The UK government announced in January 2020 their intention to establish a number of Freeports across the UK. The aim of the new Freeports was to boost International and domestic trade, innovation and investment, create jobs and encourage regeneration. They were to be seen as part of the governments ‘levelling-up’ agenda. The role of a Freeport is to offer customs and tax reliefs, the simplification of export and import procedures and the promotion of enhanced trade opportunities. These would in turn make the areas attractive to both International and domestic business. Also, in order to enable investment in skills and infrastructure, qualifying new developments in the areas enjoy full local retention of business rates. Coupled with the availability of seed capital from central government, the Freeports offer considerable advantages to businesses and trade.
Freeports are not a new idea
The concept of Freeports has been around for thousands of years. As recently as 2012, the UK has operated Freeports, although these were far more limited in scope than the latest concepts, and were concentrated on customs measures that were available elsewhere in the UK under other schemes. The plans are for a total of 8 Freeports operating in England, with a further two ‘green’ Freeports operating in Scotland, and an additional two planned for Wales. There hasn’t been agreement yet for a Northern Ireland site or sites.
Although there has been activity across the chosen 8 English sites previous to their official sign-offs by government, the first sites to become fully funded and operational were Plymouth, Solent and Teesside in December 2022, followed by Freeport East and Liverpool in January this year, and Thames and East Midlands in March. The eighth site is Humber which is expecting to receive sign-off and funding very soon.
The two Welsh sites to be jointly announced by the Welsh and UK government are Milford Haven/Port Talbot and Anglesey, and development has begun over the sites to bring them online by the end of the year. Plans for the sites focus on fair employment opportunities and low carbon solutions such as a hydrogen hub, carbon capture technologies and offshore floating wind farms. For the Anglesey site in particular development will be concentrating on marine energy testing (both wind and tidal).
Forth Green Freeport and Inverness and Cromarty Firth Green Freeport have been jointly announced by the UK and Scottish government to become Scotland’s first green Freeports. The sites needed to demonstrate how they would achieve net zero emissions by 2045 and support quality work opportunities with fair conditions at their core. Forth Green plans to deliver an additional 50,000 jobs across the UK, contributing over £4billion in GVA, and the Inverness and Cromarty Firth site is looking at a massive expansion in floating offshore wind development, with the establishment of 25,000 new jobs and the attraction of £2.6billion in new inward investment.
All the new Freeports will benefit from not just new streamlined customs measures, but a comprehensive range of tax reliefs and incentives. There is enhanced support for innovation and trade promotion, the addition of seed capital from central government to help pay for infrastructure and other enabling activities, and full local business rate retention for qualifying business developments located over the Freeport areas. Additionally, councils across Freeport areas are being asked to leverage existing planning protocols such as local development orders to pre-approve certain types of developments.
As partners in their relevant Freeport development strategy, they are also required to place employment and skills mandates to help local residents, particularly those from disadvantaged or deprived backgrounds, to seek fair and sustainable employment opportunities. Retained business rate revenues and seed capital investment can be used to fund these opportunities.
Structure and benefits
Freeports occupy a maximum physical area of 45km in diameter. They are designed to house a number of customs sites within their outer boundaries, plus up to three tax sites where tax reliefs and the local increased retention of growth in business rates will be applied. The tax sites are limited to 6 sq km in size and are required to be sited on under-developed land. The customs measures can actually already be applied for by businesses elsewhere across the UK, but there are some additional simplified declaration and authorisation processes available across the Freeports. More significant are the tax measures, and they include enhanced investment allowances, generous reliefs to employer National Insurance contributions, plus reliefs to stamp duty land taxes and business rates.
There are three main priorities for the establishment of Freeports. Firstly to promote job creation and regeneration, which is seen as a priority. Next to establish the areas as National hubs for investment and Global trade. The third priority is encourage innovation, leveraged by the relevant tax incentives and investment opportunities.
Freeports are seen as part of the government’s ‘levelling-up’ agenda, with the choice of areas like Teesside, Humberside and Liverpool representative of investment in high areas of deprivation and lack of employment and opportunities for skilled work. The areas are also part of government plans to reduce greenhouse gas emissions to net zero by 2050, with most Freeports instrumental in achieving these goals. This is particularly relevant to the Scottish and Welsh proposals.