What are freeports? 

Freeports are areas of operational and development land linked to a port where normal tax and customs rules do not apply.

A modern UK freeport can comprise a mixture of digitally linked, discreet customs and tax sites.

The policy seeks to create innovation hubs which boost global trade, attract inward investment and increase prosperity in the surrounding area by generating employment opportunities.

At a freeport, imports can enter with simplified customs documentation and without paying tariffs.

Businesses operating inside designated areas in-and-around the port can manufacture goods using the imports and add value, before exporting again without ever facing the full tariffs or procedures. If the goods move out of the freeport into another part of the country, however, they have to go through the full import process, including paying any tariffs. 

Freeports is a placed-based policy similar to enterprise zones. These are designated areas are subject to a broad array of special regulatory requirements, tax breaks and government support.

The freeport policy is a key component of the Government’s levelling up agenda to drive investment into deprived communities, increasing employment opportunities and economic activity. 

This builds upon the conclusions of the Thames Estuary 2050 Growth Commission and the work of the Thames Estuary Growth Board and the Government’s Estuary Envoy, Kate Willard OBE.

What tax benefits and planning reforms are proposed?

On tax, the Government proposes measures to incentivise private business investment based on those applicable in enterprise zones. 

These include Stamp Duty Land Tax Relief, Enhanced Structures and Buildings Allowance, enhanced Capital Allowances, Employer National Insurance Contributions Rate Relief, Business Rates Relief and Local Retention of Business Rates. 

The Government proposes planning reforms to facilitate construction and development at freeports.

This includes encouraging local authorities to make greater use of local development orders (LDO), which automatically grant planning permission for development in a particular area – London Gateway holds an LDO – and an extension of permitted development rights.

A race to the bottom?

No. DP World, Forth Ports and the Port of London Authority have signed an industry-wide charter to uphold the highest standards throughout the operation of any freeport.

The Government has publicly stated that the dilution of employment, environmental and social standards is not the intention; a point reflected in the bid prospectus. 

It states freeports will maintain ‘the UK’s high standards with respect to security, safety, workers’ rights, data protection, biosecurity and the environment…’