Member Article

Comment from Paula Swain, Partner National Head of Commercial Recoveries and Head of the Solent office for Shoosmiths, Paula is also a Director with the Solent LEP and was part of the Freeport taskforce which was successful in its bid.

Freeports: What are they and how do they work?

There is no fixed definition of a Freeport (the term is often used synonymously with “free trade zones”) but usually, a Freeport lies within a country’s geographical space but outside its customs territory. Exactly how they operate differs between different countries. Rishi Sunak’s Centre for Policy Studies report, which informed the government’s proposals, drew heavily on the United States experience of Freeports (termed Foreign Trade Zones or FTZ in the U.S.A.). Over 230 FTZ projects and nearly 400 subzones in the United States have, by and large, been effective.

Often situated within, or in proximity to, seaports, riverports and airports it’s estimated that there are 3,500 Freeports in the world, employing 66 million people. Indeed, Britain had several Freeports at various points between 1984 and 2012 (now only one remains in the Isle of Man which is a crown dependency and therefore technically not part of the EU or UK).  In 2012, the Statutory Instruments that set up the remaining five Freeports in Liverpool, Southampton, Port of Tilbury, Port of Sheerness and Prestwick Airport expired, and they were closed.  Government focused instead on “enterprise zones” where clusters of companies were offered tax relief and accelerated planning permissions.

Freeports: how do they work and what are the benefits?

Businesses operating in Freeports will benefit from more generous tax reliefs, customs benefits and wider government support, bringing investment, trade and jobs. It is expected that businesses operating in Freeports will be able to benefit from enhanced 10% rate of Structures and Buildings Allowance for constructing or renovating non-residential structures and buildings, capital allowance of 100% for companies investing in plant and machinery, full relief from Stamp Duty Land Tax on the purchase of land or property, full Business Rates relief and employer National Insurance contributions relief. Importers get relief on customs duties or can defer the duties while the goods are held in the Freeport, and there are simplified customs procedures.

Job creation around Freeports can also be expected. The U.S. experience of Free Trade Zones resulted in an improvement in employment and wages in the zones themselves and the broader community according a report conducted for the US National Association of Foreign-Trade Zones by The Trade Partnership February 2019. Those gains were greatest in the early years for employment and wages, while the establishment of an FTZ also caused a positive increase in employment growth in the surrounding area.

Freeports can also play an important role in stimulating infrastructure investment and the renaissance of coastal communities, supporting post-COVID economic recovery, but can also have an impact on inland sites, combining fiscal relief for investors and exporters with agile planning regimes and coordinated infrastructure programmes that dovetail with the Freeport’s existing hinterland.

Economic activity in the Solent area (Portsmouth and Southampton) for example has a large ‘multiplier’ effect on the local economy but the national economy benefits too, since the North and Midlands also depend on the trade flows which pass through the Solent.

Good transport links to support Freeport activity directly and to accommodate additional traffic in congested areas surrounding sites will also be critical. Each location will face its own unique challenges. For example, the Port of Southampton, unusually for a port of its scale and importance, is located in a densely packed regional city centre. This presents access challenges with competing demands for road space.

Technology is used to manage freight movements into the container port, which is located close to the M271, but access to cruise terminals conflicts with access to the city centre. Post-COVID, when multiple cruise ships once again disembark and embark passengers, the road and rail network will come under significant stress. Establishing Solent as a Freeport means there will at last be an opportunity for significant and immediate investment in new infrastructure to alleviate this.

There is certainly great potential for all those successful bidders to transform into industrial hubs. The Northern locations in particular will have the added advantage of the Treasury being close at hand in Darlington and the UK Infrastructure Bank sited in Leeds, but I am absolutely thrilled with this result for Solent, which will help to drive focus and investment in our region. Shoosmiths will continue to drive for a strong identity and impact in Solent and this result validates the firm’s decision to invest in Solent for the long term.

 

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