Freeports & The Quest To Rebalance Economic Growth:
Budgets always come with a plethora of jargon! For me, as the marketing mortal of a firm of financial advisers, it can be an enlightening time of year. As Rishi Sunak makes his announcements, our advisers muse over the nuances. But, I’m often the one that ponders the question that will resonate with clients all over the UK. ‘What does that mean in English?!’ So, when ‘freeports’ arose as a buzzword in the latest Budget, I once again had cause to ask for clarification…
What are Freeports?
Typically, freeports are located around ports or airports. The idea is that goods arriving in a freeport are not subject to the usual tariffs levied on imports. Instead, these only become payable if the goods leave the freeport and are moved elsewhere in the UK. If the goods are shipped back overseas, no tariffs are payable.
Each freeport can be up to 45km (27 miles) across, covering a significant geographical area.
The Chancellor has proposed the creation of eight such freeports. Due to become operational later this year – these will be at East Midlands Airport, Teesside, the Humber, the Solent, Plymouth, Liverpool City Region, Felixstowe and Harwich, and the Thames.
How will the rules governing them be different?
The Chancellor’s Budget was not the first time freeports have been seen. The UK had several between 1984 and 2021. The most well-known of these were Southampton, Liverpool and the Port of Tilbury. But, Rishi Sunak was keen to point out that his new generation of freeports will operate under different rules. There will be new tax breaks and relaxed planning requirements. Employers will also pay reduced national insurance for any new staff they take on. The onus is very much upon making business interactions cheaper and easier while the UK economy strives to recover.
Will they benefit the UK economy, though?
As always, opinions vary!
Supporters believe freeports help increase manufacturing whilst encouraging jobs and investment in areas that might otherwise struggle to attract them. In the past, construction group Mace even indicated freeports could create as many as 150,000 jobs. In turn, they would add £9bn a year to the UK economy! Obviously, this would be a key part of the Government’s proposed ‘levelling up’ agenda, helping rebalance economic growth around the country.
On the flip side, opponents of freeports argue that they don’t boost overall economic activity. They believe freeports simply transfer it from one area to another. The main misgiving here is that it then falls to the taxpayer to foot the bill.
The Government, though, is resolute. There are around 80 freeports in the European Union, and – aided by Brexit, the UK now has far greater flexibility now it is no longer bound by European law. As such, if Rishi Sunak’s move pays off, the UK freeports could expect to win a lot of business.