How Britain's communities can qualify for freeport status in post-Brexit era

First seven freeports will open next year as national hubs for trade, innovation and commerce

FELIXSTOWE, ENGLAND - NOVEMBER 16: Crates are stacked at Felixtowe Port on November 16, 2020 in Felixstowe, England. Shipping companies and retailers have complained of delays in unloading arriving freight, with one ship told it could wait up to 10 days for a berthing slot. The port's owner, Hutchison Ports UK, said "the imbalance in UK trade and Brexit stockpiling exacerbate current operational challenges and we are working with our customers and stakeholders to get through the current congestion." (Photo by Dan Kitwood/Getty Images)
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The UK's finance ministry is accepting bids from cities and towns across England for the country's first seven freeports, which aim to drive investment, create jobs and regenerate communities in post-Brexit Britain.

The bidding process, which opened on Monday, allows ports and their communities to apply for freeport status in a bid to transform existing sea, air and rail ports into national hubs for trade, innovation and commerce next year.

UK finance minister Rishi Sunak said the new freeports will level up communities across the UK, create new jobs and turbo-charge the country's economic recovery.

“As we embrace our new opportunities as an independent trading nation, we want to deliver lasting prosperity to the British people and freeports will be key to delivering this,” he said.

The first seven freeports will be open for business in England next year, with a further three planned in Wales, Scotland and Northern Ireland at a later date. Sea, air and rail ports are encouraged to apply in tandem with local leaders, businesses and other communities. But what is the criteria for applying for freeport status?

How to qualify

To qualify for the scheme, bidders must submit their application to the government by February 5, with the bids assessed by a panel and a final decision made in the spring.

The proposal must outline how the applicant will become a national hub for global trade and investment, how they will promote regeneration in their community and create jobs, and how they will create hotbeds for innovation, according to the government’s bidding prospectus.

Boosting trade and investment

The UK attracted 1,852 foreign direct investment projects in 2019-2020, creating 56,117 new jobs, and bidders must demonstrate how they will add to that tally by attracting new investment into the region and increasing trade through their freeport.

“Bidders should also demonstrate how they will work with local and international business to enhance the impact of increased investment in the wider region, and the country as a whole, to level up the economy,” the prospectus said.

The tenders must also outline how their freeport will generate trade growth, ensure trade processes are more efficient and increase trade and investment.

Regenerating the economy

The government’s second objective is to use freeports to regenerate the local economy through investment from the private sector and the creation of jobs.

Bidders must supply evidence of new private sector investment to support emerging industries and highlight how commercial property development will enhance the local community. They must also show how their plan will integrate with the local transport system to ensure they avoid traffic congestions and outline how they will use the skills available in the local labour market to support the needs of the sectors the freeport plans to enhance.

Ultimately, bidders must boost the number of jobs and average wages in deprived areas in and around the hub and increase economic activity.

Creating hotbeds of innovation

The final government objective is for freeports to attract innovators through private and public-sector investment in research and development.

The three areas of focus for innovative activity include port-specific innovation that directly benefits air, rail or maritime ports such as customs software that can track goods across a broader area; port-related innovation where modern methods of construction or new supply chain concepts are explored; and non-port-related innovation such as pharmaceuticals, advanced materials, robotics and Ai.

To qualify as a “hotbed for innovation”, a freeport proposal must consider the area's capabilities in research and development, its ability to collaborate and commercialise skills development and data sharing, and its supply of novel solutions for problems faced by the hubs.

Tax relief

Successful areas awarded freeport status will benefit from a wide package of tax reliefs, simplified customs procedures, streamlined planning processes to boost redevelopment and government support to promote regeneration and innovation.

The tax reliefs will link to the purchase of land, the construction or renovation of buildings, investing in new plant and machinery assets and employer National Insurance contributions.

Also at the centre of the new freeports policy is a new customs model that will allow firms to import goods into a hub without paying tariffs. They can then process the goods into a final good and then either pay a tariff on the products sold into the domestic market or export the final goods without paying UK tariffs.

Applications must also demonstrate how the areas will contribute towards the government’s decarbonisation agenda, with bidders outlining how the freeports will reach net zero carbon emissions by 2050 or earlier.