Public Affairs Director Christine Quigley looks into freeports and what they could mean for the UK

Chancellor Rishi Sunak has long been a fan of freeports. While he was still a Conservative backbencher, he authored a key report for the Centre for Policy Studies, The Free Ports Opportunity, outlining the case for freeports. He identified the key advantages of implementing this policy post-Brexit as increasing manufacturing output, creating regional employment and promoting international trade. The policy has attracted broader support across the Conservative Party as a way to boost regional economies post-Brexit. As Chancellor, Sunak now has the opportunity to put these plans into action, but what will freeports mean for the UK? 

Last week, the Government set out its plans for the creation of the first UK freeports in England. Within these areas, companies will be able to import goods without paying tariffs, process them and then either re-export without paying tariffs, or pay tariffs to sell into the UK market. Sea, air and rail ports in England will be invited to bid for freeport status before the end of the year, and the first sites in England will be established before the end of 2021. This status will confer a range of special regulations, including an “ambitious new customs model”, a package of tax reliefs on business investments, relaxations of planning laws to stimulate development and initiatives to encourage innovation. 

Freeports, while new to the UK, aren’t exactly a new idea. The first free trade zone (FTZ) was set up around Shannon Airport in 1959, with businesses based around it enjoying tax incentives in order to attract investment to Ireland’s west coast. While the majority of tax incentives and tariff reductions here have now ended, major manufacturers who had moved to the area have stayed, while the Shannon Free Zone continues to attract learning visits from around the world. There are now over 3,500 FTZs globally, across 130 countries, indicating that quite a lot of countries find them economically beneficial, even if academic research on their benefits demonstrate a more mixed picture. 

A number of airports and seaports have already indicated strong interest in bidding for freeport status, including the Port of Liverpool, Port of Tilbury and Port of Dundee. However, the trade union movement has raised concerns about workers’ rights in liberalised free trade zones, with the TUC arguing in February that freeports could be “a Trojan Horse for watering down employment protections after Brexit”, and that this could lead to lower pay and less job security in coastal communities that are already struggling. Trade unions aren’t the only groups raising questions about the disadvantages of freeports – last year, the Financial Times warned that the policy is “no silver bullet” and stated that “the threat of disruption from a no-deal Brexit cannot be defused so easily”.  

Support for the rollout of freeports is certainly not guaranteed across the political spectrum. Former Labour Shadow Chancellor John McDonnell MP heavily criticised the Government’s freeports policy earlier this year, warning that it would lead to the super-rich hoarding assets and avoiding taxes, but the party has been less vocal on last week’s announcement. SNP Trade Minister Ivan McKee has suggested that the Scottish Government could decline a potential freeport in Scotland. He argued that Scotland’s future economy would be one of high levels of technology, productivity, wages and innovation, and argued that the “traditional free port model, where you’re importing widgets, bolting them together and exporting them again” does not fit with this vision. As a model based on attracting long-term private sector investment, this lack of broad political support and the potential for future Labour-led or coalition governments to move away from freeports could jeopardise the programme rollout. With delayed Metro Mayoral elections now due in May 2021, we may also expect freeports to become political footballs across a number of city regions over the coming months. 

While the Chancellor will almost certainly continue to press ahead with the rollout of freeports in 2021, the political argument for them is not yet won and public awareness of the policy remains low. Conversations around how international models can be adapted to best fit the UK’s economic conditions are likely to grow in prominence over the next year as successful bidders are identified and the first freeports prepare to open their doors. 

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