Councils’ control of business rates could unlock entrepreneurship in seaside towns

First published on Business Zone.

Despite their idyllic reputations, seaside towns feature among Britain’s most deprived places, their economies battered by the loss of custom to resorts abroad and plagued by poverty, weak aspirations and welfare dependency. Yet research by the Centre for Entrepreneurs suggests that some towns are on the cusp of a revival, thanks to the efforts of dynamic entrepreneurs.

Hear the words ‘seaside town’ and chances are sunny beaches, fish and chips, strolls along the pier and donkey rides are what come to mind – well, perhaps minus the ‘sunny’ part. But while this might be true of some places, in many seaside towns locals have more serious challenges to face. Indeed, as revealed in last week’s release of the latest official deprivation figures (which ranked seaside town Jaywick as Britain’s most deprived locale), they live in some of the UK’s most economically challenged areas.

For several years – since the publication of a 2007 Commons report that declared them ‘in need of focused, specific Government attention’ – policymakers, academics and various organisations have attempted to explain why the UK’s seaside towns have fallen behind the rest of the country both economically and socially.
Although many rural areas face similar challenges, it is seaside towns that have captured the imagination and opened up a discussion on economic development outside of Britain’s urban centres. Perhaps this is due to nostalgia for the illustrious past many seaside towns share, having once been at the heart of the Victorian-era holiday scene, and borne of a desire to return them their lost prestige.

More than any other factor, it is the arrival of low-cost air travel that has eaten into the tourism that so many seaside towns depend on. Over the decades, this loss of demand has hollowed out the towns’ economic and social capital, manifested in common traits including severe deprivation, low-wage seasonal work, poor infrastructure, and a deficit in skills and education compounded by the relentless brain drain of the best and brightest.

But while much has been said about the problems facing seaside towns and the sources of those problems, proposed solutions have been few and far between.

In the Centre for Entrepreneurs’ latest report, From ebb to flow: how entrepreneurs can turn the tide for Britain’s seaside towns, we challenge the narrative of negativity that has until now dominated the discussion of seaside towns and propose innovative policies with the potential to revive them.

We identify and celebrate entrepreneurs that are leading the reinvention of five towns; Hastings, Bournemouth, Scarborough, Littlehampton and Portrush. We believe it is the drive and creativity of such individuals that stand the best chance of catalysing an economic recovery in Britain’s seaside towns.

By combining the experiences, both good and bad, of the entrepreneurs in the five towns with the wider literature on coastal areas, our report draws up a series of recommendations that seaside towns must implement if they are to attract entrepreneurs and businesses to the coast, and support them once they are there.

In order to unleash dormant entrepreneurial energies, we argue that seaside towns need to: develop specialised identities that will attract visitors and anchor local businesses; tackle the deficiencies in education and skills that are holding back the labour force; improve the quality of local data available to entrepreneurs; invest in infrastructure both digital and physical; and push for greater devolution from the centre so that towns can respond more effectively to local conditions.

The prospects for two of these recommendations, devolution and infrastructure investment, received a major boost yesterday with the Chancellor’s announcements on business rate reform and the creation of a National Infrastructure Commission.

Handing control of the £26bn business rate pot to local authorities is a major increase in their fiscal autonomy; under the new powers, they will be able to determine the rate of taxation themselves and decide how to use the revenues.

This will, as proponents of devolution regularly stress, allow local authorities to use their knowledge of local needs and conditions to direct spending more efficiently than central government. For seaside towns, these needs are the deprivation and educational/skills deficiencies creating the perception that such places are not suited to business.

Local authorities in lagging coastal areas will now have the option of using competitive rate reductions to lure over businesses and entrepreneurs. It was also decided that local authorities with elected mayors will be able to increase their business rates to fund major investment. Our report recommends elected mayors for seaside towns that are large enough, such as Brighton or Bournemouth; this will become an even more attractive proposition with these new powers. Having the ability to raise local rates will enable mayoral authorities to fund upgrades to the economic support base where they are needed, but they must be careful that the additional revenues are used coherently and transparently so that trust with the business community is maintained.

Our report highlights the need to upgrade the subpar infrastructure holding back many seaside towns, so it is reassuring that the government has decided to establish an independent body that will advise it on which infrastructure projects to undertake. Inadequate infrastructure is a problem affecting the entire UK economy, not just seaside towns, which is why a recent Standard and Poor report claimed that the UK would benefit more from infrastructure investment than any other major economy, excluding Brazil.

Although the Coastal Communities Fund, a government investment programme in coastal areas worth several hundred million pounds, has funded countless projects in local infrastructure and regeneration, it is beyond the Fund’s scope to finance the large-scale improvements in digital infrastructure (such as superfast broadband) and transport (better quality and faster road and rail links to nearby cities) that we believe seaside towns desperately need. This is where the new National Commission can and should step in.

Yet although we are positive about these new initiatives, we should not overlook their potential to aid deterioration rather than regeneration in seaside towns. So while control over business rates will enable more targeted local spending, the lack of a central redistribution mechanism could mean that authorities in wealthy areas prosper while those with weak local economies (such as seaside towns) are deprived of the revenues needed to invest in regeneration. Local authorities should also be wary of using business rate cuts to patch over the deficiencies in education, skills and infrastructure repelling businesses in the first place.

It is no surprise that the Infrastructure Commission plans to focus on decidedly national priorities such as boosting transport links between the UK’s cities and modernising energy infrastructure. Nonetheless, stakeholders in seaside towns must use their collective voice to ensure that their needs are also addressed. If not, they risk being left even further behind as the gap between the quality of infrastructure in cities and in seaside towns becomes too great to fix.

These reservations notwithstanding, we believe that greater devolution and infrastructure investment in seaside towns will be paramount in attracting and supporting the entrepreneurs that will revive their economies and bring prosperity. If the Chancellor’s latest policies help them do this, which on balance appears to be the case, then seaside towns should embrace them while making sure their concerns are heard.