The living is EZ-EE

The living is EZ-EE

No better place than the North East exists to show the value of Enterprise Zones to economies in transition. BQ talks to Fergus Trim and Adrian Hill to find out more.

It would have been crass of the Government not to apportion new Enterprise Zones to the North East. The region over three decades has demonstrated the value of EZs to an economy. See today the waterfronts of Newcastle, Sunderland and Hartlepool. Stockton and Middlesbrough improvements go on.

Sunderland has Doxford International Business Park, Gateshead the Metrocentre – Europe’s biggest retail and leisure complex. Difficulties an EZ sometimes causes don’t detract from this. With two of the first 10 new sites being allotted to Teesside and Tyne and Wear – and more perhaps among 11 to be further announced next year – a sizable area of our region will be advantaged. Even pre-Budget, Newcastle stood out in Centre for Cities estimates as one of only three Northern places among the country’s top 10 where private sector jobs have grown over a decade. Another office report shows Newcastle as one of the best value cities in the UK for occupancy costs, with only Cardiff less expensive.

Globally it sits between Denver and Cardiff. Fergus Trim and Adrian Hill at Quorum and Cobalt Business Parks are key figures in Tyneside’s acceleration. Trim, driver of Quorum’s EZ success on Newcastle’s outskirts, is a prime achiever in the city’s recognition alongside Preston and Wakefield. In 18 months recently more than 240,000 sq ft of office space at Quorum has been let, bringing in six tenants and more than 2,000 of the 10,000 new office jobs expected there eventually. Combine this with the performance of neighbouring EZ Cobalt in North Tyneside and the two now account for 13,500 jobs out of 28,000 ultimately expected. Without them, big names like Orange, Hewlett Packard and OSB, the world’s largest oil shipper headquartered in New York, might not be on Tyneside now.

Over 15 years, a tenant with 50,000 sq ft at Quorum will pay £40m less than in central London, since rents of £16.95/sq ft can be offered flexibly, and with five years’ rent-free occupation. There’s also the quality.

Adrian Hill at Cobalt can point to high energy performances in buildings there, cutting running costs and carbon footprint. Its data centre campus represents the region’s highest grade of technical real estate. Indeed, says Hill, its BREEAM “excellent” rating makes it one of only a handful of “green” data centres in the UK. The new EZ zones will be manufacturing-led, as per Chancellor George Osborne’s vision of “makers on the march”.

Occupants will get up to 100% discount on rates (capped at £275,000) spread over five years, and could receive tax breaks on capital. Super-fast broadband is promised. Planning restrictions are eased, and local authorities retain any increase in rates for 25 years to re-inject into development. The newly formed Local Enterprise Partnerships (LEPs) must propose sites. Trim believes the new EZs will help deliver regional growth and complement EZ offices. Hill says if they’re on prime sites geographically they’ll also benefit from good transport links. Trim reckons high-tech manufacturing stands to gain particularly from the capital allowances being aimed more at plant and machinery.

Hill says besides a strong tradition of manufacturing existing, they’ll benefit from the region’s work ethic, its people being industrious, flexible, and having many of the nation’s lowest attrition and absentee rates.

“A new EZ can also help prevent a loss of companies critical to the region by providing state-of-the-art facilities,” he says – as with Procter & Gamble which, free to relocate anywhere in the northern hemisphere, chose Cobalt.

Might the developers of Highbridge and Quorum bid for a manufacturing zone? Hill says Cobalt still benefits from significant cost savings of its present EZ status, which are passed to firms arriving.

Trim says: “We’ll be very interested to see where a new EZ is located.” He reckons the main difference in incentives between existing and new EZs may be the limiting of capital allowances to plant and machinery.

“Incentives to occupiers include rates exemption as previously, though low rents and long rent-free periods no longer seem likely. Additional funding for infrastructure and public transport to ensure a zone’s successmay need to come from Tax Increment Finance raised by the councils in the LEPs.” Meanwhile, £180m has been raised so far towards Quorum developing an ultimate 950,000 sq ft by early next year. At Cobalt, 10,000 jobs out of 18,000-plus eventually expected exist now.

There, the totalopen-ended. Yet EZ mechanism has critics. The Centre for Cities says earliest EZs cost £26,000 a job in today’s money.

The Work Foundation has reservations, as too a third think tank, the Centre for Local Economic Strategies. It feared the Government’s pressures on the public sector being extended here too. But the Chancellor has made clear local authorities will still benefit. In regional circles, Adam Serfontein, managing director of Hanro Group, argues that Tyneside’s existing EZs, being outside the main conurbation, starve the city centre of office development and lettings. His argument for restricting EZs to industry seems to have registered in Downing Street.

Multi-millionaire Duncan Bannatyne who is planning new headquarters for his hotel and leisure group in central Darlington and Sir Ian Wrigglesworth of Bluehall Properties, want more EZs in the region but agree they can distort the development market.

That’s recognised also by Stephen Catchpole, managing director of Tees Valley Unlimited which, as an LEP, must locate Teesside’s new EZ. However Fergus Trim maintains: “EZ’s main purpose has been to create jobs. I think we’ve succeeded there.” Even if £26,000 a job initially was correct, given the present jobs threat, perhaps this equivalent of one or two years’ salary per job is not outrageous judged against sums used to save bank jobs.

Of the six companies Trim and his on-the-spot team of three recently attracted to Quorum, all are private sector, as per Government preference.

Five have been significant inward investors behind many of the 3,500 jobs there so far, underlining Quorum’s claim of being speculatively the country’s most successful EZ park at present. Quorum by 2006 – two years after its start – had drawn the like of IBM, National Grid, serviced office provider MWB and HM Revenue and Customs. New funding mustered in 2008 has got eight more buildings (26,000 sq ft to 105,000 sq ft) under way.

In April 2009 Trim arrived from London to attract occupants. Q9 was almost complete, since when 252,406 sq ft of offices have been built and mostly occupied. By next April, Trim says, Quorum will be “done and dusted” – 16 units. The prime Q12 just completed (90,000 sq ft) has been one of the biggest speculative office builds outside central London recently.

Its three floors, full height atrium and a piazza and water feature dominate the park’s main avenue. A national headquarters is the quarry here. Meanwhile, a work-starved construction industry benefits. On Quorum alone, more than 1,000 workers have been on site since 2008. Employees at both parks enjoy a work-life balance at discount.

Trim says: “Our large investment in accompanying amenities and communities probably has as much to do with attracting tenants as any EZ status.

The South-East has some very large and successful business parks, but I know of none, even nationally, with facilities like Quorum.” A £180m investment to date, tree-lined Quorum includes shops and a restaurant, a nursery, barbecue area and facilities for tennis, football, boules and netball, workers getting free membership of the sports club, half-price bus travel and other discounts. The park’s 24 bus services an hour include a shuttle to the local Metro and bus interchange – also an express bus between Newcastle’s Haymarket and Blyth. Cobalt’s transport network includes 411 through bus journeys daily, including some to Northumberland Park Metro station. Highbridge has put hundreds of thousands in tax savings into subsidising transport.

Half of Cobalt’s workforce live within five miles.

All, regardless of address, can have Cobalt Community membership which, through two on-site co-ordinators, provides subsidised travel, access to more than 40 on-site social and sporting activities including football and netball, free access to pool bikes, and shopping and leisure discounts.

Trim explains: “Most businesses are about people. We offer a great commercial package and make an offering staff will appreciate, hence slogans like ‘the best move I ever made’ and ‘a better place to work’.” Trim pitches intensively in London.

Five lettings over 12 months were led and advised from outside the region, and he finds no strong Southern prejudice now against locating north of Potters Bar. “In tough times our advantages are attractive,” he says. “So our main competition is also in the North – Manchester, Liverpool, Leeds and Glasgow. We must align our key strengths and stress we have critical mass to compete with these other cities.” Tesco Bank, Quorum’s star attraction, was won against Leeds, Manchester and Liverpool. Other occupants include construction giant Balfour Beatty, AIM-listed Ebiquity, Home Group, Insure the Box, Aesica Pharmaceuticals, MWB, a serviced office provider for small businesses, and the European base of OSB. But Cobalt Park may be the one eventually in the Guinness Book of Records. Since 1998, when its first occupants were Fujitsu and LS Trillion, it has become the UK’s largest office park and may yet be Europe’s biggest.

To date 1.8m sq ft are developed, with 700,000 sq ft more to come. Eventually Cobalt will comprise 2.5m sq ft. Orange its biggest employer to date, has 2,100 staff in two facilities. Other private sector occupants include – besides Orange and Hewlett Packard – Procter & Gamble, Santander, G4S, EDS, Balfour Beatty, Newcastle Building Society, Just Learning, Village Hotel, Ramsey Health Care. Formica, long established at nearby North Shields and also Newton Aycliffe, has chosen Cobalt for a European headquarters.

Occupants from the public sector include North Tyneside Council, Northumbria Healthcare NHS Trust and Jobcentre Plus. Fujitsu’s premature withdrawal is well documented, less so the fate of LS Trillion. But as Hill points out: “Some companies that came either changed their names or have been taken over. AccuRead was acquired by G4S and GE Money was bought by Santander. What’s important is that the same people continue to work in the new organisations.” Cobalt is also the nation’s first office park with a Tesco Express. With this, and the larger retail stores and cinema at neighbouring Silverlink, it could with a church or two and apartment blocks, be more suburb than workplace, especially given its road network – open 24 hours. As we go to press, speculation is high that Tyne and Wear’s EZ will be at Wallsend for the budding offshore wind industry or beside Nissan at Sunderland, on land marked for commercial development. Teesside’s EZ might be turned to digital advantage