March 2021 Update: read our response to the Budget announcement on the first 8 freeports, here.
The UK Government is establishing 10+ Freeports around the UK. The bidding process for English ports closes on 5 February 2021 with the successful bids announced in Spring. The BPA is currently working with officials in the devolved administrations to establish Freeports in Scotland, Northern Ireland and Wales.
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What are Freeports?
In a traditional sense, a Freeport is an area that is exempt from customs duties and tariffs to enable added-value processes to take place. This is because duty is only paid on goods upon leaving the Freeport area as a finished product and entering the UK market and no payment is due if good are re-exported. However, the UK Freeport model will look very different from traditional models. The UK Freeport model encompasses a broad set of measures to stimulate economic activity and encourage the growth of certain industries while creating jobs and having a regenerative effect on ports’ local communities and will include levers relating to planning, tax, customs and innovation.
View the BPA’s animated Freeport graphic here for more details.
What is the BPA’s position on Freeports?
The BPA believes that Freeports have the capacity to stimulate investment and regeneration in coastal communities, but we are clear that they must not cause economic displacement or create an unfair level-playing field. Within the response to the Government’s consultation on Freeports, the BPA stated that Freeport status should be offered to all ports who opt for the status, to reduce the risk of displacement and disruption to the competitive ports market. At a minimum, certain levers, such as streamlined planning procedures, must be expanded to all ports.
Freeports are a potentially transformational opportunity for UK ports. As the UK Freeports model is carved out, Government has the power to unleash growth and development and we welcome their recognition of ports being valuable tools to empower coastal communities. The BPA has therefore repeatedly made the case for a model that incorporates maximum ambition – in both scope and scale. Coastal communities are often in areas of high deprivation and have been further challenged by the Coronavirus pandemic and lockdowns. The UK has 125 cargo-handling port areas, which include countless port and terminal facilities. Freeport status will benefit ports differently depending on their business profile and specialisation. Some will naturally be keener than others but there will be more than ten of these that will want to benefit and we are cautious of Government’s arbitrary cap on this ambition, even if they have now stated they will appoint more than ten Freeports if they receive many high-quality bids.
What is the timeline for establishing Freeports in the UK?
In England, the deadline to submit bids is 5 February 2021, at which point MHCLG and HM Treasury officials will assess the bids and Ministers will subsequently select the winning bids. In Spring 2021, the chosen bids will be announced, with MHCLG publishing the rationale for selection. After working with Government over the Summer, Freeports are expected to launch in England in the latter half of 2021.
We are continuing to work with officials in the devolved administrations to craft respective Freeports policies and have communicated the importance of avoiding a significant delay between the launch of Freeports in England and the other nations of the UK. We have received assurances from some Ministers in the devolved administrations that there will be time for bids to catch-up with the English process; though this assurance has been welcomed, we remain cautious as we do not have confirmation that they will establish Freeports at all.
Will Freeports result in an erosion of rules or a ‘race to the bottom’ in terms of industry standards?
UK Freeports are not about encouraging a ‘race to the bottom’ and Government plans have indicated that they will establish adequate controls to block illicit activity. Ports do not wish to see a dismantling of standards, such as employment or environmental rules, which are common misconceptions. The BPA has not called for the removal of such processes as environmental impact assessments or planning approvals; though it is worth noting that the ports industry would benefit from the streamlining, or speeding up, of these procedures to allow them to better respond to market opportunities. At present, ports can be limited in their response to business opportunities because of frequent 7+ year waits for planning approvals.
Regarding environmental standards, the BPA and their members are committed to net-gain. However, they believe targeted interventions are the most sensible means to achieve this, rather than outdated Environmental Protection Areas.
What is the BPA’s view on tax levers included in the policy?
Tax incentives outlined by government are useful to ports, though the BPA has noted that while some easements would be provided through Freeports status, many of the measures outlined are already available to ports in one form or another.
Therefore, while the BPA recognises that Government may be cautious of a possible reduction in revenue to the Exchequer from customs and other tax activities if the number of Freeports is expanded above 10, we do not anticipate a significant change. Rather, the Government will benefit through increased revenue from increased economic activity, which would generate further revenue for exchequer, through employment and NI contributions and business taxes. The BPA has not proposed any changes to corporate taxes.
What is the BPA’s view on planning levers included in the policy?
The possibility of planning easements has been especially welcomed by ports. The BPA appreciate Government’s nod to permitted development rights but believe that without more ambitious changes and a reference to marine-side planning, proposals are somewhat underwhelming and do not provide much further assistance to ports than the current system.
The industry is not calling for any erosion of planning rules but is looking to streamline the process to stimulate and incentivise growth at UK ports. The BPA does not want a race to the bottom; rather, a robust and fair planning system that recognises the dynamic nature of the ecosystems that ports operate in and ensure that the systems designed to protect and enhance them can at the same time enable sustainable development. Changes in the planning system will be of minimal cost to the Government but will unlock significant opportunities for investment for all ports.
The Government must also look at improvements to the Environmental Impact Assessment process and how planning conditions are often used as leverage points on development.
We welcome Government’s admission that they will review of the National Policy Statement for Ports in 2021 and explore expanding these permitted development rights to bring seaports in line with airports.
For links to external publications on Freeports, please see our Freeports Hub.