The government has the ambition to drive economic growth with a focus on levelling up across the UK. As part of this aim, 'freeports' have been identified as a way to drive local growth with eight locations in England announced by the government in the March 2021 Chancellor's Budget:
1 East Midlands Airport
2 Felixstowe and Harwich
4 Liverpool City Region
Freeports are designed to boost local growth by providing tax incentives within an area to encourage businesses to locate there. They're considered ‘outside the country’ for customs purposes.
This means that goods can enter and re-exit the port without incurring the usual import procedures or tariffs. Alongside tax benefits, the government is offering access to simplified planning processes and infrastructure funding to accelerate economic growth in the area.
This signals a desire to support investment in freeport areas to drive growth. There is, for example, the opportunity for councils to retain business rates growth above an agreed baseline. This would be guaranteed for 25 years, giving councils the certainty they need to borrow to invest in regeneration and infrastructure that will support further growth.
The challenges facing freeports
We've followed the development of this flagship government programme with interest and recognise the challenges faced that will require resolution.
For example, developing a common vision among stakeholders in a freeport region. This requires clarity over roles and responsibilities, and reference to a clear framework in the development of the structures to deliver this ambition.
Freeports will also need to balance risk and reward across the partners involved and understand the value that each partner can bring alongside any synergies that can be achieved through a collaborative working model.
Answering the critics of the scheme
Welcome news for local authorities is that the government hasn't been prescriptive about a particular governance solution.
There is, for example, no requirement for a freeport governance body to be incorporated. A legal entity may be required to take ownership of public and private assets, and so create a better proposition for investment. In some cases, the use of a development corporation model may add value by enabling land assembly and planning powers.
Notwithstanding these technical features, freeports give the opportunity for locally-led development that's designed to drive regional growth and employment. A clear articulation that this is unlocking new investment and meeting the ambitions of the levelling-up agenda will be key to defending proposals against freeports’ critics.
Undoubtedly, whichever solution is chosen, it must offer a strategic vision for change and place this within an objective assessment of economic and social value, a strategy for long-term investment, and a robust delivery structure, which can bring together public and private interests.
Supporting freeports taking their next step
We've worked extensively in this area over the last few months on major regional initiatives, such as the Midlands Engine’s proposal to create an East Midlands Development Corporation and our role as a Towns Fund Delivery Partner with the Ministry for Housing, Communities and Local Government (MHCLG) supporting 101 local authorities to access their £3.6 billion fund for town centre regeneration.
The next stage for each freeport will be the development of their detailed business cases to deliver the three key objectives identified by MHCLG:
1 trade and investment
2 regeneration and levelling up
I expect that freeports will play a major part in the government’s broader economic strategy to shape the UK in a post-Brexit landscape and, hence, there's a need for a clear narrative on how they'll operate and deliver benefits. A prerequisite is a business case that sets out the level of additional benefits flowing from freeports, and how they will deliver this as a partnership of the public and private sectors.
This is important not only to address the argument that freeports might displace economic activity from elsewhere, but also to demonstrate how they're fully aligned and integrated with other policy areas and are able to deliver at pace across local government boundaries.
For support in realising the government's vision for the opportunities freeports represent, get in touch with Wayne Butcher.