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REGIONSEUROPE


RESEARCH POSES QUESTIONS OVER “MINIMAL” ECONOMIC BENEFITS AND UNCLEAR GOVERNMENT STRATEGY


Expertsdoubt UKportsplan


The UK government’s plan to designate 10 freeports has sparked debate after a research by the University of Sussex’s UK Trade Policy Observatory (UKTPO) found this was “unlikely to generate any significant benefits” for the UK economy. British freeports would provide


value to manufacturers by waiving tariffs on inputs, imposing them only on the final goods exported to the domestic market from the freeport. They offer businesses potential savings over producing outside the zone as tariffs on intermediate goods tend to be higher than those on final goods, a situation known as tariff inversion. In otherwords, they wouldmake


it convenient for companies to import production inputs duty-free into the free port and pay duties on the final products when they enter the UK market, a situation that has long been exploited by foreign trade zones in the US. However, analysis by researchers


Peter Holmes and Julia Magntorn Garrett found “no evidence of significant opportunities to exploit tariff inversion”, as the weighted average tariff on production inputs was only 1.6%. This is significantly lower than the weighted average 8.8% tariff on final goods, they found. Furthermore, they found that


out of the 20 most imported inputs in the UK, which account for around 40% of its imports of intermediate goods by value, 12 are duty-free and none has a tariff exceeding 4%. Even in the fewsectors in which


tariff inversion does apply, the economic benefits were found to be small, either because these sectors comprise only a minor part of the UK economy or because the difference between tariffs on inputs and final goods is low. Besides the UKTPO’s criticism of


the UK freeports plan, other experts on freeports stressed the need to consider factors besides duty savings.


58


No free port: the UK’s freeport plan has sparked controversy


Tony Restall, who was involved in setting up several freeports in the United Arab Emirates, told fDi that “anyone looking to establish a manufacturing industry in any tax-free area will look at two things: cost of labour and cost of power” – both areas in which the UK is not competitive. Mr Restall said the government


lacks a clear strategy, pointing out that, rather than articulating the details of the programme beforehand, the government asked prospective freeports to tell it what they want from the programme. However, he believesUK freeports


would bring significant benefits beyond tariff inversion, and advocates establishing more so they can capture most of the country’s industry. But to ensure these benefits are


achieved, strategy is needed to develop a business proposition beyond that of duty savings, he said. “It is important to look at freeports as a business and operate [them] as a commercial enterprise” as they require revenue flows and strong leadership, he added.■ JACKCONWAY


Iberdrola powers Sabic plant


Spanishpowercompany Iberdrola is to invest €70mto build a 100megawatt solar plant to power upan existing chemical production facility runby Saudi state chemicalcompany Sabic. Iberdrola will install 263,000


photovoltaic panels on land owned by Sabic. The solar plant is expected to be fully operational in 2024. Sabiccommitted to purchasing the power it produces through a 25-year power purchase agreement. “This ground-breaking deal with


Iberdrola is a significant step towards achieving our long-term sustainability and clean energy targets,” Bob Maughon, Sabic’s executive vice president for sustainability, technology and innovation, said in a statement. Sabic’s ambition is to have


4 gigawatts (GW) of either wind or solar energy installed for its sites globally by 2025, rising to 12GWby 2030. In 2019, solar panels were installed at Sabic sites in India and Thailand, reducing greenhouse emissions by 200 tons. ■ PAOLOASTONE


Virussparks cybersecurity boominUK


Investment inUKcybersecurity start-ups skyrocketed to £104m between March23 andMay 18, a 940% increase from the £10m raised during the same eight-week period last year. The surge in investment, reported


by government-backed scale-up programmeLondon Office for Rapid Cybersecurity Advancement (Lorca), comes at a time when the wider UK start-up ecosystemhas seen a 50% slumpin investment, suggesting that cybersecurity start-ups are benefit- ting from security concerns caused by the Covid-19 pandemic. Lorca found that UK cybersecu-


rity start-ups have already raised £496m ($620m) since the start of 2020, putting them on track to surpass the £521m raised during the whole of 2019.■ JACKCONWAY


www.fDiIntelligence.com August/September 2020


50%


THEWIDERUKSTART-UP ECOSYSTEMHASSEENA50% SLUMPININVESTMENT


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