UK freeports will offer 'cutting-edge customs'

10 February 2020

Up to 10 new freeports are set to be opened across the UK in the wake of Brexit, the government has announced.

The government has launched a 10-week consultation process, which should lead to decisions on where to locate the zones by the end of 2020. The objective is to open the freeports for business in 2021.

The government hopes freeports will boost trade, jobs and investment and lead to the development of business clusters.

“Freeports will also offer an exciting opportunity for cutting-edge customs, transport and green technologies,” it said in a statement.

“[These will be] trialled in controlled environments, before being adopted more widely in relevant sectors of the economy.”

Mooted benefits of the plan include the fact that goods brought into a freeport do not attract tariffs until they leave the area and enter the domestic market.

No duty is payable if they are re-exported and when raw materials are imported and processed into a final product, duties are only paid on the final product.

The government is also considering locating freeports inland, as well as adjacent to ports, to reduce relocation or investment costs for existing manufacturing sites.

This may help ease congestion around seaports, which it is feared could become gridlocked with trucks due to new border checks. 

Full customs declarations are not required to move goods into a freeport, making it quicker and easier to import goods.

The government is also considering planning reforms to help sea ports develop by enabling local councils to greenlight construction projects.

And it is looking at introducing tax measures to increase investment in infrastructure, construction and machinery in freeports to raise productivity.

Incentivising research to stimulate innovation in the zones, cutting costs associated with processing goods and reducing the costs of hiring workers working in freeport sites are also being considered.

Following the consultation the government will invite bids for freeport status from sea, air and rail ports.

However, Labour shadow chancellor John McDonnell said: “This is the revival of a failed Thatcherite plan from the 1980s, designed to cut away at regulation and our tax base.

“There is very little solid evidence that so-called free ports create jobs or boost economic growth, showing this up as another ideological move from a far-right government.

“This plan only represents a ‘levelling-up’ for the super-rich, who will use free ports to hoard assets and avoid taxes while the rest of us feel the effects of under-funded public services.”

Brussels is clamping down on 82 free ports or free zones after fears they are aiding the financing of terrorism, money laundering and organised crime, according to The Guardian.

The European Commission introduced new rules governing freeports just weeks before the launch of the government’s consultation.

Since 10 January authorities across the EU have been forced to identify and report suspicious activities at the ports and zones as a result of the “high incidence of corruption, tax evasion, criminal activity”, said The Guardian.

It is not yet clear if or how the EU’s changing stance on freeports and the UK’s plan to adopt more will affect negotiations for a trade deal.

Currently the Isle of Man, a British crown dependency that is technically not part of the EU or the UK, operates a freeport.

The UK Trade Policy Observatory, a partnership between Chatham House and the University of Sussex, suggested the benefits would be “tiny”.

However, construction group Mace argued in 2018 that the creation of freeports could create 150,000 new jobs and add £9bn per year to the UK economy.

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