Agenda item

Enterprise Zone (EZ) 2020/21: Quarter 4 Update

To inform Members of the 2020/21 Enterprise Zone (EZ) Programme Financial Outturn position and to provide an update on the Enterprise Zone Programme and progress on the Enterprise Zone Investment Plan.

 

Minutes:

The purpose of the report was to inform Members of the 2020/21 Enterprise Zone (EZ) Programme Financial Outturn position and secondly, to provide an update on the Enterprise Zone (EZ) Programme and progress on the Enterprise Zone Investment Plan.

 

The Consultant Project Manager drew Members attention to three key tables within the report, specifically Table 1 for the Q3 and Q4 end of year forecast 2020/21, which reported a slight fiscal surplus, which was more than anticipated, owing to a slight reduction in Capital spend and, secondly, in terms of the increased net arising from business rates income arising from the reduction of appeals via the latest Valuation Office data.

 

Table 2 of the report sets out the annual forecast for the next five years and gives an indication how the business rates income should start to increase over the coming five years.  In terms of moving from Q3 to Q4, the LEP had received an application of Financial Principles 16, which sets out all those projects with no Outline Business Case (OBC) approved by the LEP. The associated costs would be parked at the end of the programme with the difference in the Q3/Q4 figures detailed in Table 3 as a result. Table 3 shows a difference between secured/committed business rates income, compared to all business rates income included/anticipated.  If only the secured/committed business rates income were allowed for it reports the programme at a net deficit of £659M, whereas if all the forecasted business rates were included as income the position changes significantly to a £633M surplus.  The reported position is purely on a prudence basis and assists with calculating affordability throughout the programme.

 

The Enterprise Zone Investment Plan refresh was reported to have commenced, which would align somewhat more closely with the GBSLEP Delivery Plan, as well as the emerging ‘Our Future City Plan’ via Birmingham City Council. The three EZ key projects remained as Birmingham  Smithfield, which had had its strategic OBC approved by GBSLEP Board and the signing of the Joint Venture Agreement with Lend Lease. Paradise Phase Three was being progressed, and an OBC had also been received for consideration of EZ funding from Martineau Galleries, which could potentially contribute over £500M in Business Rates Income to the EZ Programme.  A number of other key project sites have also been approved, such as for Digbeth High Street and Southside Public Realm, for which work has commenced on site.

 

Consideration has been given to bringing forward new projects as part of the EZ Investment Plan with the GBSLEP concluding that the review of the EZ Investment Plan and the review of the Project Pipeline provides an excellent opportunity to revisit how the project is being delivered, how it is moving towards delivering improved income, and how the GBSLEP can be more strategic in its finding and support for the project, whilst also providing a level of prudency in terms of spend.

 

Other updates for the EZ include the PWC audit report, carried out during Phase 1 and 2 , which had been presented to the GBSLEP Project Delivery Board and GBSLEP Board, receiving positive assurance for Phase 2 (and some feedback for Phase 1).  Of note was  that the GBSLEP Programme Delivery Board and the GBSLEP Board received a EZ Update Report at every meeting for the major projects and associated financial reports every quarter. 

 

Having received the introduction to the report from the Consultant Project Manager, in summary Members asked the following questions:

 

Councillor Peaple raised the issue of future processes governing Business Rates retention in relation to local authorities and queried how much of an impact the LEP saw arising from the application of any new Business Rates arrangements and, secondly, was any information available in relation to business property occupation rates. Finally, Councillor Peaple sought clarification as to whether some smaller sized local authorities could still expect to receive additional funding through the Business Rates scheme as had been previously expected.

 

The Consultant Project Manager advised that in terms of income, the EZ was slightly different to the on-going Business Rates Relief. The EZ had secured business rates growth up to 2045/46 , which provided Birmingham City Council with the assurance it needed to invest on the LEP’s behalf up until 2045/46.

 

In terms of demand for commercial space across Birmingham, Members were advised that the market was in some flux.  Positive indications were being received from some developers in the market at the present time, along with some hesitancy in the present climate. GBSLEP have commissioned Cushman and Wakefield to  review the potential impact on commercial rental space, as well as reviewing separately how some sites suffering from the impact of the pandemic can be supported further still.

 

It was confirmed that the Regional Fund was still allocated within the EZ Investment Plan. Members were advised that a surplus was required within the fund to accommodate the wider programme, which was confirmed at £5M per year for a period of four years. The programme was being pro-actively reviewed to see how it could support wider regional work on the back of the EZ.

 

Councillor McKiernan sought further information around the selection and appointment process for Cushman and Wakefield and was advised that the procurement exercise was carried out by Birmingham City Council on an open tender basis and not by the LEP on this occasion.

 

Councillor Kriss sought further information on the impact on businesses in Birmingham City centre arising from employees continuing to work from home, rather than from designated office space. The Consultant Project Manager confirmed that working practices were very much part of the demand model being used to define what future demand would look like for commercial rental space.  Both the size and type of organisation concerned were factors to be taken into account. The LEP was hoping to have a model and data in place in coming months which could be used to assess what impact may arise on the future Business Rates model arising from employees changing and alternative working practices arising from the pandemic.  The model would be used not only to assess potential impact on the EZ , but also in regard to footfall across the city in general.

 

The Director of Economic Strategy

 

The Greater Birmingham and Solihull LEP Joint Scrutiny Committee:

 

RESOLVED:

 

i.  To note the outturn financial position 2020/21;

 

ii.  To note the impact of the Covid-19 pandemic; and,

 

iii.  To note the progress on the Enterprise Zone Investment Plan 2021/22.

 

Supporting documents: