Shaping special economic zones to work for communities

This article originally appeared in the MJ.

The special economic zones model is still too centralised, and government must loosen its grip if they are to work for local people, says Sean Benstead.

At CLES, we’ve spent the past few months – with support from the Alex Ferry Foundation – speaking to people on the ground and in policy roles to understand how Freeports and Investment Zones (which we’re calling Special Economic Zones, or SEZs) can deliver real benefits for local communities.

The big questions? How do we make sure SEZs support inclusive growth, rather than – as some fear – simply handing out tax breaks to big corporations? What are the barriers to doing so?

Still too centralised

The SEZ model remains heavily shaped by Westminster. Local and combined authorities are expected to follow a set framework – often one that doesn’t reflect local priorities or strengths.

One practitioner put it plainly: the current process is about “shaping what you’ve got – to fit a template from government – rather than using devolved powers for our area.” There’s a particular frustration around the government’s focus on certain high-growth sectors, which may not match local realities. As one person told us, “we would have preferred to be sector agnostic.”

What’s more, progress is still judged by traditional metrics like Gross Value Added (GVA), rather than meaningful indicators like job quality or social impact. This risks missing the point of devolution – to give places the freedom to do things differently. As one stakeholder warned, “SEZ policy is not designed to deliver inclusive growth.” And the burden of reporting and assurance requirements isn’t helping. For under-resourced local authorities, “the time spent with different layers of government…was disarming.”

Making it work locally

Despite these constraints, there are signs of hope. Some local areas are already finding creative ways to align SEZs with local needs and values.

In the West Midlands, officials are planning to use business rate retention to create an impact fund, supporting the social economy and targeting employment opportunities for people out of work. In Greater Manchester, there’s a push to “grow our own” by supporting local small and medium enterprises (SMEs), rather than just chasing outside investment.

Liverpool City Region is leading the way with a gateway policy requiring Freeport businesses to sign a Fair Employment Charter – tying investment to better pay and working conditions. It’s an approach that mirrors Welsh-style social partnership arrangements, where business support is linked to fair work commitments.

Much of this innovative local practice, despite the prescriptions in national policy, is enabled by flexibilities in Green Book assessments and the “institutional clout” carried by combined authorities. In this context, combined authorities have been able to wield their powers and resources to align policies under strategic objectives, ensuring that the design and operations of SEZs are led by the local state rather than the private sector.

What needs to change

To make SEZs work for local people, central government must loosen its grip. That means giving local and combined authorities the freedom to shape SEZs around local priorities – and updating the way success is measured.

Instead of just chasing GVA growth, we should be tracking progress on sustainability, poverty reduction and health inequalities.

Local and combined authorities can also take more initiative. By learning from each other and building on what works – like South Yorkshire’s efforts to align SEZs with local economic strategies – they can push for more people-focused outcomes.

Becoming “sector agnostic” is a smart move too. When SEZs are tied to local supply chains and a mix of industries, they help build resilience. It’s risky to rely on a few big employers, especially in a volatile global economy.

Final thoughts

Despite the limitations of national policy, local leaders still have options. With strategic thinking, smart use of existing flexibilities and a commitment to doing what works locally, SEZs can be more than economic tools – they can help create fairer, more sustainable local economies.

The message is clear: Special Economic Zones don’t have to follow a top-down script. They can be shaped to serve communities – not just corporations.