🕒 Article read time: 3 minutes
Freeports – a game-changer for UK maritime and trade?
As the end of the Brexit transition period looms large on the horizon, the plan to establish at least 10 Freeports in the UK has been attracting growing interest from businesses, particularly those whose activities include trading goods between the UK and overseas markets.
Freeports have been billed as an opportunity “to turbo-charge post-Brexit trade” by the government. But do they represent a silver bullet for potential trade disruption after Brexit? Or do they risk handing a competitive advantage to a relatively small selection of UK ports?
DEFINING FREEPORTS
Freeports are special economic zones located at ports, which are exempt from customs duties. Business at a Freeport can be carried out inside a country’s land border, but under different customs rules. Not only can Freeports offer relief from duties and import taxes, they can ease tax and planning regulations, and reduce administrative burdens and tariff controls too.
Duty at the proposed zones in the UK will only be paid on goods upon leaving the Freeport area as a finished product and entering the UK market. This means that businesses within the zone can import, warehouse and re-export goods duty free. The theory is that as well as helping businesses become more globally competitive, companies will also be able to defer paying tax on their products while they are on site, helping manage cash flow.
GOVERNMENT ANNOUNCEMENT
It was Trade Secretary Liz Truss MP who first announced the government’s plan to establish 10 Freeports in the UK in August 2019, heralding them as “the gateway to our future prosperity, creating thousands of jobs”.
It was decided that ports and airports across the UK would be invited to bid to become one of the new Freeports. To advise the government, a Freeports Advisory Panel was set up to include government ministers, along with a miscellany of experts ranging from a small business champion to a tax specialist.
The big idea was that the new Freeports, which could be maritime port cities, rail hubs or airports, would be well placed to maximise post-Brexit opportunities, including growing trade with the US and Asian markets.
One member of the Freeports Advisory Panel is Richard Ballantyne, Chief Executive of the British Ports Association, which represents 86% of UK port trade. He said: “We are excited to see an ambitious Freeports programme that recognises the critical role ports play in national and regional economies. Ports are hubs of industry and economic enablers. Designating special Freeport areas with business friendly rules can facilitate new trade as well as expedite planning and job-boosting development.“
CONSULTING WITH STAKEHOLDERS
The consultation laying out the government’s vision for UK Freeports was published on 10 February 2020, and was originally scheduled to close on 20 April. But as ports and businesses faced disruption as a result of COVID-19, the government extended it until 13 July, giving all stakeholders time to submit their views and fully engage with the consultation. Outlining the government’s proposals covering tax, customs, planning and encouraging innovation, the consultation garnered 364 responses.
In his foreword to the government’s consultation response, Rishi Sunak MP, Chancellor of the Exchequer, said the Freeports policy contained measures which will “increase trade and investment, kickstart regeneration through job creation and boost innovation across the four nations of the UK.”
He added: “In this document, we set out what we heard, what we learnt and how this developed our UK Freeports vision.”
Of the 364 respondents, 39% were from ports, other businesses or business associations, the remainder being from public sector bodies, NGOs and interested individuals.
In its response to the consultation, Logistics UK called for an ambitious customs model, measures to speed up planning processes, and a commitment to geographic flexibility and opportunities for all transport modes. All of these requests have been included in the plans.
NEXT STEPS
Earlier this month the government confirmed that sea, air and rail ports in England are invited to bid for ‘freeport status’ before the end of the year, with the aim being to open the successful applicants as Freeports by the end of 2021. A bidding prospectus, with more details on the authorisation procedure for Freeport operators and businesses operating in Freeports, including infrastructure and security requirements, is expected later this autumn.
*Read the government’s response to the consultation
Published On: 22/10/2020 15:31:49
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