The government has named the first three UK freeports – special economic zones where normal tax and customs rules do not apply – to come into operation next month.
Teesside, Humber and Thames are designated Freeport tax sites in secondary legislation today. They will benefit from a range of tax breaks and incentives, including NIC relief, capital allowances for buildings and machinery, and relief on stamp duty and rates.
The confirmation was included in this week’s Autumn Budget and its accompanying red book. The Treasury announced the eight freeport locations in England in the Spring Budget.
The Barking & Dagenham Post reports that Thames Freeport will generate more than £4.5bn in new public and private investment and create at least 21,000 jobs, with significant investment in infrastructure, training and skills.
It will connect the Ford Dagenham engine plant with the global ports at London Gateway and Tilbury, with a focus on developing automated and electric vehicles.
Teesside Freeport is set to the be the biggest in the UK and will bring 18,000 jobs, reports the Northern Echo.
A new freeport brand with the tagline ‘Global trade, global scale’ was unveiled this week. Tees Valley Mayor Ben Houchen said the freeport would add £3bn to the economy once established.
Humber Freeport could create 7,000 jobs with a focus on green technology including offshore wind, hydrogen and carbon capture, reports the Hull Daily Mail.
UK freeports: the benefits deconstructed
In March when the government’s freeport policy was unveiled, IOE&IT director general Marco Forgione described it as a “diverse freeports package of incentives and allowances – one that can be tailored to a broad set of locations and companies”.
On the one hand, there are the customs processes that traditionally attract investment to freeports, including duty exemption, VAT suspension and simplified procedures.
Then there are the government’s proposed tax reforms which could prove significant. Business Rate and limited NIC reliefs will be welcome to employers willing to relocate to UK freeports.
Simplifying the planning process, with the promise of enhanced Structures and Buildings Allowances and Capital Allowances, will help address an area of policy where the UK has historically underperformed in comparison to its peers.
Many companies looking to invest in freeports will also have an eye on the growing green sectors of the economy including offshore power generation and new technologies aiming to reduce the use of fossil fuels in industrial processes.
Linking the freeports programme with the Green Energy Fund is important and will provide synergies to boost the incentives to invest.
Law firm Shoosmiths says that services companies should also pay attention to freeports, even though the incentives in freeports are aimed at goods-based industries.
“There will undoubtedly be opportunities for service businesses such as shipping companies, recruitment consultancies, facilities management businesses, not to mention catering and recreation and outsourced call centres, to support those supply and manufacturing companies based in freeports,” said partner James Wood-Robinson.
Freeports have been hailed as one of the benefits of Brexit, allowing the UK to create zones that will attract businesses and jobs to areas that might otherwise struggle to win them.
Independent economic watchdog the Office for Budget Responsibility cast doubt on the efficacy of freeports in its recent Economic and fiscal outlook – October 2021.
The OBR said that freeports would cost about £50m a year from 2022-23 but that “the main effect of the freeports will be to alter the location rather than the volume of economic activity”.