areas, and employing 1,000 people.
"This report provides valuable insight as this long-term policy continues to evolve," he said.