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Birmingham City Centre Enterprise Zone explained

Birmingham City Centre Enterprise Zone explained

🕔01.Aug 2012

The Birmingham City Centre Enterprise Zone Investment Plan, which was approved by the cabinet this week, is likely to trump all of the many previous grand development strategies that have promised great things but not always delivered very much at all.

For this is a plan that can actually be funded without going cap in hand to Whitehall, thanks to the Local Government Finance Bill which will allow Local Enterprise Partnerships to retain additional business rates generated by companies moving into designated areas.

In Birmingham’s case, it’s estimated that the uplift in business rates will be worth £26.49 million by 2018 and £415 million by 2038. This will create an income stream which can be used to pay for the borrowing that will be necessary to drive new development across the city centre.

The theory is simple. Use the cash to unlock difficult development sites, like Paradise Circus, and then cash in with the additional business rates when the private sector rushes to build offices and shops. The more development there is, the more rates are generated and more money can be borrowed to pay for further regeneration.

The City Centre Enterprise Zone project is in the hands of the Greater Birmingham and Solihull Local Enterprise Partnership (GBSLEP), which decides where and when the money should be spent.

But Birmingham City Council is the accountable body and responsible for financial delivery. That’s why the Birmingham cabinet took the first step by agreeing to borrow £119.3 million to launch the first phase of delivery.

The council’s Director of Planning and Regeneration, Waheed Nazir, will oversee the project, assisted by LEP board member Chris Webster, the chief executive of Miller Construction.

The projects to be funded in the first phase, and the cost to the LEP, include:

  • Paradise Circus £61.3 million.
  • Metro tram extension from New Street to Broad Street £25 million.
  • Direct investment into 25 smaller sites £15 million.
  • Improved public transport and digital connections £43 million.
  • Land preparation for Wholesale Markets redevelopment at Digbeth £15 million.

Under the theme of connecting economic opportunities, The LEP proposes to move forward with a number of specific projects that are deemed necessary to “create the environment that is attractive to employers”. The Metro extension, for instance, is expected to accelerate the delivery of the Arena Central development at the bottom of Broad Street by making the area more easily accessible by public transport.

Connecting economic opportunities projects include:

  • Creating a business corridor at Snowhill to help the Central Business District expand eastwards.
  • Improving pedestrian links across Great Charles Street between the Central Business district and the Jewellery Quarter.
  • The One Station project, connecting Moor Street and New Street stations.
  • Transforming the quality of Fazeley Street and Park Street as key connections to Eastside.
  • Improving congested junctions on the A4540 ring road at Bordesley Circus, Camp Hill, Garrison Circus, Haden Circus and Spring Hill.

GBSLEP chairman Andy Street describes the City Centre Enterprise Zone as a “truly exciting” project which he expects to deliver 1.3 million square metres of new floorspace, create 40,000 full and part time jobs and contribute £2 billion to the economy in GVA per year.

The Enterprise Zone business case states: “The 26 sites included in the EZ are those identified in the Big City Plan where the greatest opportunities for growth currently exist but where successful redevelopment and occupation is currently constrained by infrastructure limitations.

“The focus on those key sectors – Business and Professional Services, Financial Services, Digital media, Creative Industries and ICT – where the city has a competitive advantage in conjunction with intelligent targeting of site marketing will minimise displacement and maximise real growth.

“The programme of investments will start to unlock the growth potential in the EZ and support the delivery of the LEP’s objectives for the region. This will have a crucial role in strengthening the region’s economy drawing in private sector investment and stimulating job creation.”

What, then, could go wrong? Clearly, the greatest risk is that estimates about the ability of the private sector to help fund city centre regeneration have been over-egged, particularly at a time of great uncertainty about future economic growth.

GBSLEP estimates gross private sector contribution towards development at £375 million between 2013 and 2018, compared with £47 million from the public sector.

The business plan states that “high level risks” associated with the management of EZ resources have been identified and worked through. However, the document continues: “The assumed level of business rates income for the EZ is highly sensitive to anticipated levels of development activity. Should development fail to materialise in line with projections, investment at desired levels may not be achievable.”

In order to ensure there are sufficient reserves to meet short term falls in income or increased costs, a contingency fund equivalent to 15 per cent of annual zone income will be set aside each year to meet uncertainties. Of the remaining 85 per cent, income used to pay for long term borrowing will be limited to a maximum 65 per cent.

The overall assessment of income against costs predicts the zone to be “broadly neutral” in the first five years, with “substantial surpluses emerging” after year eight.

 

 

 

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