Investment zone programme: integrated impact assessment

The Investment Zone (IZ) Programme in Wales offers an opportunity to harness Wales’s abundant economic potential.

The Welsh Government (WG) worked with the UK Government (UKG) to design a Welsh IZ model, to deliver three main objectives:

• strengthen key industries
• boost innovation in Wales and across the UK
• support fair work and sustainability

Businesses will benefit from being part of a special zone. This includes:

• tax benefits; and
• grant funding.

The Programme includes policies on fair work and social partnership to ensure workers:

• are fairly rewarded, heard and represented
• can progress in a secure, healthy, and inclusive working environment
• have their rights respected
• the Cardiff and Newport Travel to Work Areas (TTWAs), delivered by the South-East Wales Corporate Joint Committee (CJC)
• the Wrexham and Flintshire TTWA, delivered by the North Wales CJC

In 2024, the UK and Welsh Governments announced there would be two investment zones in Wales. These are:

WG is working with the prospective IZs to ensure they:

• have a positive impact; and
• can start operating as soon as possible.

The IZ Programme for Wales will be affected by:

• climate change challenges (Dr A Netherwood (2021) Evidence for the third UK Climate Change Risk Assessment (CCRA3)) and the urgency to transition to a low carbon economy to ensure future prosperity
• risks to our natural environment (State of Nature Partnership (2023) State of Nature) and the opportunity to protect biodiversity to protect Wales’s ecological resilience
• long-standing inequalities in some geographies and communities (Welsh Government (2021) Implementing the Socio-economic Duty - A review of evidence on socio-economic disadvantage and inequalities of outcome) that can be addressed by mainstreaming equality and fairness in policy and delivery, including specific consideration of the opportunity to address socio-economic disparities currently experienced in the IZ areas
• the wider context of high demand on health services (NHS Confederation (2023) Briefing: Current challenges facing the health and social care system in Wales), and the need to take forward skills and employment initiatives to address economic inactivity to improve healthy life expectancy (The Health Foundation (2018) Relationship between employment and health)
• a Welsh culture and language that must be protected and promoted (Welsh Government (2024) Commission for Welsh-speaking Communities: Empowering communities, strengthening the Welsh language) through strong engagement with local communities
• WG’s duty to adhere to the Well-being of Future Generations (Wales) Act, which requires Wales to establish itself as a globally responsible nation

IZs are part of wider WG policy that addresses over-reliance on fossil fuels by supporting the transition towards cleaner forms of energy production (Welsh Government (2021) Net Zero Wales). 

This change will be underpinned by Wales’s planning system and environmental regulatory system that will protect and enhance our biodiversity through minimising waste, resource use and emissions while improving air and water quality. 

The employment and skills opportunities in the IZs will raise standards of living which in turn will help tackle poor health prevalent in many areas (World Health Organisation (2025) World Report on Social Determinants of Health Equirt).

Underlying economic and social problems in IZ areas are marked for groups or communities that are already disadvantaged (Dr Sara MacBride-Stewart & Dr Alison Parken (2021) Inequality in a Future Wales: Areas for action in work, climate and demographic change).  The equality and fairness focus of IZs will help address these problems.

Community cohesion will also be improved in IZ areas, particularly those with a strong Welsh language identity where IZ opportunities can have a positive impact. 

By generating multiple benefits IZs will contribute to many Welsh Government policy agendas:

• Economic mission: priorities for a stronger economy
• Export Action Plan for Wales
• Innovation Strategy for Wales
• International Strategy
• Working together to reach net zero: all Wales plan
• Future Wales, The National Plan 2040
• Planning Policy Wales
• Wales Transport Strategy
• A guide to fair work
• Net Zero Skills Action Plan
• Cymraeg 2050: a million Welsh-speakers strategy

IZs must embody Well-being of Future Generations (Wales) Act 2015 values and make a positive contribution to the seven goals set out in the Act. Section 10 of the Investment Zones in Wales: technical document (Welsh Government / Ministry of Housing, Communities & Local Government (2024) Investment Zones in Wales: technical document) outlines that ‘CJCs must use their resources and ensure their governance is effective with the aim of maximising their contribution to Wales’ national well-being goals.  CJCs must promote and carry out sustainable development by taking account of its long-term impact, and by monitoring and assessing the extent to which it is meeting its well-being objectives in relation to collaboration, involvement, and taking an integrated approach.  CJCs in Wales are required to comply with the Act when carrying out their duties related to the IZs. In considering how a CJC discharges its duties under the Act, CJCs should have due regard to the Act’s statutory guidance.’

The formation and delivery of IZs is a collaborative process. At a national level, UKG and WG develop policy, support, fund, guide and monitor and evaluate.  At regional and local levels, the establishment and effective running of IZs depends upon the social partnership way of working involving local government, the third sector, businesses, workers, and local communities. 

IZ proposals must evidence strong community support to get government support, and this must be sustained through engagement strategies.   

The arguments for and against economic initiatives like IZs have been extensively researched (M Ward (2024) House of Commons Library Research Briefing – Enterprise Zones, Centre for Cities (2019) In the zone? Have enterprise zones delivered the jobs they promised?, UNCTAD (2019) World Investment Report 2019 – Special Economic Zones).  In summary, arguments for initiatives like IZs are that they:

• have economic impacts, both direct and indirect. The direct benefits include attracting investment, job creation and income generation, export growth and diversification, and foreign exchange earnings.
• traditionally attract internationally mobile efficiency-seeking investments, for which countries compete.
• support value chain participation, industrial upgrading and diversification.
• regenerate derelict areas.

Arguments against IZs are that may:

• create significantly less jobs than forecast, with the majority being low skilled.
• cause high levels of displacement.
• perform little better than comparable areas without special zone status.
• Lead to foreign direct investment developments that do not commit to long term occupation/investment and subsequently move to other regions with more attractive financial incentives. 

These arguments were explored in depth in discussions between the officials and Ministers of the UK and Welsh governments.

The potential disadvantages have been mitigated by government:

• requiring CJCs to develop well-evidenced and robust business plans to achieve investment and jobs targets.
• planning to provide ongoing support to the IZs on finance, planning, grid connection, attracting investors, working with local businesses, skills, innovation, and net zero.
• providing clear guidance for CJCs to develop IZ proposals that will identify, quantify and mitigate displacement risks.  These will be appraised and monitored by government.

IZs receive a total funding envelope of up to £160 million for up to 10 years, which can be used flexibly between spending and a single ten-year tax offer, scalable based on the number and size of sites. This consists of:

• Flexible spend, split 40:60 between resource spending (RDEL) and capital spending (CDEL), to use across a portfolio of interventions based on the opportunities of each cluster; and
• Tax incentives, available for ten years, offered over a maximum 600 hectares across up to three sites, ideally of no more than 200 hectares each. If a place chooses not to take up tax reliefs to the full extent available, they will have a larger spending envelope available to them. The principle of flexibility is woven throughout the IZ policy offer and will respond to evidenced regional priorities, reflecting that regional partners know their economy best.

IZs are expected to match or part-match Government funding with private sector investment, local authority borrowing and co-funding from other public bodies where relevant.  Specifically, local authorities are expected to use retained non-domestic rates revenue to cover borrowing costs for infrastructure (where relevant); re-invest in the IZ tax sites to generate further growth; or offset expected effects of displacement of local economic activity from disadvantaged areas. 

Some Welsh legislation will be required for IZs including legislative amendments to the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (“LTTA”). The amendments will provide a relief from land transaction tax (“LTT”) for qualifying transactions of land within a designated Welsh special tax site for a fixed period. This will include qualifying transactions within the Welsh IZs.  A Regulatory Impact Assessment will be completed for this and published when the legislation is laid before Senedd Cymru (the Welsh Parliament).

What are the most significant impacts, positive and negative?

Promoting equality

Welsh Investment Zones (IZs) will directly benefit those of working age who will have the opportunity to take up the new jobs that IZs are expected to create. Fair work principles will ensure the new jobs are fair, safe and secure, helping to address socioeconomic disparities within the local populations. 

The Welsh IZ business cases will develop pathways to the new work for local people. It is expected that those pathways would cater for all people with protected characteristics to have equal opportunity to take up jobs by removing barriers to participation. 

Over time there is expected to be major trade and investment benefit for Wales from the two IZ areas. The wider economy, and consequently all of those with protected characteristics and who are currently classified in the lower socio-economic groups, should benefit. 

IZ fair work actions will enable the participation of trade union representatives to provide a mechanism to further ensure barriers to participation are removed and there is equal opportunity for people who share a protected characteristic.

The IZ Programme in Wales will help to promote economic development across local economies and communities by driving inclusive and sustainable growth locally, regionally and nationally. 

Bringing together local organisations that are trying to achieve similar economic goals, pooling resources and creating shared objectives can be the best way to deliver outcomes that are truly transformative. 

The IZs will also support work to decarbonise industry at local, regional and national levels helping to meet the net zero carbon targets. Green economic growth will help to address structural issues of poverty and deprivation in the local and regional economies stimulating local supply chains and increasing the skills and qualifications of resident populations. As part of the business cases, development work will be undertaken to establish clear pathways to work for local people and local businesses. This will be designed in a way that removes barriers to participation and will enable people from different groups to have equal opportunity to access the new employment the IZs are expected to create.

Community cohesion and tackling poverty

The IZ Programme for Wales will incentivise private businesses to invest in new opportunities in Wales, which will encompass making maximum progress towards decarbonisation. The IZ Programme in Wales will build on existing local strengths and will make cities, towns and villages in travelling distance of the IZs even better places to live and work. 

Inclusive economic growth has the potential to transform deprived communities in proximity to the IZs and to address the root causes of the poverty and disadvantage that people currently experience. The commitment to fair work and sustainability should ensure that new employment will be fair, safe and secure.

Welsh language

Lack of local employment opportunities in communities with high levels of Welsh speakers can lead to out-migration particularly of young people.  This can erode the use of the language in these communities.  Boosting local economic conditions in IZs areas with a significant proportion of Welsh speakers can therefore contribute to the preservation of the Welsh language by providing increased employment especially for young people. In areas with lower densities of Welsh-speakers creating new economic opportunities can create conditions to strengthen the language within the area.

Biodiversity and Net Zero

Pivoting activity in IZ areas towards green energy will reduce negative impacts on the environment, as well as supporting the UK’s transition towards a lower carbon future. The set up and development of the IZs are being guided and monitored by WG and UKG to ensure any impacts on biodiversity can be fully mitigated and biodiversity enhanced. 

Leading the transition to net zero will be a priority for both Welsh IZs.  Addressing decarbonisation is a key building block in the UK meeting its 2050 net zero target.  The Welsh IZs Programme is focussed on the opportunities presented by energy transition. 

Well-being of Future Generations (Wales) Act 2015

Long-term

The IZ Programme for Wales will aim to promote regeneration across local economies and communities by driving inclusive and sustainable growth locally, regionally and nationally.  The Welsh IZs will aim to support WG’s mission to build a prosperous, green and equal economy based on the principles of fair work, sustainability, and the industries and services of the future. The IZs will aim to further enhance Wales’s ability to attract investment and new businesses, bringing growth and prosperity to deprived communities. 

The IZ programme also aims to help Wales become a more sustainable nation through improving the social, economic and cultural well-being of Wales, specifically applying the sustainable development principle designed to maximise contribution to achieve each of the well-being goals as set out by the Well-being of Future Generations (Wales) Act 2015. 

The IZ Programme will provide access to a mixture of financial incentives coupled with good governance that will support a strong partnership between local, private and public sector stakeholders.  The Welsh and UK governments will support the IZs to attract investment and develop strong local and regional skills bases. 

The Welsh IZs can be a catalyst for significant economic growth within their localities and the wider regions linked to emerging industries.  This will support work to decarbonise industry at local, regional and national levels helping to meet the net zero carbon targets.  Green economic growth will help to address structural issues of poverty and deprivation in local and regional economies stimulating local supply chains and increasing the skills and qualifications of resident populations.

Prevention

The IZ Programme in Wales represents a new opportunity to help Wales continue to develop a globally competitive, entrepreneurial, inclusive and sustainable economy. It will make a positive contribution to WG’s commitments to the economy, fair work and the seven well-being goals set out in the Wellbeing of Future Generations (Wales) Act 2015 which deliver long term benefits to improve the economic, social, environmental and cultural wellbeing of Wales. 

The potential of the Welsh IZs is a unique opportunity to fast-track high potential economic projects including low carbon technology and decarbonisation focussed projects, contributing to the net zero agenda.  IZ status should trigger larger scale private investment. 

Government is seeking to overturn the advantages overseas manufacturers have amassed through state support, sunk costs, and accumulated economies of scale and extensive experience. The combined Welsh IZ offer of land, tax incentives, coordination of planning, enabling infrastructure and skills/innovation investment is compelling to investors.

Collaboration and Involvement 

Welsh IZs policy and oversight is a joint UKG and WG endeavour.

On the ground, CJCs will have a communications and engagement approach for marketing the opportunities and benefits of the IZs, and ways of engaging local communities (including under-represented groups), prospective investors, local strategic stakeholders including entities with a remit for (sub-) regional economic strategy; local political stakeholders; and local education and skills providers.

Regarding legislative aspects of the Welsh IZs Programme, amendments to the Land Transaction Tax Act were subject of an eight-week public consultation and engagement exercise, which began on 19 December 2023 and ended on 18 February 2024. The consultation document, which included the draft Statutory Instrument (SI), was published on the consultation pages of the Welsh Government’s website. Respondents were able to submit their views and comments. During the consultation, Welsh Government officials met with stakeholders, to discuss the proposed legislative amendments.

Integration

The Welsh IZs can secure a step change in industrial investment by creating new, fair, safe and secure jobs in the sectors of tomorrow and safeguarding the living standards of future generations.  The CJCs are taking a long-term, community-based approach, considering how the IZs can improve the ‘social, economic, environmental and cultural well-being of Wales’.

A prosperous Wales

Welsh IZs can deliver significant investment for Wales in modern industrial sectors, enabling people to benefit from the wealth generated through securing fair work.  The CJCS are planning to pool recycled NDR to support transformation, for example, through vocational and academic offers at schools, colleges and universities in the IZ regions, helping to prepare future generations for the jobs the 21st century economy will require, as well as upskilling adults already in employment.

A resilient Wales

The technology investments that the IZs will bring forward will, over the medium to long term, support the accelerated reduction of carbon emissions in Wales. Moreover, by supporting the transition away from a fossil-fuel based economy, it will reduce Wales’s exposure to demand-supply shocks of geopolitically vulnerable industries such as gas. 

Many of the Welsh IZ proposed site locations are existing brownfield locations, minimising the impact of development on local biodiversity. Where impacts are identified, the IZs are required to deliver mitigation measures.

A healthier Wales

The Welsh IZs can create fair, safe and secure jobs and increase employment which will improve the mental health of job seekers. People who live in areas with high employment rates are more likely to live longer - there is positive correlation between an area’s employment rate and both men’s and women’s healthy life expectancy.

A more equal Wales

The Welsh IZs will direct significant private investment to areas adjacent to deprived communities in Wales. They will generate labour market and training opportunities (through private investment, landowner/developer commitments and recycled NDR) for local people in these communities. The projected economic growth around the IZs will help to tackle poverty, growing local productivity and wages. 

A Wales of cohesive communities 

Increased investment and a growing local economy are often linked with increased community cohesion. 

A Wales of vibrant culture and thriving Welsh language 

The IZs will protect and strengthen the Welsh language. The creation of jobs across the whole skills spectrum, combined with a powerful education offering, will provide a strong platform of aspiration for local people. This will reduce emigration from IZ areas – a particular problem amongst the younger members of the population who are more likely to speak Welsh. The IZ can also create favourable economic conditions that could increase the number and use of the Welsh language in lower density areas

Furthermore, increased economic growth can generate revenue to invest into culture and arts. 

A globally responsible Wales 

The IZs provide the opportunity for Wales to achieve international recognition as a major producer and innovator in the development and manufacturing of products that can have a global impact.   

Reducing Negative Impacts

Government guidance to Welsh IZs is comprehensive requiring them to articulate their vision. This must include a summary of how the IZ can maximise its contribution to Wales’s national well-being goals as outlined in the Well-being of Future Generations Act.

In addition, each IZ must produce a business case including an economic case, fair work measures (including published fair work statements with clear commitments), an equalities impact assessment, decarbonisation proposals, and environmental management measures.

How will the impact of the proposal be monitored and evaluated as it progresses and when it concludes? 

The impact of Welsh IZs will be monitored and measured as part of a UK-wide IZs Monitoring and Evaluation Framework

Policy objectives 

This is an impact assessment for the Investment Zone (IZ) Programme for Wales which offers an opportunity to harness Wales’s abundant economic potential.

The Welsh Government (WG) worked with the UK Government (UKG) to design a Welsh IZ model, to deliver three main objectives:

• strengthen key industries
• boost innovation in Wales and across the UK
• support fair work and sustainability

Businesses will benefit from being part of a special zone. This includes:

• tax benefits; and
• grant funding.

The Programme includes policies on fair work and social partnership to ensure workers:

• are fairly rewarded, heard and represented
• can progress in a secure, healthy, and inclusive working environment
• have their rights respected.

In 2024, the UK and Welsh governments announced there would be two investment zones in Wales. These are:

• the Cardiff and Newport Travel to Work Areas (TTWAs), delivered by the South-East Wales Corporate Joint Committee (CJC)
• the Wrexham and Flintshire TTWA, delivered by the North Wales CJC

The IZs Programme is a long-term economic development initiative overseen by the Welsh and UK governments that will create employment and skills opportunities for children in the region when they become young adults.

Gathering evidence and engaging with children and young people

After an extensive search, no relevant research and data could be found on children and young people in relation to IZs or economic regeneration initiatives more generally.  The businesses that locate in the IZs, and the associated infrastructure projects, will come to fruition as part of ongoing business case implementation. Financial and commercial factors will guide this process albeit the investment must align with the IZ objectives to attract investment and create high-quality jobs.  Children and young people will be engaged when it is clear what investments and infrastructure are planned for each IZ so they can give their views on the nature and implementation of that investment.

Analysing the evidence and assessing the impact

IZs policy pays due regard to the United Nations Convention on the Rights of the Child. One of the primary objectives of IZs is to raise living standards for the local communities within an IZ’s boundary and in the communities linked to it. The ‘Rights of Children and Young Persons (Wales) Measure 2011’ that is based on ‘The United Nations Convention on the Rights of the Child’ contains the following articles that may be relevant in the context of IZs. 

• Article 2: with the adoption of fair work measures the IZs have the potential to enhance fairness and equity in economic prospects for young people across Wales.
• Article 12: the IZs will seek to include children in stakeholder engagement plans so that they have a say in how proposals are developed and implemented.  
• Article 27 (standard of living) – the employment and skills opportunities in IZs will raise the standards of living for families with children, and for young adults.
• Article 28 (right to education) – one of the primary foci of the Programme is skills development for young people

Ministerial advice and decision

This assessment has been signed off at Deputy Director level and the Cabinet Secretary for the Economy, Energy and Planning will be informed about the assessment.

Publication of CRIA

This assessment is being published on the Welsh Government website.

Communicating with children and young people

Welsh IZs will seek to include children in stakeholder engagement plans so that they have a say in how proposals are developed and implemented. 

Monitoring and review

The impact of Welsh IZs will be monitored and measured as part of a UK-wide IZs Monitoring and Evaluation Framework which is under development. This will consider ways of measuring impacts on children.

Welsh Language Impact Assessment reference number (completed by the Welsh Language Standards Team, email: Safonau.Standards@gov.wales): 03/10/2025

Does the proposal demonstrate a clear link with the Welsh Government’s strategy for the Welsh language? 

• Cymraeg 2050 A million Welsh speakers and the related Work Programme for 2021-2026?
• Cymraeg 2050: work programme 2021 to 2026 [HTML] | GOV.WALES?

Yes, the IZs Programme supports the Welsh Government’s aim of increasing the number of Welsh speakers and the use of Welsh by 2050. This will help build cohesive communities and protect and enhance the Welsh language, its culture and heritage.

Describe and explain the impact of the proposal on the Welsh language and explain how you will address these impacts in order to improve outcomes for the Welsh language. How will the proposal affect Welsh speakers of all ages (both positive and/or adverse effects)? 

The Welsh Government’s strategy “Cymraeg 2050: a million Welsh speakers” outlines the importance of sustaining and growing communities with high numbers of Welsh speakers. It also acknowledges the opportunities to increase the number and use of the language in areas with lower densities of Welsh-speakers which is central to the aim of ensuring the Welsh language flourishes across the whole of Wales. There are clear links to the IZs in this sense as the movement of people both into and from these communities can have an impact on the number of Welsh speakers.

The IZs will protect and strengthen the Welsh language with the creation of jobs across the whole skills spectrum, combined with a powerful education offering, and will provide a strong platform of aspiration for local people of all ages. Another of the Welsh language strategy aims is retaining young Welsh speakers in Welsh speaking communities as a goal as this promotes the continuation of the Welsh language into future generations. In addition, Cymraeg 2050 aims to create favourable conditions for the language to thrive in all parts of Wales which includes new opportunities to learn and use the language in areas with lower densities of Welsh-speakers.

Additionally, Section 4 of The Well-being of Future Generations (Wales) Act 2015 highlights the creation of a vibrant culture and thriving Welsh language as one of seven well-being goals. Welsh IZ business plans are required to set out how they will contribute to the seven National Well-being Goals including, “A Wales of vibrant culture and thriving Welsh language”.

The CJCs and the businesses they support will be required to meet statutory Welsh language standards including on digital material, signage, and training and public events. Providers and partners will be provided with the following toolkit Bilingual technology toolkit for good user experience | GOV.WALES

Evidence for this Welsh language assessment has been obtained from:

• the “Annual Population Survey - Ability to speak Welsh by local authority and year" (Welsh Government (2024) Annual Population Survey - Ability to speak Welsh by local authority and year); and
• engagement with the CJCs 

The numbers of Welsh speakers, and the use of Welsh, in the IZ areas will be tracked to measure the impact of the Programme on the language.

We will look at the findings of the independent evaluation of the ARFOR Programme and will consider the key lessons learned and opportunities to mainstream the Welsh language into socio-economic interventions.