POLITICS
There’s no place like the East Midlands for a new Freeport
In February, the Government published its consultation on Freeports and the role they can play in boosting trade, jobs and investment across the UK. The consultation seeks views on how the UK can create a ‘best-in-class’ Freeport model that maximises the benefits of global trade in a way that delivers for the country’s less affluent communities. In this article, East Midlands Airport sets out why it thinks the East Midlands region is the perfect location for the UK’s first inland Freeport.
The Government has said it will designate up to ten Freeports in the UK as part of a bid to keep Britain globally competitive for international trade post Brexit. Once created, these zones will seek to reduce costs and tariffs, liberalise planning laws and tax arrangements and stimulate regeneration, innovation and job creation. A Freeport could accelerate regional growth in
the East Midlands and help deliver priorities set out in Local Industrial Strategies and local development plans. We’re in a unique position in the UK to drive
rapid, sustainable economic growth and have a number of key strategic assets that will be critical to future growth: • A fully capable international airport with global cargo credentials and capacity for growth
• A Strategic Rail Freight Interchange immediately adjacent to the airport
• Land for development at Ratcliffe on Soar Power Station, perfect for advanced manufacturing
• Connectivity to national transport infrastructure that has recently been upgraded
• A new Development Corporation that is focused on industrial growth and place-making
When you combine these ingredients, you end
up with more than just a Freeport; you have a hub of trade and economic activity that spans regional, national and global economies, underpinned by leading businesses and industries and facilitated by a wealth of new transport development and place creation.
WHAT IS A FREEPORT? There are approximately 3,500 Freeports worldwide, employing 66 million people across 135 countries. The USA is home to over 250 Freeports, which employ 420,000 people and handle around $750bn of merchandise. In both the USA and the Middle East, there are examples of Freeports clustered around airports. The UK did have a small number of Free
Zones, although these were decommissioned in 2012 and replaced with Enterprise Zones. This new policy won’t replace Enterprise Zones and, in fact, aims to increase the number of Enterprise Zone areas in the UK, seeing potential for these to set up around Freeports. A Freeport is a designated area within a country
that sits outside of the domestic customs area. Within a Freeport, domestic duties are not applied, and a more relaxed taxation and regulatory environment is created. Freeport areas also usually benefit from increased investment in innovation and research, as well as new connective infrastructure and housing to support workers who move to the area to take on new jobs.
Freeports work by utilising four key benefits:
1. Deferred Duty through Storage In a Freeport, duty can be deferred on goods that are ultimately destined for the host country until they leave the Freeport and enter the domestic economy. Goods can also be stored and re-exported without facing any tariffs. This deferral allows companies to improve cash flow cycles and enables a simplified, localised and more resilient just-in-time supply chain. This can be of real benefit to complex manufacturing industries, such as automotive, and also for businesses which experience seasonal demand surges, such as at Christmas. In order to deliver this benefit, a Freeport in
the East Midlands would need to have ample land available for processing, storage and distribution of goods on a large scale.
2. Manufacturing and Assembly A Freeport allows products to enter without incurring import tariffs or duties, meaning they can be processed, merged or engineered into finished goods within the Freeport before being re-exported, tariff-free, to a third country. Due to complexities in the tariff regime, many
finished goods can often command a lower import tariff than their component parts. Using a Freeport, components that would traditionally
‘A Freeport could accelerate regional growth in the East Midlands and help deliver priorities set out in Local Industrial Strategies and local development plans’
62 business network March 2020
be subject to high import tariffs could be imported duty-free. These can then be manufactured or assembled into a final product before being imported domestically and subject to a much-reduced tariff. This could be of interest and benefit to the advanced and high- tech manufacturing sector. In order to deliver this benefit, a Freeport
must again have ample land available to allow the construction of manufacturing facilities at a large scale.
3. Bonded Transit A Freeport does not have to be restricted to one single geography and, providing the correct security and customs infrastructure is put in place, can operate as a series of satellite sites. In order to deliver this, reliable and resilient transport infrastructure is required to allow goods to travel between Freeport satellites under bond - i.e. it is securely moved between two customs exempt areas and so does not legally enter the domestic market.
4. Ancillary Benefits While tax benefits vary across Freeports, most provide a level of financial support to incentivise new economic activity. This concept is very important in the establishment of a Freeport as it helps ensure additional value is being added to the economy rather than displacement and erosion of business from other regions. Typically, these incentives take the form of lower VAT rates, reduced corporation tax, tax
Chris Hayton, Director of Corporate Affairs, East Midlands Airport
East Midlands Airport is the UK’s largest dedicated freight airport
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