On 7 October 2020, the government set out further details on how it will introduce a number of new Freeports across the UK in order to create jobs, investment and regenerate communities post-Brexit. We look at what this means and how this could help benefit the economy.
Freeports can be airports or maritime ports where imports can enter with simplified customs documentation and without paying tariffs. Within the Freeport, businesses can make products using the imported components and then export them without incurring the usual tariffs and with less red tape.
In a nutshell, Freeports are designated areas which come with a range of tax breaks and government support, designed to specifically encourage businesses that import, process and then re-export goods.
One point which is often overlooked is that Freeports go beyond encouraging the manufacture of goods from imported components. The government is keen to establish them as 'hotbeds for innovation', focusing private and public-sector investment in R&D, to encourage innovators to collaborate in new ways, while offering controlled spaces to develop and trial new ideas and technologies. The government hopes this will create new markets for UK products and services, improving productivity, creating jobs and encouraging investment.
The government expects Freeports to become national hubs for global trade and investment, intensifying the economic impact of our ports and generating increased economic activity across the UK.
Freeports will have a significant positive impact on the local economy, helping to create jobs and improve regeneration in those local areas. It has been suggested that it could create as much as 10,000 jobs just in relation to the Port of Dover if they become a Global Trade and Innovation (GTI) Zone.
It is likely to attract additional businesses that trade internationally, including those involved in the wider supply chains. There is also the potential benefit of helping to reduce travel and transport issues and are likely to be closely linked with businesses involved in the transport and infrastructure sector.
In short, they could provide a real boost to the local economy as we come out of the pandemic and deal with the changes caused by Brexit. The real benefit of Freeports will be realised if the government continues to support them and also introduces additional incentives to encourage businesses to relocate to those areas, for example by relaxing planning rules, grants or other tax reliefs.
Thee free trade zones will help those trading internationally not just through helping with tariffs, but also through becoming a hub with similar businesses and businesses that can support them in exporting their goods in due course. This should encourage the sharing of ideas, development of new technologies and ultimately improved efficiencies.
The UK’s close physical proximity to the EU, makes it well placed to continue to sell into those markets and the use of Freeports could help to incentivise businesses to remain in the UK (rather than re-locate to the EU) or even attract new investment from foreign companies that could expand by using the UK as a base for selling into the EU, as well as the UK market.
On the 16 November the full Bidding Prospectus became live.
This Bidding Prospectus is a guide for bidders entering that process. It sets out the government’s ambition for their Freeports policy, their core Freeport objectives, what is expected of bidders and what a best-in-class Freeport proposal from them will include.
Bidders will need to submit their bids by Friday 5 February 2021, and a decision will be made in spring.
The announcement by the government confirmed that Freeport statuses will also benefit from a wide package of tax reliefs, including for purchasing land, constructing or renovating buildings, investing in new plant and machinery assets and on Employer National Insurance Contributions, which is good news for business. In addition streamlined planning processes and government funding will also boost redevelopment and promote regeneration and innovation in those areas.
Tim Morris, Chief Executive Officer, UK Major Ports Group, said:
“We welcome the launch of the Freeports Bidding Prospectus. Port operators all across the UK are developing ambitious proposals to respond to the Freeports opportunity. The UK Major Ports Group and the port operators themselves look forward to working closely with the government to build ever stronger gateways for the UK’s global trade, boost prosperity for coastal and inland communities and maintain high standards.”
There is a lot of information in the prospectus and with a deadline of 5 February, we would encourage those interested, to start reading through and considering their bids as soon as possible. With COVID-19, Christmas and Brexit all occurring between now and the deadline the period is not as long as it may seem.
For more information on how this could impact your business, contact Darren Rigden or your usual Crowe contact.