Doug Specht looks towards industrial strategy zones in the UK and their potential impacts
On paper, the UK government’s Industrial Strategy Zones sound sensible: designated areas offering tax breaks and planning freedoms to encourage investment, create jobs, and support economic regeneration. But beneath the surface, a more troubling picture emerges, one of inadequate oversight, questionable economic benefits, and profound concerns about transparency and accountability.
Rebranded by the Labour government in June 2025 from their previous incarnations as Freeports, Investment Zones, and Enterprise Zones, Industrial Strategy Zones (ISZs) now encompass an extraordinary 74-86 special economic areas across the UK. This represents a significant proportion of British territory operating under different regulatory and fiscal regimes, a development warranting far greater public scrutiny than it has received.
A post-Brexit experiment
The modern UK freeports programme emerged directly from Brexit. While government ministers claimed the EU prevented Britain from establishing such zones, this was misleading: 72 free zones operate across 20 EU member states, and the UK itself ran freeports until 2012 as an EU member. What Brexit actually delivered was freedom from EU state aid rules, enabling more aggressive tax incentives that would have been prohibited within the Single Market framework.
Enjoying this article? Check out our related reads…
Today’s ISZs comprise three categories. Freeports are designated areas around ports and airports offering enhanced capital allowances (100 per cent first-year write-offs for plant and machinery), business rates relief for up to five years, employer National Insurance contribution relief, and streamlined customs procedures. Investment Zones focus on innovation clusters around universities, each receiving up to £160 million over ten years. Enterprise Zones offer similar incentives across 48 English locations.
The financial commitment is staggering: overall public investment exceeds £11 billion, with the government projecting over £50 billion in private investment and more than 300,000 jobs. But will they deliver?
The evidence gap
Economic policies don’t exist in abstract space; their effectiveness depends on local conditions, infrastructure, and the mobility of capital and labour. The evidence for UK freeports creating genuine new economic activity is, at best, inconclusive.
By early 2024, freeports had created just 5,600 jobs, a mere 4 per cent of the government’s 214,000 target over twenty years. This mirrors the disappointing performance of Enterprise Zones established in 2011, which achieved only about one-quarter of the forecast jobs. The Institute for Fiscal Studies warns that such initiatives face two critical problems: deadweight (economic activity that would have occurred anyway) and displacement (simply moving existing businesses rather than creating net new activity).
The House of Commons Business and Trade Committee delivered a damning assessment in April 2024, finding that the government’s failure to publish impact assessments made it ‘impossible to accurately assess’ whether freeports provided value for money. The Committee concluded that ‘on their own they will be unable to deliver levelling-up’, undermining the core policy rationale.
The Teesworks scandal
If there’s a single case crystallising concerns about ISZ governance, it’s Teesworks, the flagship Teesside Freeport development. An independent review found no corruption but identified serious ‘issues of governance and transparency,’ concluding that ‘a number of decisions taken by the bodies involved do not meet the standards expected when managing public funds’.
This former steelworks site received £560 million in public funds, yet 90 per cent of shares were handed to private investors without a tender process. When MPs called for the National Audit Office to investigate, the government argued it was ‘not the NAO’s role to audit or examine individual local authorities’, revealing the accountability vacuum at these zones’ heart.
Deregulation of space
Globally, free zones have a troubling track record. Transparency International UK warned that freeports present a major money laundering risk due to the secrecy and security they offer and risk effectively establishing onshore havens in which criminals and the corrupt could anonymously hide their ill-gotten gains.
From a geographical perspective, ISZs represent selective deregulation of space, creating pockets of differential regulatory treatment within national territory. Each freeport has an ‘outer boundary’ up to 45 kilometres in diameter, with smaller ‘tax sites’ receiving fiscal benefits. This creates complex geographies that may reinforce rather than reduce regional inequalities.
Labour rights present another concern. The Trade Union Congress warned that freeports represent a race to the bottom on workers’ rights, noting that free zones globally are often associated with labour suppression. The Institute of Employment Rights highlights that administrative measures, including access issues, are deployed to undercut effective rights, in particular freedom of association, with trade union access a significant issue, given the likely stringent security measures.
The environment also faces less protection. Freeports benefit from extended permitted development rights and streamlined planning through Local Development Orders. While Environmental Impact Assessment requirements nominally remain, simplified frameworks create opportunities for ‘greenwashing’, particularly concerning as fossil fuel companies establish operations in zones marketed as supporting ‘green industries’.
Further to these environmental concerns, in February 2025, the government announced AI Growth Zones, offering streamlined planning for AI-enabled data centres requiring sites with at least 500MW of power capacity. Data centres require enormous amounts of electricity and water for cooling, resources under increasing pressure from climate change. Concentrating them in zones with reduced planning oversight could create new environmental pressures in areas least equipped to manage them.
Should we be worried?
A parliamentary petition calling for transparency and review of the free zones and ports’ impacts articulates widespread concerns about job displacement, value for taxpayers’ money, deregulation impacts, potential for land grabbing, profit splits between public and private sectors, greenwashing, and AI Growth Zones.
If we expect public investment to deliver genuine economic benefits, protect environmental standards, maintain democratic accountability, and provide value for money, then yes, we should be deeply concerned. The geographical extent of these zones represents a fundamental shift in how we organise economic space. The lack of robust evaluation, governance failures exemplified by Teesworks, disappointing job-creation figures, risks of money laundering and labour exploitation, and expansion into AI infrastructure warrant far greater scrutiny.
Most troubling is the evidence vacuum. The Commons Committee’s finding that the absence of impact assessments makes it ‘impossible to accurately assess’ value for money should be a democratic scandal. We’re conducting a massive spatial experiment with public funds without the data infrastructure to determine if it’s working.
Industrial Strategy Zones embody a placeless economic logic that assumes tax breaks and deregulation will universally attract investment, regardless of local context, existing infrastructure, or environmental conditions. The evidence suggests this assumption is profoundly flawed. Britain deserves regional development policies grounded in evidence, accountable to democratic institutions, protective of labour and environmental standards, and transparent about outcomes. Until ISZs meet these criteria, concern isn’t only warranted, it’s essential.
