Freeports ready for takeoff: Could Yorkshire be at the forefront of post-Brexit trade?

As negotiations with the EU appear gloomy, the way in which the UK trades with other countries and remains prosperous come 2021 has yet again been up for discussion. The creation of up to 10 freeports, where goods can be imported without paying customs duties, is seen as somewhat of a panacea. But opinion on them is split, with little understanding in the public consciousness of what benefits they may actually bring, as Geraldine Scott reports.

When a consultation into freeports was launched in February, ministers claimed the new “business and enterprise hubs” would create thousands of jobs.

Then-Chief Secretary to the Treasury Rishi Sunak said: “Free ports will unleash the potential in our proud historic ports, boosting and regenerating communities across the UK as we level up.”

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And International Trade Secretary Liz Truss said: “We are taking back control of our trade policy, and opening every corner of the UK to opportunities across the world.

Rishi Sunak is said to be planning to open bidding for towns, cities and regions to become freeports – where UK taxes and tariffs will not apply – in his autumn Budget.

“Free ports will unleash the potential of our historic ports, creating jobs and regenerating communities across the UK. These hubs will also deepen partnerships around the world as we restore our economic and political independence.”

But the Trades Union Congress (TUC) has warned Yorkshire’s leaders to think carefully about plans, amid concerns the ports put working rights, health and safety, and environmental protections at risk. And the benefits which freeports could bring to the region remain unclear.

Proponents such as Conservative MP for Don Valley Nick Fletcher and director of the Northern Policy Foundation think tank Tom Lees say the investment would truly level up the North.

And the areas floated as potential sites for Freeports, the Humber ports Grimsby, Immingham and Doncaster, are all areas where the Conservatives are keen to make an impression after beating Labour in local ‘red wall’ seats during the last General Election.

The aim is to have sites up and running by 2021 after the UK leaves the European Union, with designated areas where goods can be imported without paying customs duties.

The duties would only be payable when the goods, possibly after processing, enter the domestic market. And other incentives on tax, planning and reduced red tape may also be available.

But Mr Lees, who wrote a paper on freeports three years ago and he says is now the basis of government policy, said the real benefit for Yorkshire would come in the opportunity to increase activity in research and development (R&D), with the aim of bringing higher-paying jobs to the region and upping prosperity.

He said: “The key thing that we want to do with them in the UK is increase R&D and innovation.

“The big problem the North has is it's stuck in a low productivity, low growth, low pay, low skill sort of tumble dryer that keeps spinning, and we need to escape it and get out of that cycle. The way to do that is through R&D and innovation.”

A report from the University of Manchester’s Professor Richard Jones and Tom Forth, Head of Data at ODI Leeds, found this year that many parts of the UK have missed out Government R&D spending, to the tune of £4bn each year.

Spending on R&D in Yorkshire was among the lowest in the country, and a lack of government spend also meant regions missed out on private sector investment.

“So these freeports will have lots of incentives to try and get people to innovate, spend more money on R&D in the zones, in the hopes that they will then boost productivity and create higher-paying, higher-quality jobs,” Mr Lees said.

“And it's not just willy nilly tax freebies and giveaways, the idea is to make sure that these freeports have a strategic focus. So for example, the ones over in the Humber and in Grimsby, they might want to over focus on clean energy.

“So then you would encourage businesses that want to invest in that kind of sector, in R&D and innovate in that kind of industry to go there.”

He said: “People who don't get into the details of it say all it is, is an enterprise zone, basically, but it's a super duper enterprise zone.”

Enterprise zones are designated areas across England where businesses located there can benefit from tax breaks and Government support.

“But one of the problems with enterprise zones is they last five years,” Mr Lees said, “Freeports last for decades.

“One in the Middle East, for example, the biggest one in the world is the Jebel Ali Free Zone which is in Dubai, and that one was created in 1985 and is still there and it still exists. It's still got the benefits.

“So they're quite different because they’re long term propositions, they're not just short term gimmicks.”

The proposals prompted manifesto promises from the Government, and when Boris Johnson made his first speech as Prime Minister a year ago, he said: “As we prepare for a post-Brexit future it is time we looked not at the risks but at the opportunities that are upon us so let us begin work now to create freeports that will drive growth and thousands of high-skilled jobs in left behind areas.”

There are more than 70 freeports in the EU and freeports existed in the UK before 2012.

The UK could have created freeports before leaving the EU, but the idea has garnered more attention as a way of boosting trade after leaving the bloc.

According to the Government’s consultation, airports, rail ports and sea ports could be considered. And freeports could be located next to ports or inland.

But competition will be tough, with just 10 sites to be announced initially.

To try and secure the best chance for Doncaster Sheffield Airport in his constituency, Mr Fletcher put together a briefing as part of any reply to the Government’s consultation.

He said: “Designating Doncaster Sheffield Airport as a freeport would be an excellent way for our Government to demonstrate its commitment to levelling up the North.

“The creation of a freeport would be fundamentally different to other regeneration programmes, as it is not a one-off grant or time limited scheme, but rather a long term investment that would allow Doncaster to create its own income for many years to come.

“This will ultimately lead to better jobs, more housing, and improved life chances for a generation.”

He said many of the businesses surrounding the airport specialise in logistics, pharmaceuticals and the energy sector.

And added: “The Sheffield City Region and Doncaster Sheffield Airport therefore have enormous potential, with well established export businesses already operating close to Doncaster Sheffield Airport.

“It is clear that the region also contains businesses which do not export globally but have the ability to become commercial partners with firms abroad – particularly those in emerging markets.”

But not everyone is enthused by the perceived benefits.

The TUC has warned that a no-deal Brexit poses a huge risk to jobs and Yorkshire’s economy, and that freeports will not make significant inroads to repairing that damage.

Their analysis suggested a no-deal with the EU and the resulting tariffs on manufactured goods put just under 16,000 jobs are at risk in the region, with sectors such as manufacturing particularly at risk as they depend on barrier free trade in goods and low barrier trade in services with the EU.

And the union body believes freeports do not create more jobs, but are more likely to displace jobs and industries in surrounding areas, exacerbating poverty and undermining sustainable economic growth.

TUC Regional Secretary Bill Adams said: “We desperately need a plan to make sure people have access to good quality jobs in the Humber and Doncaster. The coronavirus crisis has made that even more urgent. But the freeport proposals are not the right approach.

“We already have rules that allow freeports to be created. But the government is proposing new rules to let companies cut corners on workers’ rights and avoid tax. That will mean firms in freeports take the gain, and the community takes the pain. More like freeloader ports than freeports.”

He added: “We need an approach where the bottom line is good quality jobs, and a fair share going back to the community to support local services. If not, then just who are freeports there for?”

There is some way to go yet in showing the benefits of freeports, but local leaders have suggested they are open to exploring the possibilities.

Speaking at the DevoConnect Northern Powerhouse Education, Employment and Skills Summit last month, Vice Chair of the Northern Powerhouse Partnership Jim O’Neill said: “From the fact that I didn't highlight [freeports] in my pre-prepared comments, to be candid, suggests to me that for the long term goals of the true success of the Northern Powerhouse - which by that I mean getting rid of the productivity underperformance - I don't frankly regard it as as important as education and skills initiatives, more housing, more technology.

“But I do think, particularly given Brexit, it is something that is worthy of serious consideration.”

He said: “I'm in the camp that thinks there is still evidence needed to be provided that there is some actual economic benefits from leaving the EU

“And I say that a day after we seem to be making further steps to deliberately distance ourselves from the biggest creator of economic growth in the world, known as China, so we've got to start coming up with something that's going to help our engagement with the rest of the world.”

He added: “By using the opportunities that couldn't be pursued by being in the EU is obviously something we should be serious about doing.

“What I'm not completely convinced about is whether this simply takes away from other forms of activity that would be going on, in any case, into the freeports.

“That I'd like to see more evidence about, but it's definitely something that's worth serious consideration in my view.”

While Leeds City Council leader Judith Blake added: “It's an issue that we haven't really got a full understanding of how it's going to work and what it's going to mean for other areas.”

Speaking at the same event, Local Government minister Simon Clarke said there needs to be “meaningful incentives for business to relocate to those ports”.

He said: “It's about winning business from abroad. It's about showing that the UK is gearing up to be an entrepreneurial free-trading nation at the end of the transition period, and I know that this is something where senior ministers across government from Liz Truss, to Rishi Sunak, share a common ambition.”

And he added there was an opportunity “to use freeports to help stimulate parts of our economy and areas of our country where growth has lagged behind the greater southeast”.

The Chancellor is said to be planning to open bidding for towns, cities and regions to become freeports in his autumn Budget, with the ports “fully operational” within 18 months of the UK leaving the customs union and single market at the end of this year.