• Beatrice Bullough

CMI Explains: Freeports



As The Chancellor announces his budget today, he has revealed the locations of a number of new freeports across the country in a bid to rejuvenate deprived areas. Freeports - which are geographical areas that goods can be imported to without paying tariffs, had existed in the UK until 2012 and they exist throughout the EU. Their revival would mean component goods could be imported into a freeport without paying the normal import taxes, then processed into another good before either being exported abroad with no tariffs or sold within the UK after paying import tax. Because the tariff on the finished good would be cheaper, it could incentivise global manufacturers to create facilities in freeports to cut costs, which the government says will create new jobs and trading opportunities.



The Chancellor has planned to bring freeports back post-brexit as a way of encouraging business development, especially in maritime areas that have seen industry take a hit. This approach is similar to George Osbourne's, who as Chancellor introduced Enterprise Zones to target 'the parts of Britain that had missed out' on areas of economic success. The freeports won't just be tariff free, but offer other incentives such as reduced stamp-duty (a land tax) and lowered business rates (a property tax). Such offers will hope to draw in international business to areas that either haven't got a history in such trade, or have seen a downturn since Brexit.



Ministers had promised at least 10 freeports across the whole of the UK, with the locations of 8 English freeports announced this afternoon as East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside. In his announcement, the Chancellor claimed these locations will 'unlock billions of pounds of private sector investment', with trade and jobs being created 'up and down the country.' Thirty different areas had reportedly bid to be chosen for the scheme with the final priority seeming to be northern, coast-side and deprived areas. This effort to reduce regional inequality will face much scrutiny after the criticisms levelled at the 'Northern Powerhouse' and accusations of impartiality over the £3.6 billion fund for struggling English towns.

Westminster isn't the only government looking at freeports as an option for financial opportunity. With Scotland, Wales and Northern Ireland all in charge of their own policy on freeports, the Scottish government has introduced plans for 'greenports' which promise to help create 'inclusive growth, fair work practices and delivering a net zero economy.' Tax and customs relief would only be provided for those that pay employers the real living wage, commit to supporting sustainable growth in local communities, work as part of Scotland’s transition to net zero Greenhouse gas emissions, and adopt the Scottish Business Pledge. With bidding for freeport licenses constantly out-demanding supply, only those that adopt the voluntary real living wage of £9.50 and can promise the best sustainable development will be in with a chance of success.

There is widespread support for freeports, notably from the British Ports Association who have lobbied for the removal of the cap on the number of freeports in the UK, which currently stands at 10. Freeports won't only be maritime areas, but 95% of the UK's international trade is done at ports and they have been uniquely impacted by Brexit meaning that they usually make up the largest proportion of freeports. The Chancellor promised that freeports will "turbo-charge" the economy, but others disagree. Accusations that freeports are nothing more than glorified tax havens that will cost taxpayers with no guaranteed return have been levelled at the new plans.

Freeports were originally scrapped in 2012, with complaints of illegal activity and lack of benefits for local areas. Many argue that there's no reason to reinstate them without solid proof that they work in a time where the government desperately needs the taxes they plan on cutting. There are also doubts over whether the promised job and trade creation will actually be seen, with former diplomat and trade negotiator, Dmitry Grozoubinski, saying freeports wouldn't 'do much in terms of jobs and growth.' Regardless of any criticism, the Government has moved ahead with the plan of creating new freeports as part of the budget, meaning that only time will tell whether or not they will bring prosperity to their chosen destinations, or whether they will become another failed attempt at economic revival for areas most in need.