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Confusion over UK freeports plans, survey finds

Most firms still do not have a full understanding of how UK freeports will operate and be governed, several months after a new wave of port-based special economic zones were unveiled, a survey of 500 businesses has found

Most firms still do not have a full understanding of how UK freeports will operate and be governed, several months after eight winning bids were announced for the new economic zones, a survey of UK businesses has found.

The survey by law firm Womble Bond Dickinson, including responses from the British Ports Association, Brittany Ferries and Lloyds Bank, found that 64% of about 500 businesses questioned were unclear about how the eight freeports in England would work, The Times reports.

England’s eight new freeports were announced at the March 2021 budget and consist of East Midlands Airport, Felixstowe and Harwich, Humber region, Liverpool City Region, Plymouth, Solent, Thames and Teesside.

Their introduction is seen as a key post-Brexit initiative to regenerate deprived port regions and create new hubs of international trade and investment.

Tax incentives in freeports are expected to be introduced next year.

Customs benefits

Despite being within a country’s geographical borders, freeports are effectively outside a country’s customs borders. This means goods imported into a freeport are generally exempt from customs duties until they leave the freeport and enter the domestic market. No duty is payable if they are re-exported.

The UK had seven freeports between 1984 and 2012 with locations including Liverpool, Southampton and Tilbury, The Times highlighted.

The survey included respondents with an annual turnover ranging from less than £10 million to more than £100 million, operating in sectors ranging from maritime, aerospace and energy, to logistics, manufacturing and technology. A third of respondents were based in a planned freeport.

Almost half of respondents agreed that freeports would boost trade, and a littleover two thirds said they would help attract overseas investment. About half of the businesses based within a planned freeport said they intended to create new skilled jobs within two years.

Richard Ballantyne, chief executive of the British Ports Association, said: “We are pushing policy-makers to consider how an improved regulatory and business environment might be rolled out for all port locations to stimulate growth and investment.”

In April, UK freight forwarding body the British International Freight Association (BIFA) said the publication of the International Trade Committee’s report on UK freeports would “do little to change the indifference to the freeports concept felt by the majority of its members”.

Robert Keen, BIFA’s director general, commented: “From a purely Customs viewpoint, the benefits of freeports are marginal and provide very few new advantages compared to the existing Customs Special Procedures, which since 1 January 2021 have no longer needed a guarantee to operate. The report also

acknowledges the security risks that accompany freeports and any BIFA member that is considering setting up in one of the eight freeports that has been announced to date, should bear in mind that long term storage is prohibited, and there is also a lack of clarity regarding customs regimes.”

Keen concluded: “Clearly, if the freeports scheme succeeds in increasing international trade and investment, it will be of benefit to BIFA members that handle a large percentage of the UK’s visible international trade, but that remains to be seen.”

In its report, the International Trade Committee described freeports as “designated areas which enjoy various concessions on customs and other benefits”.

Although Brexit supporters have long championed freeports as a benefit of leaving the EU, critics have pointed out that the UK had several freeports while it was within the EU and had eliminated them in 2012 under a previous Conservative-led coalition government. Others have argued that EU membership provided all of the benefits of freeports and much more, which was why they fell out of favour in the UK.

Post-Brexit customs and trading complications

However, the additional customs and other taxation and trading complications reintroduced by Brexit into UK-EU trading has reinforced the potential benefits of freeports under the new post-Brexit arrangements, alongside other facilities such as customs bonded warehousing and simplification arrangements.

Those gaining freeport status are expected benefits such as favourable customs duties and processing, suspension of VAT, business rates relief, zero national insurance contributions, enhanced capital allowances, simplified planning and development rules and stamp duty reliefs.

Government documents indicate it believes that the importance of initiatives such as freeports had been increased further by the effects of Covid-19, noting: “As we look beyond the unprecedented disruption caused by the Covid-19 pandemic, the government is more determined than ever to boost our economy, level up our country and strengthen our Union through programmes such as the UK Shared Prosperity Fund, the Levelling Up Fund, and Freeports. Revitalising our port regions through an ambitious Freeport policy is a key component of realising this vision and unlocking the deep potential of all nations and regions of the UK.”

Displacement concerns

Although the government claims that freeports would create “national hubs for trade” and “turbo-charge” the UK’s economic recovery, critics are concerned that they will instead simply shift investment from one location to another. Adam Marshall, head of the British Chambers of Commerce, has said his members were nervous that jobs could be “displaced”, while an internal Treasury document conceded that “zone-based policy can have a displacement effect”, the FT reported.

Source: Lloyds Loading List

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