23 August 2022
In 2016 a young, unknown MP wrote a report for the Centre for Policy Studies extolling the benefits of freeports as the UK planned to exit the European Union. When he was chancellor, Rishi Sunak fulfilled his 2016 vision, and in the March 2021 Budget, announced eight new freeports.
Liz Truss has promised to cut taxes, help people with the cost-of-living crisis and has pledged to turn brownfield sites and other locations into investment zones, dubbed “full-fat freeports”, stating:
“As prime minister, I will be laser-focused on turbocharging business investment and delivering the economic growth our country desperately needs.”
What are freeports?
Freeports are special areas within the UK’s borders where different economic regulations apply. Freeports in England are centred around one or more air, rail, or seaport, but can extend up to 45km beyond the port.
Eligible businesses have access to a suite of tax benefits including reduced import tariffs in some circumstances and tax reliefs in respect of business rates, property stamp taxes, employer national insurance contributions, an enhanced structures and building allowance, and enhanced capital allowances, all designed to incentivise new investment within the boundaries of freeport ’tax sites’.
In what may be seen as a strengthening in support for freeports, Ms Truss has said that she will reform current government policy to “unleash the potential” of current freeports and “by creating these new investment zones we will finally prove to businesses that we’re committed to their futures”.
Are freeports the answer?
Whilst freeports and enterprise zones are a help to the many businesses who have a presence in the locality, the benefits are not enjoyed by businesses who don’t have a presence there. Some say that they don’t help the economy overall but simply move investment to an alternative site at the taxpayer’s cost.
Critics also point to the looser regulatory control being open to money laundering and possible tax havens.
Freeports are not a new phenomenon, Margaret Thatcher’s government in her second term, gave freeport status to six areas, but they were not deemed a success and in 2012 David Cameron did not renew their licences.
So, with both candidates advocating the creation of freeports, will we see more created and further incentives included? The current government has stated that it is committed to establishing at least one freeport in each of Scotland, Wales and Northern Ireland as soon as possible. That could be just the start with a lot more to come.