The impact of the Government’s new freeports policy has been questioned by a Parliamentary committee.
As the UK prepares to roll out its freeports policy to “turbo-charge” post-Brexit trade, a report released this week by the International Trade Committee questions the real impact of the special trade zones on British exports.
The Government made a commitment to establishing freeports – areas that are inside the geographic boundary of a country but are legally considered outside the country for customs purposes – in its 2019 election manifesto, as part of wider plans for post-Brexit Britain.
During his Budget speech last month, Rishi Sunak, Chancellor of the Exchequer, announced eight freeport locations in England, saying that they would “encourage free trade and reinforce the UK’s position as an outward-looking, trading nation, open to the world”.
The International Trade Committee, a cross-party parliamentary body that examines the spending, administration and policy of the UK’s Department for International Trade (DIT), launched an enquiry into the freeports proposal in April last year, and since then has been collating submissions from a panel of experts about what benefits freeports can offer.
After holding its final evidence session in February, at which it heard from the Chief Secretary to the Treasury and the minister for regional growth and local government, the group of 11 MPs has now published its final findings.
As part of its inquiry, the committee considered the Government’s stated objectives for the freeports policy, and how achievable they are, and its conclusions are underwhelming.
The Government’s vision is for the UK’s freeports to become “international hubs for manufacturing and innovation”, with tariff and customs benefits incentivising businesses to locate manufacturing and processing of imported goods in the sites, which have been named as East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames.
While several freeports do exist across the EU – a list produced by the European Commission puts the number at 80 – EU rules governing trade and state aid mean that the UK’s model, which includes customs concessions and tax incentives, is only permissible now that the country has left the bloc.
Among the benefits to companies are duty suspension, whereby no tariffs, import VAT or excise will be paid on goods brought into a freeport from overseas until they leave the freeport and enter the UK’s domestic market; duty exemption for re-exports; and duty inversion, whereby if the duty on a finished product is lower than that on the component parts, a company could import the components duty-free, manufacture the final product in the freeport, and then pay the duty at the rate of the finished product when it enters the UK’s domestic market.
However, this raft of measures is unlikely to move the needle when it comes to boosting trade figures, according to the committee’s findings.
While it heard evidence from the UK Major Ports Group (UKMPG) that “the development of freeports provides a strong base for supporting existing UK trade with the world and creating more capacity and capability to boost trade further”, the committee concluded, in the face of research provided by the UK Trade Policy Observatory (UKTPO), that benefits and savings to businesses from the trade elements were likely to be “limited” in the UK context.
The committee also raised questions about the apparent lack of engagement by the DIT in the Government’s freeport policymaking.
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