Freeports competition seeks to turn the tide on red tape for industry
The first of the low tax, pro-business enclaves could be up and running this year
Billed by Chancellor Rishi Sunak as a way of “turbo-charging” post-Brexit Britain and regenerating regions “left behind”, freeports are touted as a means to reinvigorate the economy.
Freeport status offers tax breaks, easier planning consent and lower National Insurance on wages of staff employed in them. They also avoid customs tariffs, meaning goods can be landed there, manufactured to add value, then brought into the UK or exported. Friday is the deadline for bids to be designated a freeport to be submitted to the Treasury, with the Government having made the policy a key part of the “levelling up” agenda.
Sunak describes freeports as having the potential to “create national hubs for trade, innovation and commerce” that he sees as a way to “deliver lasting prosperity”.
About 30 bids are expected, with not only ports, but airports, business parks and regional authorities forming alliances to apply. Applications for the 10, possibly 12, awards will be assessed in March, with decisions in the spring. It’s hoped the first freeports could be operating before 2022. Tees Valley mayor Ben Houchen is one of their most vocal supporters.
In 2019, he submitted a paper to the Government predicting a freeport on the River Tees could create 32,000 jobs and add £2bn to the economy.
“Our bid is already delivering benefits,” he says. “We’ve got a foreign investor who would bring £100m of investment and 1,500 jobs insisting on being written into the terms of our bid, with them going ahead dependent on us getting freeport status.”
Freeports have been tried before in the UK, but were quietly shelved in 2012 when they didn’t deliver the benefits expected. Jackie Doyle-Price, the Conservative chair of the all-party maritime and ports group, believes this time will be different.
“Brexit means we are freed from the constraints of the EU, and we’ve got serious, credible bids with business and the public sector coming together,” she says. “Most of the land being looked at for inclusion around the sites is brownfield, ex-industrial. You can’t build houses on it.”
However, some are not so confident freeports will deliver. One industry insider describes them as “not so radical as you think”, saying many of the incentives can be offered under existing policies. Throwing cash at freeports to lure investors could also trigger a response from the EU, others warn. And they may not attract the kind of innovative jobs and quality businesses the Chancellor is desperate for, says Paul Swinney, research director at the Centre for Cities.
“Freeports attract a certain type of business that’s concerned by cost,” he says. “Manufacturing, certainly, but not ones that generate intellectual property.”
“High-tech, innovative employers don’t always go looking for low-cost locations,” adds Swinney. “They are willing to pay for talent, which often clusters, creating more expensive areas thanks to the higher wages they are willing to pay.”
Freeports are unlikely to be in such areas, he adds, meaning they tend to be most attractive to manufacturers, though their wages tend to be above average. “You can give freeports a glitzy title, but it’s industry they attract. Just look at Nissan; it does its production in low-cost Sunderland, but its design and engineering is around London.”
Indeed, Nissan hopes to benefit from freeports, joining a bid for an area stretching from the Port of Tyne to the carmaker’s Sunderland plant. Getting freeport status may mean components coming into the factory for assembly into cars which are exported is easier.
Although intended to level up, and probably with a focus on the North, as well as at least one each in Scotland, Wales and Northern Ireland, the pandemic means once-thriving areas have been economically devastated.
One source says “it’s a given” Heathrow would win freeport status if it bids, such is the damage to the area around the airport caused by the collapse in air travel.
A 1,600-acre bid for a London freeport backed by the Tilbury and Thames Gateway ports is also highly favoured. Doyle-Price, whose Thurrock constituency neighbours the site, has an interest in the creation of a local freeport. She argues to focus just on the North would be wrong: “Three of the country’s poorest towns are in my area.
“It’s simplistic to look North. There are places of deprivation even next to prosperous areas, and coastal communities particularly hard hit all around the country.”
Meanwhile, Houchen warns freeports “have to deliver”. “There’s no better example of levelling up than freeports,” he says.
“For a government elected by the ‘red wall’, people in those areas will want to see them in place and lifting their regional economies.”
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