The role of place and the ‘zonification’ of growth

JACK SHAW

Economic growth is the central mission of the UK Government. In her inaugural speech as Chancellor of the Exchequer, Rachel Reeves described it as the “only route” to national prosperity.^[1] What has followed is a full-throttled search for growth which must now be driven primarily by productivity. Yet the institutions responsible for directing that growth potential — and the spatial scales at which they operate — have been shifting.

Mayoral Authority

Over the past decade, England has witnessed what American political theorist Benjamin Barber termed the “rise of the Mayor”: the growing importance of strategic, mayoral-led authorities in shaping local economies and driving regeneration.^[2] The proposed English Devolution and Community Empowerment Bill would extend strategic authorities across England, giving them responsibility for large-scale regeneration through new spatial development strategies.^[3] They are also central to the Industrial Strategy White Paper — even if the connection between industrial policy and place remains contested, with sectoral priorities far clearer than spatial ones. Meanwhile, the political appetite for emerging technologies such as data infrastructure and renewables continues to grow, and strategic authorities are expected to accelerate their rollout.

Special Purpose Vehicles (SPVs) and zonification

However, the same period has also signalled and accelerated a process of “zonification” — the proliferation of geographically defined areas led by new special purpose vehicles (SPVs) such as Freeports and Development Corporations (DCs). These institutions, rather than strategic authorities, have become the principle vehicles for realising economic transformation.

This approach is not new. Conservative administrations have long embraced SPVs as a means of stimulating growth. Urban Development Corporations were set up in the 1980s to regeneration places like the London Docklands UDC. Enterprise Zones were set up over a similar period in a dozen locations, including Gateshead, Middlesbrough and Liverpool. They have enthusiastically been adopted by Conservative administrations over the past decade too, namely Freeports, Investment Zones and DCs. Although governance arrangements vary — for example, DCs require local authority consent for regeneration while Mayoral Development Corporations do not — their underlying powers have remained broadly consistent: targeted tax incentives, streamlined planning, and limited accountability to local democratic institutions.

Labour administrations, by contrast, have traditionally been sceptical of SPVs, favouring instead more centralised approaches such as the Regional Development Agencies overseen by the Government Office for the English Regions.^[4] Yet the current administration has revived the model. SPVs have become the preferred vehicle to accelerate economic growth and have multiplied, with new Industrial Strategy Zones, AI Growth Zones, and a revived New Towns programme. The New Towns Taskforce proposed the creation of a further dozen DCs to co-ordinate development.^[5]

Local and strategic authorities

This trend reflects, in part, a perception in Whitehall that local authorities are, at best, ambivalent about growth and, at worst, resistant to it. This view is underpinned by the Government’s decision to increase central oversight over the planning regime.^[6] It is also reflective of the financial burden on local authorities, which are preoccupied with delivering statutory public services such as social care and therefore ill-equipped to accelerate growth at the required sale. Second, strategic authorities remain institutional immature and lack the capability to drive large-scale investment in many cases.

This approach, however, reveals a tension inherent in zonification: SPVs have the potential to accelerate growth — which is substantial and at least in the short-term requires empowering them further — but are, at the same time, products of centralisation. Rather than empowering strategic authorities to lead economic transformation directly, Whitehall has reasserted control through the vehicles it created and oversees.

Where SPVs fail

Moreover, SPVs have their own shortcomings. Evaluations suggest that their incentives can often displace, rather than generate, economic activity.^[7] Rebranded Freeports and Investment Zones — now called Industrial Strategy Zones  — have been strengthened with 99 new policy interventions through the Industrial Strategy Zones Action Plan, though many are marginal and the core offer continues to coalesce around planning and tax incentives.^[8] AI Growth Zones are not dissimilar, promising only to support AI-enabled data centres by “improving access to power and planning support”.^[9]

The consequence is a fragmented economic geography, with overlapping mandates and weak coordination between SPVs, local and strategic authorities, which do not operate within an integrated, spatially coherent framework.

While the Industrial Strategy Zone Action Plan has sought to integrate at least Freeports and Investment Zones under strategic authorities’ oversight, the reality remains one of fragmentation. As a result, key questions persist: should Industrial Strategy Zones be ‘extra-territorial’, marketed internationally to attract foreign direct investment, even as strategic authorities develop their own international prospectuses? How should investment pipelines, infrastructure priorities, and trade strategies should align across different layers of governance.

What changes should be made?

A more coherent and ambitious model is required. SPVs should be endowed with greater ability to promote and direct investment, such as compulsorily purchasing sites and capturing the uplift in land value, as is envisaged in the New Towns programme. This should take place while strategic authorities are building their capacity and capability. A shift of this kind may also give the Government more fiscal headroom: if SPVs are given autonomy to raise revenue the Office for National Statistics might re-classify their debt as off-balance sheet.^[10]

SPVs alone cannot connect effectively with research pipelines, shape sectoral priorities, or develop the skilled workforce that growth demands. Strategic authorities, by contrast, possess democratic legitimacy, a broader spatial remit, and the ability to convene local actors. They are better placed to coordinate innovation assets, align them with local economic strategies, and ensure that SPVs reinforce wider productivity and inclusion objectives.

In the long-term, strategic authorities should therefore be given strategic control over zone development. Poor integration will, without mayoral oversight, raise questions of democratic legitimacy. Only by embedding zones within wider spatial and industrial strategies , — encompassing skills, employment, infrastructure and R&D — can they evolve from a patchwork of isolated initiatives into a coherent national growth framework.

How can we make these changes?

Achieving this shift will require not only institutional capacity building among strategic authorities but also a cultural change from Whitehall. Strategic authorities must be trusted as the primary agents of growth in their patches, with the resources and discretion to shape long-term investment priorities rather than merely facilitate and support SPVs designed by Whitehall.

Taking this to its further still, strategic authorities could ever be empowered to establish their own SPVs. With the new Right to Request mechanism offering a formal route to further devolution, they can now seek powers reserved to Whitehall. Decisions with major fiscal implications, such as tax and subsidy regimes, would remain under HM Treasury oversight.

Why do we need to make changes?

Without this evolution, a potentially significant driver of economic growth and productivity remains constrained between the centralising instincts of Whitehall and sub-national institutions that still lack sufficient capacity, capability and autonomy. Insufficient trust in local and regional actors continues to inhibit the development of coherent, place-based growth strategies. With public pressure mounting on the Government to raise living standards — and with the prospect of the Office for Budget Responsibility downgrading its forecasts ahead of the Autumn Budget — the Government will need to deploy every tool at its disposal, and in ways it has so far been reluctant to do.

[1] Rachel Reeves, Growth is the UK’s national mission, 8 July 2024.

[2] Benjamin Barber, If Mayors ruled the world: Dysfunctional nations, rising cities, Yale University Press, 2013.

[3] At the time of writing the English Devolution and Community Empowerment Bill is at Bill Committee stage and amendments are being debated. The content and scope of the Bill is not expected to significantly change.

[4] One exception is the DCs that were first established under Labour’s Clement Attlee immediately after World War II as part of the New Towns programme.

[5] MHCLG, New Towns Taskforce: Report to Government, 2025.

[6] Ministry of Housing, Communities and Local Government, Pro-growth package unshackling Britain to get building, 13 October 2025.

[7] Adam, S. and Phillips, D. Freeports: what are they, what do we know, and what will we know?, Institute for Fiscal Studies, 2023; Cotton et al. The politics of freeports – a place-based analysis of regional economic regeneration in the United Kingdom, Local Economy: The Journal of the Local Economy Policy Unit, 38, 6, 2024.

[8] Department for Business and Trade, Industrial Strategy Zone Action Plan, 2025.

[9] Department for Science, Innovation and Technology, AI Growth Zones: open for applications, 2025.

[10] Thomas Aubrey, Avoiding the pitfalls of private finance initiatives and departmental budgets to fund the next wave of sustainable new towns and urban extensions, Bennett School of Public Policy, 2024.