Freeports, infrastructure, regeneration - all this and more

 

‘Blue wall’ mayor bids to create a super-port

Tees Valley mayor Ben Houchen aims to absorb PD Ports' vast Teesport container gateway into the freeport zone

ByRussell Lynch, ECONOMICS EDITOR17 April 2021 • 8:00pm

The Tees Valley mayor Ben Houchen is in talks with ministers and Middle East investors over a deal to create a new super-port and “level up” Britain’s former industrial heartlands.

Teesside is already set to become the largest freeport in the UK, after winning the new tax-friendly status to encourage investment and jobs in March’s Budget.

Some 4,500 acres of land including the former SSI steelworks is now owned by the South Tees Development Corporation (STDC) chaired by Mr Houchen, representing the biggest regeneration project in the UK.

But the mayor, who is seeking re-election next month, is now mulling an audacious takeover of PD Ports, currently owned by Canadian fund giant Brookfield. Mr Houchen aims to absorb PD Ports’ vast Teesport container gateway into the freeport zone and spur further investment.

Mr Houchen - a key ally of Boris Johnson in the so-called “blue wall” that helped deliver his resounding General Election victory - is understood to be in early talks with Downing Street and the new Office for Investment headed by Lord Grimstone over the possibility of buying PD Ports, whose major asset is the Teesport facility.

The move could be backed by Abu Dhabi based sovereign wealth fund Mubadala, which last month agreed a joint investment deal with the UK government which could see up to £5bn spent on life sciences, technology, clean energy and infrastructure over the next five years.

The senior source said: “One of the projects that we’re working on with Number 10 and Mubadala is the acquisition of PD Ports, and then to bring PD Ports into the wider ownership of Teesworks [the STDC] with various private partners, and then to turn the whole 4,500 acre site into a world-leading fully automated freeport with another £1-1.5bn worth of investment - to turn it into a brand new inward trade port into the UK.

“Bringing all of this together, it would probably make this the most advanced port in the UK with the investment from the Middle East.”

If realised, Mr Houchen’s ambitions would dwarf his previous £40m deal to take the region’s airport to public ownership - a key pledge when he was first elected in 2017 - after it was threatened with closure. Houchen said at the time that “international investment doesn’t arrive on a bus”.

Ben Houchen became Tees Valley mayor at the age of 30 CREDIT: Mark Pinder 

PD Ports’ main asset is the Teesport site, which employs 700 people and handled 28m tonnes of goods last year. But it is surrounded by the STDC land with just a single point of access, a risk to the business as the wider regeneration project gathers pace and construction work begins elsewhere on the vast site.

Insiders said the access issue is hampering Brookfield’s efforts to dispose of the company after putting PD Ports up for sale last year with a rumoured £1.2bn price tag through investment bank RBC.

Several buyers are understood have looked over the business but are unwilling to proceed without a second access to the port. “They can’t sell the business before this issue is resolved,” the source said.

The problem has gained added urgency as US conglomerate GE Renewable Energy has committed to a major new manufacturing facility building giant blades for wind turbines, which should create 2000 jobs.

“There is one road in and out of the port but if we build a massive shed for GE there is no prospect of getting a second access,” the source said. The STDC has recently taken PD Ports to court to establish that the company only has one legal access.

The Department for International Trade refused to comment on “commercial transactions by independent parties”. Lord Grimstone, Brookfield and the STDC all declined to comment while Mubadala was approached for comment.

This one is especially for Charlie:

 

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

ByAlan Tovey,  INDUSTRY EDITOR31 January 2021 • 9:00am

The Chancellor Rishi Sunak visits The Royal Docks in London as he announces a new Freeports strategyCREDIT: HM Treasury

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.”

Freeports will avoid customs tariffs in a bid to make imports and exports smootherCREDIT: Simon Walker/HM Treasury

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.”