About the Authors
Paper
Mitchell Palmer is an Economist at the Adam Smith Institute. He is the author of Foreboding Fiscals, a new fifty-year model of British fiscal policy, and a co-author of The Growth Agenda, the Institute’s flagship paper for 2026. He previously worked as a special advisor to the Deputy Prime Minister of New Zealand and in economic consulting. Mitchell holds a first-class degree in History and Economics from the University of Oxford.
James Hodgkinson is a Research Associate at the Adam Smith Institute. He is co-author of Affordable Abundance: Alternatives to Section 106 of the Town and Country Planning Act 1990 and Taming the Hydra: Ofcom and the British Broadcasting Market. He is one of Britain’s youngest Parish Councillors and will soon take up a place reading History and Politics at the University of Cambridge.
Foreword
Sir David Harrison KGCN, DUniv, MBA is recognised as one of the leading entrepreneurs in the North of England. In 1997, he founded Positive Solutions, a financial advice firm that became the largest independent financial adviser in the country. Sir David currently holds a significant shareholding in True Potential LLP, a Newcastle-based financial services organisation he established, noted for its rapid growth in the UK’s financial technology and fund management sectors. His diversified business portfolio encompasses investments in hotels and real estate both domestically and internationally. Locally, his companies employ over 1,000 individuals. Additionally, Sir David founded the Harrison Centres for Social Mobility in 2017, based across the North of England, online and overseas providing education and employability opportunities to people of all ages and backgrounds. Sir David is the founder of the Harrison Foundation, holds an Honorary Doctorate from the Open University, and in 2018, co-founded the national Social Mobility Pledge alongside former Secretary of State for Education, Rt Hon Justine Greening
Acknowledgements
The paper authors gratefully acknowledge assistance from a number of defence industry participants. All errors and omissions remain our own.
Foreword
The argument this paper makes is simple. By removing regulatory, tax, and cost barriers in the way, the North East of England could once again power Britain’s rearmament.
The Adam Smith Institute has undertaken a comprehensive and meticulous study, presenting a compelling case for why the government should seriously consider the proposed project. Their analysis sets out clear reasons and benefits for this approach.
As a businessperson, I wish to emphasise that the process being advocated is grounded in straightforward principles—perhaps even too straightforward for some tastes. Success often comes from replicating what has worked elsewhere. It is puzzling that the success of the Nissan Plant near Sunderland, which continues to generate quality employment for the UK, has not been replicated, either within the same region or across the country.
I am personally acquainted with the challenges of obtaining regulatory approvals and the burden of various taxes imposed on new businesses. The proposal under discussion is, in essence, a large-scale regional pilot. Should it succeed, it can be rolled out nationally; if it fails, nothing is truly lost—after all, if something does not currently exist, there are no resultant gains for the UK or its local authorities. In many respects, the UK stands to gain everything and risk nothing, as one cannot tax what does not exist.
In fact, this proposal solves three problems at once. First, it allows Britain to trial a new, more liberal approach to business. Second, it will create good jobs in the struggling North East of England. Third, it will make rearmament cheaper and easier.
For a business to get off the ground, it needs a fair chance. Accelerating the growth of any business requires support, but this does not have to involve distributing public funds. Instead, it means removing barriers such as planning permissions, regulations, taxes, and other costs—expenses that, fifteen years down the line, businesses may well be able to afford (whether they should is a political debate, which falls outside the scope of this discussion). Businesses do not need advice on staff training or product development for profit—they already possess such expertise. What they require is relief from excessive start-up costs, which would enable rapid expansion.
The North East region consistently ranks at the bottom of economic and social indices.1 Left-leaning parties often respond with training schemes and initiatives that, while employing many helpers, have not delivered results. The reasons for this are less important than the outcomes themselves. Conversely, right-leaning parties have often neglected the region, focusing public investment in London.2
From my experience, I know what businesses need, and I understand that regions require jobs—not government welfare payments, but genuine employment. Creating jobs will naturally resolve many systemic issues. There is no need for so-called “experts” or welfare schemes—jobs themselves are the solution.
Finally, the defence industry is currently being called upon to provide even more armaments. As a sector experiencing growth, it is somewhat insulated from competition—a rising tide lifts all boats.
This proposal is rooted in the realities of contemporary Britain. As a nation, we must maintain our strength, defend ourselves, and be a reliable ally to others. Choosing a defence-based company or group is a logical fit with the skills still present in the region, and with the government as a natural customer, there is strong potential for synergy.
Talent is spread evenly across our country; opportunities are not. This project offers a chance to redress that imbalance.
Sir David Harrison KGCN, DUniv, MBA Founder of True Potential LLP
Summary for Policymakers
The United Kingdom has a proud industrial heritage, but our remaining advanced manufacturing sector is under threat. High energy costs, burdensome planning rules, and punishing taxes all conspire to make Britain a less attractive place to build things. But wholesale, nationwide radical reform may be politically difficult. A trial, constrained to a particular region, will allow reform to prove itself to risk-averse policymakers and voters.
To do this, Britain will need a more effective model of place-based policy. In this paper, we argue that such policies have succeeded historically only under specific conditions: where there is a strong economic reason for firms to locate in the area, a major anchor tenant to create critical mass, and a policy package strong enough to overcome Britain’s unusually high barriers to industrial development.
We take Nissan Sunderland as our central model. Since arriving in 1986, the firm has created thousands of stable jobs and invested billions in the area, as have its suppliers. Nissan was not attracted by a generic subsidy scheme. Instead, it was a package offer from the Government, built around cheap land and quick delivery, in exchange for a credible long-term industrial commitment. It suggests that major industrial investment can succeed in Britain when the government removes the binding constraints rather than merely offering modest incentives.
By contrast, the UK’s broader experience with enterprise zones and freeports has been mixed. Many zones have simply displaced activity from elsewhere, while freeports offer limited benefits in a low-tariff economy. The most successful examples — including Canary Wharf, MediaCityUK, and Bristol Temple Quarter — have generally only succeeded once they have enjoyed strong anchor institutions and wider ecosystems, not tax relief alone.
On that basis, we propose a new model of enterprise zone: one targeted at a specific sector and anchor tenant, built on government-owned land, and supported by more radical planning and environmental reform than current policy allows. Tax concessions should focus on capital investment, especially industrial buildings, while planning approval should be streamlined through a single fast-track process capable of delivering projects at internationally competitive speed. Electricity price discounts should be offered where practical and efficient.
The North East of England is the natural location for a pilot. It combines high unemployment, low land prices, an industrial heritage, and substantial potential gains from regeneration. It is therefore the part of the country where a successful zone is most likely both to raise output and create jobs and to demonstrate the case for wider reform.
Defence manufacturing is the strongest candidate sector for the first pilot. Unlike many other industries, defence is relatively insulated from low-cost international competition, has obvious customers in the British military and its allies and partners, and fits the North East’s industrial history and existing capabilities.
To test the feasibility of this approach, we examine government and local-authority landholdings across the North East and identify five potential sites that are large, contiguous, publicly owned, and relatively unconstrained by environmental protections, flood risk, or electricity-capacity limits. These sites provide a plausible basis for an initial pilot programme.
Britain should stop treating enterprise zones as small, generic tax experiments and instead use them as focused vehicles for serious deregulation and industrial development. A Defence Enterprise Zone in the North East would be the best place to begin. If successful, it could provide a template both for further zones and wider national reform. It could also play an important role in national rearmament.
Introduction
Less than a mile north of the River Wear in the North East of England lies a miracle of modern manufacturing. Nissan’s Sunderland plant is an internationally competitive producer of mid-range automobiles, located in a supposedly services-dominated economy. Moreover, it began operations during the alleged height of Britain’s deindustrialisation under Margaret Thatcher.3 It is also a striking exception from the southward shift of England’s economic geography.
Despite a tumultuous few years for Nissan globally, its British operation still (directly) employs about 6,000 people and produces around 300,000 cars a year. Between 1986 and 2023, it produced 11 million cars – or one car every two minutes.4
This success is made even more impressive by comparison. At the same time as it approved Nissan’s new factory, Mrs Thatcher’s Cabinet agreed to give British Leyland, the state-owned automotive behemoth, almost £1 billion in aid, raising the eyebrows of the European Commission.5 The torrid subsequent history of British Leyland is well-known. Today, despite starting with a dramatic lead, the combined output of both surviving Leyland descendants is fewer than 400,000 cars across four factories.6
Three questions naturally arise. Why did Nissan Sunderland succeed, when so many other British industrial efforts have failed? And, perhaps more importantly, can we replicate this success and, if so, how?
A recent paper from the Adam Smith Institute – The Growth Agenda – lays out some of the economy-wide barriers to modern British industrial success. In particular, we quantified the large effects that restrictive planning laws, high energy costs, an increasingly inflexible labour market, poorly-designed taxes, and a strangled banking sector all have on economic output.7
In this paper though, we zoom in. We investigate the possibility of a new Defence Enterprise Zone in the North-East of England, modelled on the success of Nissan Sunderland. The aim is not simply to attract capital into one part of the country, but also to create large numbers of durable, productive private-sector jobs in a region where employment has remained persistently weak. It will also support Britain’s sovereign capability to produce the equipment she needs to defend herself.
An Enterprise Zone is an area of the country that is exempted from certain burdensome regulations and taxes, in an effort to encourage development and growth. It can also be tied with more direct incentives, such as generous terms for the sale of land. A Defence Enterprise Zone is naturally such a zone focused on defence-related industries. Nissan’s factory itself was not an Enterprise Zone, but it received similar treatment and was surrounded by a number of connected EZs in Tyne and Wear.
Enterprise Zones are attractive for three reasons. First, they allow the government to cut taxes and red tape, even if the political and fiscal situation does not permit widespread liberalisation. Second, they allow the government to concentrate those reforms where additional employment matters most: in places with weak labour markets, low private investment, and a strong need for economic renewal. Finally – and perhaps most importantly – the success of one Enterprise Zone can encourage broader liberalisation across the economy.
But not all Enterprise Zones – and other types of similar place-based policy – succeed. They necessarily involve the government ‘picking winners’ (or in many cases, losers) and can simply reallocate economic activity from one part of the country to another. The relevant test is therefore not whether a zone contains more jobs on paper, but whether it creates genuinely additional employment, raises local labour-market participation, and supports a wider ecosystem of suppliers and related firms. In this paper, we identify the key features that lead to the success of place-based policies in Sunderland, London’s Docklands, and Salford. In particular, we argue that the presence of an anchor tenant(s) that has a good economic reason to be in the location, as well as the possibility of spinning off an entire ecosystem of suppliers, is indispensable.
The North East is a natural place for Britain’s next Enterprise Zone. It has the lowest employment rate in the United Kingdom, meaning that growth and redevelopment will have the largest marginal impact there.8 Land prices are also the lowest in England.9 Moreover, the region has a history of heavy industry. Finally, it has political attractions. Boris Johnson’s success in the 2019 election shows that winning the North East is no longer necessarily a guarantee for Labour, so all parties – including Labour, Reform, and the Conservatives – could profit electorally by investing heavily there.
A major defence manufacturer is perhaps the best candidate as an anchor tenant for the first Enterprise Zone in the North East. Almost uniquely for an industrial sector, defence is not subject to (economic) competition from low-wage, low-energy-price countries in East Asia. The North East also has a strong heritage in defence and a number of Ministry of Defence sites locally. Finally, as a major customer for any new defence site is likely to be His Majesty’s Government, many of the tax benefits and concessions are likely to flow back indirectly to the Treasury, making it the most affordable industry to begin with.
We have investigated the landholdings of both central government and the local authorities in the North East to find suitable sites for such a facility. We have identified five possible sites, which are large contiguous sites, in government ownership, not subject to onerous environmental protections, and in areas with sufficient electricity lines capacity. Both these sites and their surrounds would need to be subject to Enterprise Zone rules in order to generate the largest possible gains.
These pilot sites – and the defence sector – are the obvious place to start for a new Enterprise Zone programme. However, in the future, a sufficiently ambitious government could extend the policy to other sites in the North East and the rest of the United Kingdom. Moreover – and perhaps most importantly – the policies that allow these enterprise zones to succeed could be adopted across the entire economy.
The Case for Place-Based Policies
In an ideal world, governments would implement the ideal tax and planning system across the entire United Kingdom. A recent ASI paper, The Growth Agenda, reveals the huge economic benefits that could come from such a comprehensive approach.10 Such radical, wholesale reforms have happened before. For instance, in New Zealand, two radical finance ministers – Sir Roger Douglas and Ruth Richardson – from opposing parties (and their colleagues) transformed the most controlled economy outside the Warsaw Pact to third in the world for economic freedom in under 10 years.11 Similarly, the Baltic states transformed from Soviet Socialist Republics into paragons of free market capitalism during the 1990s. Nonetheless, these cases are notable for their rarity. They were often traumatic and typically occurred in the context of acute crises – whether economic or political.
But the reform agenda need not be doomed. More cautious politicians – subject to substantial economic or political constraints – can still get real change done. One obvious way to do so is to constrain the reforms geographically.12 This reduces the political and economic costs of failure. It also allows policymakers to target the changes to those areas where the marginal gains are expected to be largest. For instance, the areas could be chosen based on their suitability for the chosen task or because they simply need the resulting growth most. Once the ideas are proven, they can then be gradually expanded across the country.
The best example of this concept in practice is the special economic zones of the People’s Republic of China. These were a low-risk way for the new paramount leader, Deng Xiaoping, to pilot his ‘reform and opening up’ agenda. The Communist Party designated four coastal cities to lead China’s liberalisation and, especially, to attract foreign direct investment. They were released from foreign exchange controls and permitted to liberalise their land and land markets, for instance. They were a stunning success. The top performer – Shenzhen – was transformed from a tiny town of 30,000 into a global metropolis, with Western-style average incomes and more than 17 million residents. Unsurprisingly, many other regions in China quickly sought – and were granted – the same freedoms as the SEZs.13
In Britain, enterprise zones, the specific support provided to the Nissan factory at Sunderland, and freeports were meant to play a similar (though much less dramatic) role during the Thatcher premiership. In the 2010s, David Cameron’s administration attempted to revive the Enterprise Zone policy. Neither the Cameron nor the Thatcher version of the Enterprise Zone concept were unalloyed success stories. But there are certainly lessons to draw. Freeports were more successful but had a limited scope. They were subsequently revived – again in limited form – by Rishi Sunak as Chancellor. We do not yet know how successful this second round will be. Nissan Sunderland has, of course, been a substantial success.
Enterprise Zones
The 1970s were not a successful decade for the British economy. High energy prices and excessive wage settlements made Britain a very unattractive place to invest. Indeed, by 1975, the average rate of return on private capital across the economy had dropped to 10%, while inflation hit 24% and the Bank of England’s base rate was around 11%. Industry, in particular, bore the brunt of the malaise. Manufacturing sustained 1 million job losses between 1970 and 1979. By 1975, the unemployment rate in the industrial North was double that of the services-led South at 4.2%.14
Such an unemployment rate may look quite mild by today’s standards, but in the inflexible labour market of the 1970s, temporary unemployment could become permanent quite quickly. Moreover, this unemployment was concentrated in a small number of deindustrialising urban areas.
These areas began to visibly suffer. In the East End of Glasgow, 20% of land was disused by 1978. In Liverpool, 500 hectares was disused across the city as a whole. The vacant land in Liverpool was said to ‘attract vandalism and contribute to an atmosphere of obsolescence, dilapidation and decay’.15 Similar sights could be found across Britain.
Naturally (and rightly) suspicious of government-led investment, Enterprise Zones were the Thatcher ministry’s chosen solution. The concept was first legislated for in the Local Government, Planning and Land Act 1980.16 Within such zones, companies would benefit from 100 per cent tax allowances for capital expenditure on buildings, exemption from Business Rates, and simplified planning procedures. Each enterprise zone would enjoy these tax breaks and discounts for a decade, to begin with.17
Between 1981 and 1996, thirty-eight Enterprise Zones were established across the UK. 18 The first phase of the enterprise zone programme ended in 2006, with the Tyne Wearside Enterprise Zone being the last to close.19
The 2011 budget and the accompanying plan for growth contained details of plans for 24 enterprise zones. Additional zones were created in 2015 and 2016, creating a total of 48 enterprise zones, as of 2024. The government pledged that the new enterprise zones would create approximately 54,000 jobs between 2012 and 2015.
The new zones were situated across England. Unlike the original enterprise zones which were intended for general urban regeneration and were thus sector neutral, the new zones were designed around key sectors—such as North Kent’s ‘healthcare and medical technologies (teaching and practice)’ sector, and Blackpool’s ‘wind, nuclear and waste to energy’ sector.
The record of enterprise zones in practice has been decidedly mixed. The first round of enterprise zones saw the total number of jobs in the zones increase by between 96,000 and 125,000, many of which were in London. However, many of these jobs were displaced from elsewhere.20 Of the total jobs created, only an estimated 58,000 were new jobs.21 These newly created enterprise-zone jobs were also expensive to the Crown, with each job costing approximately £23,000 in forgone tax revenue and other incentives to create.22
The second wave of enterprise zones saw similar problems. Employment growth in Enterprise Zones areas between 2012 and 2017 was just one-third of the original Treasury predictions, and most of the jobs that were created were in low-skilled services sectors.23
However, these middling aggregated results belie some transformative results in certain areas. In particular, it is worth highlighting the (eventual) successes of Canary Wharf, MediaCityUK, and Bristol Temple Quarter.
London Docklands (1982)
Throughout the second half of the twentieth century, commercial shipping in London’s docklands experienced profound decline. The docklands finally closed in 1981, with the last commercial vessel leaving port in December.24 In the same year, the Thatcher government created the London Docklands Development Corporation (LDDC) and assigned the docklands EZ status in 1982.25 The area suffered from dereliction, with poor rail, road and transport links.26 For a 10-year period, the following three financial benefits were enshrined in law: freedom from local business rates for a ten-year period until 1992, no development land tax, and 100% capital allowance for new commercial and industrial buildings, which could be set against corporation and income taxes.27 The planning process was also modified, as the LDDC took the role of local authorities in the planning process, reducing friction and accelerating decision making.28
By 1998, the London Docklands enterprise zone had attracted around £8.7 billion of private investment and created about 80,000 jobs, at a cost of £3.9 billion to the taxpayer—a ratio of private to public investment of 2.23:1.29 During the development process, a number of key firms moved to the area, including Morgan Stanley and the Telegraph newspaper.30
Post-1992 (when the initial EZ designation ended), economic development continued. Today, the Docklands remain central to London’s services sector, with companies including JP Morgan and Thomson Reuters, who headquarter their UK operations within Canary Wharf.31 The area now provides c. 120,000 jobs. Had London Docklands enterprise zone not been created, economic activity within the wider Tower Hamlets borough would have been 69% lower, and employment 59% lower than it is today, according to an impact report commissioned by the Canary Wharf Group.32
Salford and MediaCityUK (1981)
It took a period of nearly 25 years for the Salford EZ to yield tangible success in the adjoining MediaCity. The initial 1981 Salford Docks EZ provided planning and tax based concessions to encourage companies to establish within the newly created EZ.33 Initially, the response to the EZ was mixed, and few developers were enticed to invest in the generalised EZ—although it did unlock and de-risk the prospect of development within the docklands.34 Development of the Salford Quays continued into the early 2000s, with the completion of the Lowry Theatre in 2000 and the hosting of the Commonwealth Games in 2002.35
In later years, Salford Quays, a site renovated and improved during the 1980s as part of the Salford Enterprise Zone, became used as the basis for MediaCityUK—one of the UK’s most important media-based sites. Completed in 2011, the BBC originally acted as the major anchor tenant for the site—as part of their strategy to move broadcast production away from London.36 Today, the site provides 8,000 jobs across large broadcasters including the BBC and ITV, as well as a group of approximately 250 small and medium enterprises.37
Bristol Temple Quarter (2012)
The Bristol Temple Quarter EZ was created through the most recent round of EZ designation, and was incorporated in 2012.38 Across the 70 hectare site, a number of financial incentives were offered to encourage business relocation.39 For a period of five years, eligible businesses could receive business rates discounts of up to £275,000, and companies making significant investments in machinery within designated areas could claim 100% enhanced capital allowances. Additionally, the planning process was simplified through the introduction of local development orders.40 The wider Bristol Temple Quarter and Bath North-East Somerset valley EZ created the most jobs of any of the EZs announced in 2011 (5,000).41 Anchor tenants rapidly began to move into the Temple Quarter EZ, including PwC, Nat West Accelerator and Ultraleap.42
What sets the Temple Quarter EZ apart from other sites is the extent to which the original EZ designation has been a catalyst for widespread urban regeneration. In 2017, the EZ was expanded by a further 30 hectares, and plans are now underway to create mixed use communities with 10,000 homes and 22,000 jobs.43 One of the largest developments—the University of Bristol’s Temple Quarter Enterprise Campus—is set to open in September 2026.44
Through collaboration between local, regional and national authorities, as well as National Rail, transport infrastructure has also been improved. The first phase of the renovation of Bristol’s Temple Meads railway station (at a cost of £95 million) and due to complete in Autumn 2026 will ensure that the area’s transport network is resilient to the pressures that increased footfall in the regenerated area will cause.45
Freeports
Freeports are designated areas in which goods can be imported, processed, and re-exported without paying customs tariffs or duties. Tariffs are only paid if the goods subsequently leave the freeport for the wider domestic economy. In effect, the freeport exists as a small area outside of the customs territory of the wider country, often with investor-friendly tax and regulatory policies added to sweeten the bargain.46
The First Generation: UK Freeports, 1984–2012
In February 1984, the Thatcher government designated six freeport sites across the United Kingdom: Belfast (Aldergrove Airport), Birmingham, Cardiff, Liverpool, Prestwick Airport, and Southampton.47 The sites were selected with an eye to helping areas of high unemployment, rather than for their suitability as locations for international trade.48
The initial results were decidedly unpromising. By the time the freeports concept had emerged from the bureaucratic process, the designated sites offered few attractions to draw potential investors. Instead of a completely new tax and customs regime that would cut out paperwork and make UK freeports compete with those elsewhere in the world, a few existing customs reliefs were simply concentrated in one spot, taxes remained unchanged, and paperwork stayed overpowering.49 European Community regulations made even the central operating principle of freeports – treating the zone as if it were foreign territory for customs purposes – impracticable in the UK.50
Of the six sites, only Liverpool enjoyed much initial success. Liverpool’s freeport was the first to open, on 29 November 1984, and benefited from its size (c. 600 acres), its privately managed operation through the Mersey Docks and Harbour Company, and the enthusiasm of the local community.51 In its first twelve months, Liverpool handled goods to the value of £24 million, and in the first six months of 1986 the freeport handled 75,000 tonnes of goods valued at £36 million.52 Southampton, which opened on 6 April 1984, also performed reasonably, handling goods valued at £12 million in its first twelve weeks of operation, though it was beset by an early industrial dispute with dockworkers that delayed operations by over a year.53
The remaining sites fared poorly. Belfast, eighteen months after designation, had not yet opened. Cardiff had no physical progress, with only two employees working on the freeport project. Birmingham was not yet operational at the time of the ASI’s 1986 review, although its £6 million investment and 200 prospective firms suggested future promise. Prestwick, hampered by doubts over the airport’s future, had only two firms and 30 employees in its zone.54
The fundamental problem was that the UK’s freeports were far more conservative in operation than those elsewhere in the world. Taxation was not lower within the freeports. VAT continued to apply on all transactions, making UK freeports unsuitable for commodity trading. Regulations had not been reduced – freeports did not even enjoy the 100% capital write-off allowance available in enterprise zones. And the management of each freeport, while nominally independent, remained heavily constrained by the planning system, dock labour schemes, and the discretion of local Customs & Excise officers.55
The statutory instruments underlying the remaining five freeports (Liverpool, Southampton, Port of Tilbury, Port of Sheerness, and Prestwick Airport) expired in 2012.56
The Second Generation: UK Freeports from 2021
Freeports featured prominently in post-Brexit economic policy. Boris Johnson referred to freeports in his first speech as Prime Minister in July 2019, and the 2019 Conservative Party Manifesto included a commitment to create ‘up to ten’ freeports around the UK.57 Advocates argued that EU state aid rules had previously limited freeports to little more than storage and warehouse facilities with simpler customs formalities, and that leaving the EU opened up new possibilities.58
In February 2020, the Government published its Freeports consultation, and the March 2021 Budget announced eight freeport locations in England: East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth & South Devon, Solent, Teesside, and Thames.59 Two ‘green freeports’ were subsequently announced in Scotland (Inverness & Cromarty Firth, and the Firth of Forth) in January 2023, and a Celtic Freeport was designated in Wales (Neath Port Talbot and Pembrokeshire).60
The new freeports offer a considerably broader package of incentives than their 1984 predecessors:
- Customs: simplified customs documentation and delayed tariff payments at designated customs sites.
- Tax: Stamp Duty Land Tax relief, Enhanced Structures and Buildings Allowance, Enhanced Capital Allowances for plant and machinery, employer National Insurance contributions relief for new employees, and business rates relief and retention.
- Planning: changes to permitted development rights for ports.
- Infrastructure: each freeport receives up to £25 million in seed capital funding, plus significant sums in locally-retained business rates.
- Innovation: support for research, development, and innovation.61
Each freeport contains up to three designated ‘tax sites’ plus a broader ‘outer boundary’ within a 45km diameter intended to benefit surrounding communities. Delivery is led by a local partnership of councils, businesses, and other stakeholders forming a ‘Freeport governing body’.62
In October 2021, the Office for Budget Responsibility estimated freeports would cost around £50 million a year from 2022/23, with the largest costs arising from employer national insurance contributions and business rates incentives.63
The Problem with Freeports in a UK Context
A persistent criticism of freeports – across all generations of the policy – is that their customs benefits are of limited value in the UK. The principal benefit of freeports is avoiding burdensome taxes and tariffs on imported goods used as inputs to a domestic production process. But the UK is already a relatively low-tariff economy. The post-Brexit UK Global Tariff has an average tariff on imported inputs of 2.8%, or 1.6% when weighted by trade. Some 59% of imported intermediate goods face no tariff at all, and another 20% face tariffs of under 5%.64
Moreover, the UK already has policy levers for reducing the distortions created by these taxes. Inward Processing Relief allows firms to reduce and delay payments on goods brought into the UK, paying tariffs only when the goods are released into free circulation. Bonded warehouses allow goods to be brought in without payment of duty or VAT until released into free circulation.65 As the Financial Exchequer Secretary noted in 2018, ‘many of the customs-related benefits of free ports are already available through existing customs facilitations, for example inward processing relief’.66
Those goods subject to high tariffs are not in areas associated with high growth potential; dog and cat food products, wheat, undenatured ethyl alcohol, and vegetable oils are among those singled out, accounting for around 0.6% of total UK intermediate imports.67 Trade experts at the University of Sussex concluded that ‘introducing Freeports in the UK is unlikely to generate any significant benefits to businesses in terms of duty savings’.68
The risk of displacement – moving economic activity from one place to another rather than increasing growth overall – is also substantial. The OBR assumed, on the basis of historical and international evidence, that the main effect of freeports ‘will be to alter the location rather than the volume of economic activity’. It further noted that if freeports did generate additional economic activity, this would likely be small relative to the economy as a whole and ‘would probably be difficult to discern even in retrospect’.69
Nissan Sunderland
Not all successful place-based policies fit neatly into a single programme. The story of Nissan’s Sunderland plant illustrates a different model: a sui generis package of government support, assembled on a bespoke basis to secure a single transformative anchor investment for a deindustrialising region. Unlike enterprise zones or freeports, there was no broader legislative framework or nationwide programme. The intervention was targeted, ad hoc, and – in the long run – remarkably effective.
Background
In 1981, the British government approved the construction of a brand-new Nissan car plant somewhere in the United Kingdom. At the same time, the Cabinet agreed to give British Leyland, the state-owned automotive behemoth, almost £1 billion in aid, raising the eyebrows of the European Commission.70 The long-term payoffs of these two decisions could not look more different. Starting from zero in 1986, Nissan produced 282,000 cars in Sunderland alone in 2024. Meanwhile, the combined output of both surviving Leyland descendants was 367,852 across four factories.71 Especially after Jaguar Land Rover’s recent tumult, Nissan is the United Kingdom’s largest individual car manufacturer by some margin.
Why Nissan Came to Britain
Since the late 1970s, Japanese automakers had been ‘voluntarily’ restricting their exports to Europe, including the United Kingdom, under pressure from European governments seeking to protect their domestic industries.72 The threat to European incumbents was real: Japanese carmakers were dramatically more productive than their European counterparts. As Margaret Thatcher was told on her 1977 visit to Japan, the average Nissan autoworker produced 41 cars a year, compared to just 11 in Europe.73
In the face of this protectionism, only local production in Europe would allow Japanese manufacturers to serve the market on reasonable terms. Several such attempts were made in cooperation with local firms – Honda, for instance, struck a deal with British Leyland to cooperate on local production in the 1970s.74 But in 1981, Nissan boldly proposed to open and operate a factory in the UK without a European partner. This was met with strong approval from the Government and utter dismay from the Opposition, the incumbent manufacturers, and their unions.75 In particular, Mrs Thatcher’s government saw Nissan as a promising ‘test balloon’ for a wider labour market reform – as it turned out to be.
The Government’s Role
The government’s support for the Sunderland project did not take the form of an enterprise zone or any other standardised programme. Instead, a bespoke package of incentives was assembled to attract and de-risk the investment. The Washington Development Corporation played a central role, successfully competing against a range of local authorities to secure Nissan’s attention and directing it to the former site of RAF Usworth – a massive, contiguous plot of land with no planning constraints or existing residents. Land was offered at agricultural prices, and very large grants (in lieu of tax allowances) were provided, amounting to some £125 million in total subsidy by 1988.76
The speed of execution was equally remarkable. The first cars rolled off the line at Nissan’s Sunderland factory in 1986, just two years after groundbreaking in 1984 and five years after approval-in-principle was granted in 1981.77 Eighteen months of that delay were due to Nissan’s own postponement of the project, making the actual elapsed time between government approval and factory operation only three and a half years.78 This pace is almost unimaginable today.
Lessons
Any new place-based policy should take explicit lessons from the mixed history of UK place-based policies so far.
Firstly, anchor tenants are critical. Successful zones (London Docklands, Salford Quays, Bristol Temple Quarter, Nissan Sunderland) relied on a large, transformative ‘anchor tenant’ or cluster. This creates critical mass, de-risks the location for suppliers, and signals long-term government commitment. Without a compelling reason (e.g., proximity to ports, specific infrastructure) for a major employer to locate there, EZs risk becoming ‘paper zones’ that merely displace economic activity.
Secondly, land availability is a necessary condition. Access to large, contiguous plots of land at a reasonable cost is essential. Government’s ability to offer land at favourable prices (Nissan Sunderland) or assemble vast tracts of derelict land (London Docklands) significantly de-risks investment.
Third, swift and comprehensive deregulation will be required. Protracted planning and restrictive regulations are fatal. Nissan Sunderland’s success was partly due to the speed of execution enabled by swift planning decisions on a large, unencumbered plot. A successful modern model requires fundamental changes to planning and environmental regimes to match the pace of international competitors.
Finally, tax concessions must be meaningful. While tax benefits rarely drive relocation alone, they are a critical complementary incentive. The most successful features include 100% capital allowances for buildings and machinery, and relief from Business Rates. For Freeports, the limited value of customs reliefs in a low-tariff UK economy suggests that tax and regulatory concessions are the more important levers.
A New Modern Model
Based on the lessons learnt from Britain’s historical experience – and a number of other papers on the topic – we propose a new modern model for Enterprise Zones. It has much in common with the model proposed by Sam Ashworth-Hayes, in a previous Adam Smith Institute paper, for ‘full-fat’ freeports, but with the specific industry/tenant-targeting of Canary Wharf and Nissan Sunderland.79 It is less radical than the fully autonomous cities proposed by Vera Kichanova for the Institute of Economic Affairs in 2025, but it represents a step towards them.80
Anchor Tenants
As noted above, one of the distinguishing features of successful place-based policy is that it is built around a specific target tenant or sector. This may sound uncomfortably like picking winners, but it is a crucial corollary of geographic limitation. If there is no natural sector or large tenant to anchor a new zone, it may very well end up simply being a tax haven, diverting activity from elsewhere in the economy, instead of generating new activity. This could end up being harmful for the economy overall, by diverting activity from its most economically efficient location to its most tax-efficient. If, however, a location features a critical mass of new investment, it is likely to spark a variety of downstream investment by suppliers and purchasers of the new industry that would not have otherwise happened. The easiest way to guarantee this is by making a deal with a single large anchor tenant. As such, the next enterprise zone should have a specific anchor tenant – ideally a large multinational firm – identified before it is established.
Planning and Environmental Rules
Britain’s restrictive and discretionary planning system is one of the most substantial constraints on large-scale industrial development. Major projects are routinely subject to judicial reviews, complex environmental hurdles, and discretionary local decision-making, which collectively make the UK an unattractive location for industrial developers seeking to build large-footprint facilities quickly and efficiently. For a new Enterprise Zone to succeed, it must fundamentally circumvent or reform these burdensome rules.
The original Enterprise Zones sometimes achieved this through their own planning authority (as with the London Docklands Development Corporation), but modern Enterprise Zones (since 2012) have typically relied on Local Development Orders (LDOs). LDOs are a tool for local authorities to grant planning permission for specific types of development in a designated area, effectively streamlining the planning process and removing the need for developers to apply for individual permissions.
However, LDOs are constrained in scope. For instance, the Tees Valley LDO still required planning permission for any manufacturing facility larger than 4,000m2, required all buildings to meet the BREAM ‘very good’ energy efficiency standard, and prohibited changes of use between permitted uses.81 Crucially, they do not circumvent statutory environmental protections, which remain a major source of delay and legal challenge. The new model must go further.
We propose a model similar to New Zealand’s Fast-track Approvals Act, where a single one-stop shop would approve any development in the new Enterprise Zone. Under the FTAA, an independent hearing panel can issue planning, environmental, heritage, minerals, and wildlife approvals on a single application.82 Such approvals can only be appealed on questions of law and only then by the applicant, a relevant local authority, the Attorney-General, or an invited submitter and only to one court by right, with further appeal only by leave from the Supreme Court.83
To adapt this model to the UK, we propose that each zone should have an Enterprise Zone Authority vested with these fast-track powers. These, just like the Urban Development Corporation that rebuilt the London Docklands, would be separate to the underlying local authority and have a dual role as the landowner and planning authority. This would align their incentives appropriately in a pro-development direction. The Authority should have a chairman and members appointed by ministers and a nominee from each of the local authorities affected. The ministerial nominees should have a voting majority.
Businesses should be able to make a one-stop application to the Authority for any new project in the Zone. This application could be combined with the sale-and-purchase and/or lease of the relevant land. An application granted by the Authority should be considered equivalent to permission under the Town and Country Planning Act, heritage controls, the Habitats Directive (as applied in Britain), and other environmental rules. The Authority would not be required to follow the consultation or decision-making requirements in the overridden legislation. Instead, they would be required to ‘maximise the economic potential of the zone, as far as is consistent with preventing serious, irreversible environmental degradation or unreasonable and uncompensated effects on third parties’. A small list of required consultees would include the nearby local authorities and any directly affected neighbours.
Decisions by Enterprise Zone Authorities should be appealable on the merits only to the Business Secretary himself. Uniquely, the elected Ministry has the democratic mandate to make trade-offs between (say) environmental objectives and economic progress. Appeals on questions of law should only be available to one layer of court by default – and restricted to mandatory consultees and the applicant themselves.
Tax Concessions
Tax concessions that make capital investment more attractive are a crucial component of any enterprise zone. However, the full expensing for industrial machinery that used to be a key attraction for enterprise zones has been rendered ineffective by its welcome application to the entire country.
But there are still meaningful tax concessions that could be made. In particular, Britain has very high taxes on industrial developments, such as new factory buildings.84 Firms in EZs should be able to either write the entirety of their building costs off their taxes in the year they are incurred or to do so gradually, with an inflation allowance. Similarly, business rates should be permanently zero-rated, rather than time limited. However, this relief should only apply to the value of improvements. The value of land inside the EZ should still be taxed, as this will simply be absorbed in lower initial valuations. In order to encourage employment inside the zones, reliefs on employer-side National Insurance Contributions could also be considered.
Electricity Pricing Reform
In the Growth Agenda, we identified that lowering energy costs would substantially improve Britain’s overall economic output.85 Naturally, an enterprise zone policy cannot address some of the core macro-drivers of Britain’s high energy prices – e.g., overregulation of the nuclear sector, the strangling of North Sea output, and the over-subsidisation of unreliable wind – but it can address some contributing factors. In particular, Great Britain’s old-fashioned electricity market has the same price for electricity no matter where in the island it is delivered. The result is that consumers (including industrial users) in the energy-rich, demand-poor North of England and Scotland are cross-subsidising users in the energy-poor, demand-rich South. The Government has announced a limited deviation from uniform national pricing for AI data-centres in Scotland and the North.86 This is relatively fiscally neutral, because the electricity discount is provided instead of constraint payments to wind farms, whose power would otherwise be wasted. We propose a similar discount be extended to electricity users in enterprise zones that are located in electricity-surplus areas (i.e., Scotland, the North East, and Cumbria).
Land
Economic theory predicts that much of the substantial tax and regulatory advantages of an EZ will accrue to the initial landowner in the form of higher rents and/or land valuation. This can erode the intended effect of the tax relief and create unearned windfall gains for landowners. As such, any new Enterprise Zone should be established on government land, including that owned by local authorities. The government could either acquire land before designating it or establish the zone on already-owned land. When the Zone is established, the Enterprise Zone Authority should take ownership of the required land. Initially, lease or sale receipts should be reinvested in enabling works – e.g., land remediation or infrastructure – required to make the Zone viable. If government funding for these works is necessary in advance of sales, it should be repaid using the same receipts. Any final profits should be distributed to the Treasury and local authorities in proportion to initial land and money contribution.
There are, naturally, constraints on what land can be used for an enterprise zone. Any candidate site must be of sufficient scale to accommodate large-footprint industrial facilities, internal infrastructure, and future expansion. It should have a viable path to electricity supply, since areas where the local grid is already at capacity would face prohibitive reinforcement costs and delays before any major consumer could connect. It should not fall within the highest-tier landscape designations — National Parks and National Landscapes (legally still, Areas of Outstanding Natural Beauty or AONBs) — where major industrial development is practically and politically impermissible. Ideally, it will be near a large labour market, to provide the necessary workforce, as well as strategic transport links to get goods to market and supplies to site.
We apply these constraints in our site selection process below. The government should, in consultation with local authorities and commercial experts, apply a similar process for future sites.
The Pilot: Defence Enterprise Zone in the North East
Enterprise zones are an obvious way to ‘test out’ important reforms that are too politically challenging or fiscally expensive to apply nationwide initially. However, given they are necessarily constrained to a small number of locations, we need to choose where our first enterprise zone should be and, just as importantly, what it should focus on. This gives us a chance to prioritise certain other national objectives, such as creating good jobs in deprived parts of the country and reindustrialising for defence purposes.
The Case for the North East
The North East is a natural place for Britain’s next Enterprise Zone, because it is the place where the economic gains are likely to be greatest. The region has the lowest employment rate in the United Kingdom and structurally so, with the trend present in almost every year since the 2008 financial crisis.87 Despite rising employment rates across the rest of England, the North East has been consistently left behind.88 This makes it a logical location for early implementation of placed based policy, as the region’s depressed economic baseline will mean that the rate of return on deregulation and investment will likely be higher.
Land prices are also the lowest in England.89 This is particularly important as previous examples of successful projects (such as Nissan Sunderland) were made possible because of the relatively low price of land (amongst other factors) on which factories and manufacturing facilities were constructed.90 Additionally, house prices in the North East are the lowest of any English region – 45% lower on average than the English average.91 This would incentivise specialised workers who may be needed to establish and run the industries within the new Enterprise Zone to move to these areas (although after the successful establishment of the zones it would be natural for property prices in these areas to increase accordingly).92 Rising property prices themselves could be seen as a measure of the zone’s success, and would represent a financial dividend to existing residents.
Moreover, the region has a history of heavy industry and manufacturing. The steel industry had a major presence in the region until the closure of the Consett Steelworks in 1980.93 The North East’s coal industry continued for longer, with the final deep pit mine in the region closing down in 2005, while open cast mining continued until 2020.94 The North East’s shipbuilding industry declined more gradually, with only one commercial shipyard still operational by the start of the 21st Century. This closed in 2006. That history matters not simply for symbolic reasons, but because it leaves behind assets that can still support employment growth: positive public attitudes towards industry, an existing technical workforce, and industrial supply chains on which a new anchor tenant could build. The North East’s current manufacturing base of 110,000 workers means that a new enterprise zone would not be attempting to create an industrial labour market from scratch. It would be reinforcing and expanding one that already exists.
Furthermore, the region’s physical geography presents distinct advantages. Proximity to ports provides natural routes for both the importing of materials and the export of products. In 2020 alone, 19 million tonnes of goods were exported from the region’s ports, which include the Ports of Tyne, Blyth and Sunderland. In addition, the region’s relatively shallow coastal waters and North Sea location have made it ideal for siting wind power generation plants, including at Dogger Bank.95 As a result of this and the relative proximity of even more wind in Scotland, electricity transmissions and distribution constraints are less binding than in the South.96 Under the present system of uniform national pricing, these advantages do not typically correspond to lower costs in the North East. But by deviating from this arrangement, we would allow the North East to profit from its fortuitous location.
Finally, it has political attractions. Boris Johnson’s success in the 2019 election shows that winning the North East is no longer necessarily a guarantee for Labour, so all parties – including Labour, Reform, and the Conservatives – could profit electorally by investing heavily there.
The Case for Defence
A major defence manufacturer is perhaps the best candidate as an anchor tenant for a new Enterprise Zone in the North East.
Firstly, it would contribute to the important national strategic objective of rearming and rebuilding sovereign capability. This would also mean that, almost uniquely for an industrial sector, such a zone is not subject to (economic) competition from low-wage, low-energy-price countries in East Asia.
The North East also has a strong heritage in defence and a number of Ministry of Defence sites locally. The North East was a global centre of defence production for over a century, anchored by its shipbuilding industry along the Tyne, Wear, and Tees. In the 19th century, the region produced roughly two-fifths of the world’s ships, with major centres in Middlesbrough, Newcastle, and Sunderland.97 By the First World War, this industrial base had expanded into heavy armaments: Armstrong Whitworth, headquartered at Elswick, became the world’s largest munitions producer, employing 76,000 people, most on Tyneside.98 During the Second World War, Vickers-Armstrongs produced tanks, artillery, and aircraft components at scale, while North East shipyards delivered a substantial share of Britain’s naval output.99 Of course, defence manufacturing contracted after 1945, with only brief revivals during the Korean War and Suez Crisis.100 Nonetheless, the region retains a defence presence today, including specialised armoured vehicle production and emerging cyber capabilities, supported by ongoing MOD spending.101 Moreover, Lockheed Martin – the world’s largest defence contractor – is significantly expanding its presence in the North-East by investing £15 million to become the anchor tenant at Northumbria University’s new space research and technology centre (NESST) in Newcastle.102 It has also proposed the construction of an £85 million satellite assembly factory in County Durham.103
Third, a defence-focused Enterprise Zone is likely to be relatively popular. According to polling from Stonehaven in early 2025, 69% of voters would support a defence or security company opening a site in their local community.104 Only healthcare, clean energy, and hospitality performed better on this metric. Moreover, the regulatory accommodations given to the new firms could be easily justified on national security grounds.
Finally, as a major customer for any new defence site is likely to be His Majesty’s Government, many of the tax benefits and concessions are likely to flow back indirectly to the Treasury, making it the most affordable industry to begin with. However, this is also a key source of risk for the Enterprise Zone. Its success will be largely dependent on the cooperation of defence procurement and the existence of a pipeline of defence spending.
Will There Be Industry Interest?
The British government has committed to substantially ramping up defence spending in the medium term. This is a bipartisan commitment, with both Reform and the Conservatives being strongly committed to rearmament too. This alone should provide the impetus for substantial investment in the British defence sector, despite recent delays to the Defence Investment Plan.
However, this business case is reinforced by two recent changes. Firstly, the recent experience of Britain’s allies in Ukraine and the Persian Gulf has shown that the nature of warfare has changed. Exquisite systems, such as multi-million-pound fighter jets, retain a place, but they need to be supplemented by cheaper systems deployed en masse. We cannot sustainably defend ourselves against £25,000 drones with £2 million air-to-air missiles alone.105 We also need similar offensive systems of our own. This unmet demand creates a new segment in the defence sector that will need to find manufacturing facilities somewhere.
Secondly, the increasingly complex geopolitical environment has encouraged Western nations to seek to diversify their suppliers and bring defence manufacturing closer to home. This creates increased demand for British defence products, from both our own Ministry of Defence but also those of other European allies. It may even result in larger orders from Gulf and Pacific allies.
But even if there is likely to be increased demand for British defence products, will the investment come? Defence manufacturers currently face substantial barriers to operating and expanding in the UK. We have catalogued these through private conversations with defence sector leaders, as well as by consulting public statements by firms and industry bodies. Our proposals are tightly aimed at solving these identified problems.
Access to capital and the high cost of capital faced by defence firms are regularly cited as key constraints on rearmament.106 Full expensing for industrial buildings will substantially reduce the after-tax cost of capital for such firms. Moreover, immediate tax relief will mean the firms need less external financing.
Similarly, the ADS industry survey found regulation is the single-largest constraint on aerospace, defence, and space businesses in Britain.107 Our planning fast track proposal directly targets the largest such regulatory impost. It aligns with the industry’s Scottish manifesto, which asks the next Scottish government to reform planning and to incentivise ‘industrial development and high-potential clusters … through targeted prioritisation and accelerated permitting and planning processes’.108 Similarly, the industry-led Defence and Economic Growth Taskforce called for the integration of ‘infrastructure planning with targeted incentive packages [d]rawing on applicable learnings from the Freeports Programme’.109
Energy costs are also often mentioned. For instance, BAE Systems consumes 763 GWh of grid electricity a year. At prevailing UK industrial electricity costs in 2021, this means annual expenditure of £203 million. In the US, this would cost £40 million.110 Our proposed electricity discount directly targets a subset of these costs. It will not be enough to eliminate the gap between the US and UK, but it will narrow it.
Firms also regularly mention workforce constraints as a barrier to expansion.111 Our proposal does not directly address this problem, but high unemployment in the North East suggests that finding lower-skilled labour should be relatively straightforward. Higher-skilled labour can be sourced from a number of good universities in the area – Durham, Newcastle, Northumbria, among others.
The key remaining barrier to private sector investment in the British defence industry is demand-side risk. Manufacturers do not necessarily trust the British state to be a sustainable, long-term customer. Solving this problem is out of the scope of this paper, but the increasingly vulnerable geostrategic environment is likely to force governments to spend more, and sustainably so.
Site Selection Process and Shortlist
To demonstrate the possibility of a pilot ‘defence enterprise zone’ in the North East, we developed a process to find a suitable site. For ease, we have focused on land already in government or local authority ownership.
Data Collection
Unfortunately, to our knowledge, the United Kingdom does not have an easily accessible single geospatial database of government landholdings. We have therefore constructed one from three publicly available land-registry and cadastral datasets.
We use the Commercial and Corporate Ownership Data (CCOD) published by HM Land Registry for local authority land holdings. The CCOD is a full extract of all registered titles in England and Wales where the proprietor is a corporate body or public-sector entity. We used the March 2026 release, which contains approximately 4.38 million title records. From this dataset we retained only those titles in the North-East region whose Proprietorship Category is “Local Authority” or “County Council”. The CCOD does not include geographic coordinates. Each record carries a property address – of varying degrees of accuracy – and/or a postcode, which we geocoded in a later step.
For central government land, we used the Cabinet Office’s published list of land holdings. This records all land and property held by UK government departments and their arm’s-length bodies. We used the latest release, from October 2025, containing approximately 65,500 rows. We filtered this dataset to the North-East region. Unlike the CCOD, this dataset includes Easting and Northing coordinates, so no geocoding was required.
Finally, we matched these datasets with the INSPIRE Index Polygons. This is the freely available parcel boundary dataset published by HMLR under the European INSPIRE Directive. Each polygon represents a single registered land parcel. We merged the GML files for the 12 North-East local authorities.
Because HMLR’s free INSPIRE dataset deliberately omits title numbers (these are only available in the very expensive National Polygon Dataset), we could not directly join ownership records to parcel boundaries by title number. Instead, we used a point-in-polygon spatial join. For CCOD records that carry a postcode, we resolved each unique postcode to a British National Grid coordinate via the postcodes.io bulk API. For CCOD records without a postcode, we geocoded the property address string via the Google Maps Geocoding API. Both methods necessarily lead to fuzzy matches, but they seem to be sufficient for our purposes. Central government coordinates were already supplied as Eastings/Northings and required no geocoding.
We then performed a spatial join, matching each geocoded point to the INSPIRE polygon it falls within. This attached parcel geometry to every ownership record for which we had a valid coordinate. The output of this stage is a single database containing all government- and local-authority-owned land parcels in the North East for which we could establish a spatial match.
Selection Process
Starting from the full set of matched government and local-authority parcels, we applied a sequence of spatial and geometric filters. Each filter addresses a specific physical, regulatory, or practical constraint that a major industrial site should satisfy.
First, we excluded every parcel smaller than 5 hectares. A major tax-favoured industrial zone requires substantial contiguous land to accommodate large-footprint facilities (manufacturing plants, logistics hubs, energy infrastructure), internal road networks, buffer zones, and potential future expansion. Nissan Sunderland’s site, for instance, is more than 300 ha. Our minimum parcel size is smaller than this simply because many contiguous parcels could be combined to create a single coherent site. Only sites meeting this requirement are shown.
Second, we excluded any parcel that intersects a substation area where the declared demand headroom from the local electricity distributor (Northern Powergrid) is zero. In particular, we focused on constraints at the bulk supply point (BSP) level. This is where the distribution network steps down from 132kV to 33kV or 66kV. A major industrial user might connect directly to the distribution network at such a point. Northern Powergrid publicly announced the remaining capacity (in MW) available for new demand connections at each of their BSPs. Where this figure is zero, the local grid is already at capacity – any major new electricity consumer would require costly and time-consuming reinforcement works before it could connect. Industrial zones are, by definition, heavy electricity users (manufacturing, data centres, electrified heat). Siting a zone in an area with no spare grid headroom would either delay the project by years or impose prohibitive connection costs. This filter ensures every candidate site has a viable path to electricity supply. Areas not meeting this requirement are blocked out by red in the above map.
Third, we excluded any parcel that intersects a National Park or an Area of Outstanding Natural Beauty (AONB / National Landscape). These are England’s highest landscape and environmental designations. Planning policy affords them the strongest protections: major industrial development within their boundaries is, for all practical purposes, impermissible unless exceptional circumstances are demonstrated. Even though such protections would not necessarily be binding under our proposed model, we think they (in this limited case) represent legitimate and very strongly held community views. Overriding them would be politically impossible and likely undesirable, in any case. These areas are blocked out in green in the map above.
Fourth, we calculated the percentage of each parcel’s area that falls within Environment Agency Flood Zones 2 and 3 (rivers and sea) and generally excluded parcels with substantial overlap. Flood Zones 2 and 3 indicate land with a significant probability of flooding. Placing an EZ there would expose assets and workers to unacceptable flood risk. We allowed a 10% tolerance because large sites may have a minor overlap with a flood zone along one edge (e.g. a river boundary) that does not compromise the usability of the site as a whole. Beyond that threshold, the flood constraint becomes material.
Finally, we used visual inspection of the sites on satellite, street, and topographical maps to narrow the list further. We excluded sites that were too far from population centres to ensure workers could live near their jobs. We preferred sites with nearby access to A-roads for ease of both construction and logistics in operation. We eliminated mountainous or boggy sites. Finally, we eliminated sites that already contain a large number of present uses, such as homes.
We were left with five (5) natural candidates for pilot sites, detailed in the table overleaf.
| Site | Map | Location | Area | Advantages | Disadvantages |
|---|---|---|---|---|---|
| 1 |  |
High Hanning, SW of Sunderland, Intersection of the A19 and A690 | 543ha | A very large site Located on strategic roads Nearby to a major metropolitan area | Not entirely in public ownership Not within an existing metro area Currently in agricultural use |
| 2 |  |
Quarrington Hill, NE of Bowburn Interchange 61, SE of Durham | 300ha | Near to Durham Direct on-ramp to the A1(M) Partially on brownfield land | Not within an existing metro area |
| 3 |  |
Adjacent to Blaydon Quarry, W of Gateshead, south of the A695 | 125ha | Nearby brownfield sites Room for expansion | Relatively small site More distance from strategic routes |
| 4 |  |
High Pittington, East of A690, North East of Durham | 184ha | Near to Durham Located near strategic roads | Not entirely in public ownership Not within an existing metro area Currently in agricultural use |
| 5 |  |
Newburn Riverside, SW of the A1 and A69 intersection | 83ha | Very well located in the west of Newcastle | Small flood-prone site |
Implementation
One of the key lessons of successful place-based policies is that speed matters. Nissan Sunderland went from approval-in-principle to cars rolling off the line in three and a half years of elapsed government time. The London Docklands Development Corporation was established, given planning powers, and began transforming the area within a similar period. The implementation of a new round of enterprise zones should learn this lesson. It should not genuflect to existing process for its own sake. When existing frameworks are complicated or get in the way, Parliament should use its sovereignty to simply sidestep them.
In particular, three components should be addressed in parallel: Tenant acquisition, legislation, and land assembly. A small number of ministerial appointees should be in charge of the commercial elements. These should be businessmen with experience in the North East, industrial property development, and/or the defence sector. Once the first Enterprise Zone Authority is established, these people should be appointed by ministers to it.
Tenant engagement should begin immediately. The Nissan precedent shows that early, direct engagement with a specific firm is more effective than open-ended consultation. The Ministry of Defence and the Department for Business and Trade should jointly approach the most plausible candidates — which include Anduril, BAE Systems, Rheinmetall, MBDA, Helsing, and Lockheed Martin, the last of which is already investing in the region — and set out the proposed package: land at favourable prices, fast-track planning, tax concessions, and discounted electricity. The goal is a binding framework agreement committing the anchor tenant to capital investment and employment in exchange for the government’s commitments.
Second, the government should draft and pass a bespoke legislative package that implements the entire agenda in a single place. A short, focused Enterprise Zones Act should give the Business Secretary the ability to designate a zone by statutory instrument. It should create the aforementioned Enterprise Zone Authorities and enable them to make decisions under all of the relevant planning and environment legislation. Although the proposed defence manufacturing plants are unlikely to be too controversial, tight drafting will be necessary to avoid uncertainty for investors. The EZ Act should also implement the proposed tax changes, including capital reliefs for building and business rates relief, and the electricity discounts.
Third, the government should begin working with local authorities in the North East to assemble the required land. North Eastern local authorities have recently tended to welcome growth with open arms, so this step will not likely present many barriers. This process should occur in collaboration with the possible anchor tenants to ensure that the proposed sites are ideal for them. Once the land is assembled, the requisite local authority members could be appointed to the new Enterprise Zone Authority.
Fourth, the Enterprise Zone Authority should move quickly to sign a binding contract with the anchor tenant, selling or leasing the required parcels at the agreed price, with the agreed investment commitments. This contract could be contingent upon – or signed after – the initial planning permission is granted by the Authority.
The physical work will then begin. Government funding might be advanced to the Enterprise Zone Authority to allow it to remediate the land and build any required underlying infrastructure before any lease revenue is received.
Conclusion
A successful programme of place-based policy in the United Kingdom will require learning from the successes and failures of past interventions. The mixed record of enterprise zones and freeports shows that modest adjustments to tax or customs regimes rarely deliver lasting, transformative growth. In particular, the UK experience with freeports demonstrates that customs reliefs offer limited value in a low-tariff economy, while displacement effects can easily dominate any gains. By contrast, the most effective interventions—London Docklands, Salford, Bristol Temple Quarter, and Nissan Sunderland—combined meaningful deregulation, large-scale land assembly, and a clear focal point for private investment.
The North East of England does not lack industrial heritage, skilled workers, or suitable land. Nonetheless, the regulatory and taxation environment discourages major manufacturers from building there. We have argued that a Defence Enterprise Zone, modelled on the lessons of past successes, offers the most credible way to change that calculus.
The model we propose reflects the lessons of past policies directly. It centres on securing a major anchor tenant in a sector with durable demand and limited exposure to international cost competition, allowing an ecosystem of suppliers and complementary firms to emerge. It recognises that access to large, contiguous land—assembled and de-risked by the state—is a binding constraint on industrial development. It also addresses the central role of planning delay and regulatory fragmentation by proposing a single, fast-track approvals regime capable of materially reducing uncertainty for investors. It also directly addresses Britain’s high electricity costs, by taking advantage of the North East’s location. Without these elements, even generous fiscal incentives are unlikely to shift investment decisions at scale.
Defence manufacturing is the natural sector for such a pilot. It is insulated from the low-cost competition that constrains other forms of manufacturing, while its primary customer is the British state itself, meaning that a substantial share of any fiscal support is indirectly recouped. The North East combines the necessary industrial base with persistently low employment rates and low land costs, ensuring that the returns to new investment are both high and likely to be additional rather than displaced. The identification of five candidate sites—large, contiguous, publicly owned, and free from major infrastructural or environmental constraints—demonstrates that the proposal is immediately actionable.
The significance of a Defence Enterprise Zone, however, extends beyond the performance of a single site. Its value lies in demonstrating that large-scale industrial development can still be delivered quickly and predictably in Britain under a different set of rules. The planning reforms, tax structures, and land policies required to make such a zone viable are not inherently local; they are simply easier to implement within a bounded area. If the pilot succeeds, it provides a practical foundation for extending the same principles more widely across the economy.
For instance, the North East has the lowest employment rate in the United Kingdom and the highest suicide rate in England and Wales. Source: Office for National Statistics, ‘Labour market in the regions of the UK’ (February 2026) and ‘Suicides in England and Wales’ (October 2025).↩︎
Between FYE 2017 until FYE 2025, the North East consistently ranked 8th or 9th out of the 12 countries and regions of the UK for identifiable public capital expenditure per head. Identifiable capital spending (per-head, in real terms) over the period was 14% lower in the North East than in England overall. Source: HM Treasury, ‘Country and regional analysis: 2025’, table 4A.b and ‘Country and regional analysis: 2021’, table 4A.b; spliced.↩︎
The word alleged is used advisedly. In fact, British deindustrialisation began in the 1960s and peaked during the energy crises of the 1970s. See Thomas Weston, ‘The UK economy in the 1970s’, House of Lords Library (4 April 2024).↩︎
Nissan UK, ‘A car every two minutes for 37 years: Nissan Sunderland Plant passes 11 million milestone’ (7 June 2023).↩︎
Peter Hill, ‘Datsun Wins Approval to Build First Car Plant in Britain’, The Times (29 January 1981).↩︎
Society of Motor Manufacturers and Traders, ‘Motor Industry Facts 2025’ (May 2025).↩︎
Jasper Ostle and Mitchell Palmer, The Growth Agenda, Adam Smith Institute (2025).↩︎
Office for National Statistics, ‘Labour market in the regions of the UK’ (February 2026).↩︎
Ministry of Housing, Communities & Local Government, ‘Land value estimates for policy appraisal’ (2020).↩︎
Palmer and Ostle, The Growth Agenda, pp. 9-10.↩︎
Don Brash, ‘Hayek Lecture: New Zealand’s remarkable reforms’, Reserve Bank of New Zealand (1996).↩︎
James Lawson and Madsen Pirie, Micropolitics Revisited, Adam Smith Institute (2025), pp. 74-76.↩︎
For a detailed summary, see Douglas Zhihua Zeng, ‘China’s Special Economic Zones and Industrial Clusters: Success and Challenges’, Lincoln Institute of Land Policy (2012).↩︎
Weston, ‘The UK economy in the 1970s’.↩︎
Aaron Andrews, ‘Dereliction, decay and the problem of de-industrialization in Britain, c. 1968-1977’, Urban History (2019).↩︎
Local Government, Planning and Land Act 1980 (as enacted), s. 179 and sch. 32.↩︎
CBRE, ‘Northern Ireland as an enterprise zone’, Northern Ireland Affairs Select Committee (20 January 2011), para. 4.↩︎
‘Enterprise zones: Will an 80s revival really work?’, BBC News (2011).↩︎
Thomas Pope and Maelyne Cobbins, ‘Investment Zones’, Institute for Government (2022).↩︎
Paul Swinney, ‘In the zone? Have enterprise zones delivered the jobs they promised?’, Centre for Cities (2019).↩︎
Swinney, ‘In the Zone’.↩︎
‘Enterprise zones: Will an 80s revival really work?’, BBC News (2011).↩︎
Swinney, ‘In the Zone’.↩︎
London’s Royal Docks , ‘London’s Royal Docks History’, (n.d.).↩︎
Giles Shaw, ‘London Dockland Development Corporation’, House of Commons (1982).↩︎
Simona Florio & Sue Brownill, ‘Whatever happened to criticism? Interpreting the London Docklands Development Corporation’s obituary’, City (2010).↩︎
Swinney, ‘In the Zone’.↩︎
Sam Bidwell and Rolf Merchant, ‘Dwharfing the City: The next generation of Urban Development Corporations’, Adam Smith Institute (2025).↩︎
Sarah Townsend. ‘Back to the 80s: Mixed legacy for enterprise zones’, Planning (2011).↩︎
Morgan Stanley, ‘Our History’, (n.d.); Chris Tryhorn, ‘Telegraph to leave docklands’, The Guardian (2005).↩︎
Paul Norman, ‘JPMorgan completes lease for 150,000 square feet of Canary Wharf overflow space’, CoStar (2025).↩︎
Canary Wharf Group, ‘Canary Wharf - Catalyst for 30 Years of Growth in Tower Hamlets’ (2018).↩︎
Andreas Baing and Cecelia Wong, ‘The impact of brownfield regeneration on neighbourhood dynamics: The case of Salford Quays in England’, Town Planning Review (2018).↩︎
Baing and Wong, ‘The impact of brownfield regeneration on neighbourhood dynamics’.↩︎
MediaCityUK, ‘MediaCityUK marks 10 years since construction started’ (2017).↩︎
‘MediaCity UK, Salford’, The Developer (2021).↩︎
Bristol Temple Quarter, ‘Enterprise Zone’, (n.d.).↩︎
Bristol City Council, ‘Bristol Temple Quarter: A Vision for the Future’ (2022).↩︎
Ministry for Housing, Communities and Local Government. ‘Enterprise Zones’ (2011).↩︎
Swinney, ‘In the Zone’.↩︎
Bristol Temple Quarter, ‘Enterprise Zone’.↩︎
Bristol City Council, ‘Bristol Temple Quarter: A Vision for the Future’.↩︎
University of Bristol, ‘Welcome to Temple Quarter Enterprise Campus’, (n.d.).↩︎
Network Rail, ‘The Bristol Temple Quarter regeneration’ (2025).↩︎
Sam Ashworth-Hayes, ‘Seeing It Through: A Plan for “Full Fat” Freeports’, Adam Smith Institute (2022), p. 3.↩︎
Warwick Davies and Eamon Butler, The Freeport Experiment, Adam Smith Institute (1986), pp. 1–2; Webb and Jozepa, ‘Government policy on freeports’, p. 8.↩︎
Davies and Butler, The Freeport Experiment, p. 1.↩︎
Davies and Butler, The Freeport Experiment, p. 1.↩︎
Davies and Butler, The Freeport Experiment, pp. 4–5.↩︎
Davies and Butler, The Freeport Experiment, p. 25.↩︎
Davies and Butler, The Freeport Experiment, pp. 25–26.↩︎
Davies and Butler, The Freeport Experiment, p. 30.↩︎
Davies and Butler, The Freeport Experiment, pp. 17–29.↩︎
Davies and Butler, The Freeport Experiment, pp. 4–6, 10–14.↩︎
Webb and Jozepa, ‘Government policy on freeports’, p. 8.↩︎
Webb and Jozepa, ‘Government policy on freeports’, p. 7.↩︎
Rishi Sunak, The Free Ports Opportunity, Centre for Policy Studies (November 2016), p. 18.↩︎
Webb and Jozepa, ‘Government policy on freeports’, pp. 10–12.↩︎
Webb and Jozepa, ‘Government policy on freeports’, pp. 21–23.↩︎
Webb and Jozepa, ‘Government policy on freeports’, p. 13; Department for Levelling Up, Housing and Communities, ‘Freeports’ (27 October 2021).↩︎
Department for Levelling Up, Housing and Communities, ‘Freeports’ (27 October 2021).↩︎
Office for Budget Responsibility, Economic and fiscal outlook, CP 545 (October 2021), para. A.23; cited in Webb and Jozepa, ‘Government policy on freeports’, p. 14.↩︎
Ashworth-Hayes, ‘Seeing It Through’, p. 4.↩︎
Ashworth-Hayes, ‘Seeing It Through’, pp. 4–5.↩︎
PQ 190815 [on Freeports], 21 November 2018; cited in Webb and Jozepa, ‘Government policy on freeports’, p. 9.↩︎
Peter Holmes and Julia Magntorn Garrett, ‘Tariff inversion in UK Freeports offers little opportunity for duty savings’, UK Trade Policy Observatory (28 July 2020); cited in Ashworth-Hayes, ‘Seeing It Through’, p. 4.↩︎
Holmes and Magntorn Garrett, ‘Tariff inversion in UK Freeports offers little opportunity for duty savings’; cited in Webb and Jozepa, ‘Government policy on freeports’, p. 26.↩︎
Office for Budget Responsibility, Economic and fiscal outlook, CP 545 (October 2021), para. A.29; cited in Webb and Jozepa, ‘Government policy on freeports’, p. 25.↩︎
Peter Hill, ‘Datsun Wins Approval to Build First Car Plant in Britain’, The Times (29 January 1981).↩︎
Society of Motor Manufacturers and Traders, ‘Motor Industry Facts 2025’ (May 2025).↩︎
James T. Walker, ‘Strategic Trade Policy, Competition, and Welfare: The Case of Voluntary Export Restraints between Britain and Japan (1971-2002)’, Oxford Economic Papers 67, no. 3 (2015): 806–25.↩︎
Peter Hazelhurst, ‘Mrs Thatcher Praises Japanese Efficiency’, The Times (16 April 1977).↩︎
Roland Gribben, ‘Japanese “See Way to Fight Car Imports Limit”’, The Daily Telegraph (5 April 1979).↩︎
‘ MPs Not Thrilled by Nissan Plant Plan’, The Guardian (2 February 1984); Joanna Walters, ‘All Hail the Man Who “betrayed” the UK Car Industry’, The Observer (17 January 1999).↩︎
Hill, ‘Datsun Wins Approval to Build First Car Plant in Britain’.↩︎
‘ Nissan Motor Corporation, ‘Nissan Celebrates 25 Years of Manufacturing in the UK’ (8 September 2011).↩︎
Hill, ‘Datsun Wins Approval to Build First Car Plant in Britain’; Ged Parker, ‘Nissan Visit April 1981’, Washington History Society, (n.d.).↩︎
Ashworth-Hayes, ‘Seeing It Through’.↩︎
Vera Kichanova, ‘Beyond Freeports: Revitalising Britain with self-governing cities’, Institute of Economic Affairs (2025).↩︎
Middlesbrough District Council, ‘Local Development Order: Teesside Advanced Manufacturing Park’ (2012). BREAM being the Building Research Establishment Environmental Assessment Method.↩︎
FTAA, s. 101.↩︎
Mitchell Palmer, ‘Britain’s Tax System is Blocking Builders’, Adam Smith Institute (2025).↩︎
Palmer and Ostle, The Growth Agenda, p. 29.↩︎
Department for Science, Innovation, and Technology, Delivering AI Growth Zones (2025), p. 8.↩︎
Andrew Powell. ‘Labour Market Statistics: UK regions and countries’, House of Commons Library (2021); Office for National Statistics, ‘Labour market in the regions of the UK: November 2025’, (2025).↩︎
Office for National Statistics, ‘The 2008 recession 10 years on’ (2018).↩︎
Ministry of Housing, Communities & Local Government, ‘Land value estimates for policy appraisal’ (2020).↩︎
Judith Kenner Thompson and Robert R. Render. ’Nissan U.K.: A worker’s paradox?’, Business Horizons (1995).↩︎
HM Land Registry, ‘UK House Price Statistics’ (2026).↩︎
Jeffrey E. Zabel. ‘Migration, housing market, and labor market responses to employment shocks’, Journal of Urban Economics (2012).↩︎
‘Steel Towns: From Boom to Bust’, BBC Two (2014).↩︎
Christopher Robinson. ’Last coal shipment leaves River Tyne’, BBC News (2022).↩︎
Net Zero North East England, ‘Our North East Heritage has Become Our Green Future’, (2022).↩︎
Simon Gill, ‘Exploring options for constraint management in the GB electricity system’, Scottish Renewables (2024), p. 53.↩︎
D.J Dougan, ‘A History of North East Shipbuilding: Being an Attempt to Describe and Analyse the Development of Shipbuilding in the North East of England from Earliest Times to the End of 1967’, Durham University (1968).↩︎
‘ Elswick Works, Newcastle: HQ of the Biggest WW1 Munitions Company’, BBC World War One at Home (2014).↩︎
St James’ Heritage & Environment Group, ‘Benwell and Scotswood in the Early 20th Century’, (2019); Pearson Engineering, ‘History’, (n.d.).↩︎
Tom de Castella, ‘Five years that shaped the British Military’, BBC News (2015).↩︎
Georgia Hutton, ‘How much does the defence industry contribute to UK regions?’, House of Commons Library (2025); Ministry of Defence, ‘New multi-million pound Army support deal for North-East firm to boost national security and growth’, (2025).↩︎
Northumbria University, ‘Northumbria University announces £50m space skills, research and development centre set to transform the UK space industry’ (2023).↩︎
Mark Denton, ‘Space firm proposes £85m satellite factory’, BBC News (2026).↩︎
ADS, GMB Union, and Prospect, ‘Securing Our Future, Together’ (2025), p. 10.↩︎
James Lawson, ‘The changing economics of war’, The Spectator (19 April 2026).↩︎
E.g., Luke Charters MP and Alex Baker MP, ‘Rewiring British Defence Financing’ (2025).↩︎
ADS, ‘2024 Industry Outlook’ (2024).↩︎
ADS, ‘Aerospace, defence, security and space: Delivering at the heart of Scottish communities’ (2025), p. 7.↩︎
Oliver Wyman and CBI, Defence & Economic Growth Taskforce (2025), p. 56.↩︎
BAE Systems, ‘Annual Report 2025’, p. 58; Department for Energy Security and Net Zero, ‘Industrial electricity prices in the IEA’ (2025), table 5.3.1.↩︎
E.g., Joe Fay, ‘How the defence sector is battling a skills crisis’, BBC News (2026).↩︎