Why Freeports could help re-balance the UK economy

What is a Freeport?

Freeports are ‘special economic’ areas; secure customs zones located at ports, where normal tax and tariff customs rules of a country, for example, the UK, do not apply.

This is particularly of interest to importers, exporters and manufacturers because it would allow the import of materials to enjoy tax incentives and their manufacture, which are then exported, to be done so without tariffs.

Companies can operate in the designated zone and by doing so pay lower taxes, such as reduced VAT and lower rates of employment tax. The Government has also implied that it could also use tax changes to reduce the costs of hiring workers in Freeport sites.

Other ways that Freeports could be used to incentivise business is via a host of different tax incentives, around for example, business rates and enhanced capital allowance on new machinery and equipment or R&D tax credits.

The core customs benefit the Government is proposing

Where would the UK’s Freeports be located?

The Government has said it would like to see a Freeport in every nation and is considering up to 10 Freeports in the UK. Typically, they are located close to ports, which does include rail and airports.

The north can also benefit from its digital and hi-tech sectors, because according to the Adam Smith Institute, Freeports could and should, be hi-tech, high enterprise hubs for the British economy, springboards for regional and global competition through free trade, and gateways to local employment and prosperity.

Director of the Adam Smith Institute, Eamonn Butler has said that “Freeports will provide safe harbour for trade in turbulent times and show that hi-tech hubs of enterprise, low taxes, deregulation and trade without restriction can rebalance the economy and benefit regions that have been left behind. Free trade and Freeports will set Britain on the right course as we sail out of the European Union and into the world.”

The northern region has the infrastructure in place to attract new investment and benefit from the opportunities of a vibrant digital sector that can help to build a digitally connected Freeport.

It will also provide opportunities for collaboration and partnership across different sectors and regions and draw upon the excellence created in sectors that the north excels in – manufacturing, transport and logistics – and provide a landscape to trial innovative technologies in customs as well as a platform to pursue green/decarbonisation programmes.

Transport connectivity

Freeports could also provide a welcome boost for improved transport connectivity, particularly on our road and rail networks.

Richard Ballantyne, Chief Executive of the British Ports Association, which has been lobbying for a port zoning economic vision akin to the Freeports strategy, said that Freeports^ mean the government can explore how to better deliver on its levelling up agenda without picking regions over each other. Coastal communities are often in areas of high deprivation and have also experienced challenges resulting from the Coronavirus pandemic and lockdown so this potentially transformative policy will be welcomed across a range of locations.

And for a region like the North East, where the value of goods exports per adult is higher than across England (excluding London) there is plenty to be gained especially through job generation and inward investment. The Tees Valley Combined Authority estimates that a Freeport on the River Tees could create up to 32,000 jobs and add £2billion to the regional economy.

There is great potential across the north to drive manufacturing and exports and we need to grasp the opportunities because exporting and manufacturing is key to this success. If we are to get more balanced regional growth, then where better to start than Freeports?

Read related insights