In May the UK Government published a Policy Paper setting out the monitoring and evaluation strategy for the UK Freeports programme. Freeports are special areas within the UK’s borders where different economic regulations apply. In this article, we explain what Freeports are, list where they are located and describe the business benefits they provide.
What are Freeports?
Freeports have been created to act as hubs for global trade and investment across the UK. They act as designated tax and customs sites with benefits for businesses, tax breaks, simplified customs, and investment funding to foster expansion and create high-skilled jobs. There is also a focus on establishing innovation clusters, and promoting conditions to attract new businesses, investors, and innovations to the area.
What are the key business benefits of Freeports?
Goods imported into Freeports from abroad are exempt from tariffs, that are normally paid to the UK government on arrival. It means manufacturers in Freeports can import raw materials tariff-free, only paying tariffs on finished products leaving the site for elsewhere in the UK, or goods can be re-exported overseas without the UK duties being paid.
In England, it has been confirmed that companies inside Freeport sites will also be able to claim lower property taxes, including on new buildings they buy. Companies based in Freeports will also benefit from lower rates of National Insurance if they hire new staff.
Companies within Freeports enjoy direct access to relevant regulators through a Freeport Regulatory Engagement Network (FREN). This will enable early engagement with regulators, minimising bureaucracy and uncertainty.
How can manufacturers benefit from Freeports?
The ability to avoid paying a tariff or VAT creates several opportunities. These include being able to set up an export-focused manufacturing hub within a Freeport that makes products using foreign components, that would have otherwise been subject to high import duties. For example, this is effectively what happens when smartphones are assembled in special economic zones in China and then shipped all over the world.
Manufacturers might also establish themselves within a Freeport to benefit from tariff-inversion. This is when the final product is subject to a lower tariff than its inputs, meaning that companies can benefit from importing the high tariff materials into the Freeport, processing them, and then selling the final product attracting a lower tariff when moved out of the Freeport.
Where are the UK’s Freeports?
There are eight Freeport locations in England and a further two to be announced in Scotland.
Teesside became the first operational Freeport in November 2021 and the Thames Freeport in Essex started a month later.
A Freeport near Felixstowe and Harwich, and another near Hull, have also now been granted most of the tax breaks available to companies. Another Freeport zone, near East Midlands Airport, is England's only Freeport close to an airport.
Other Freeports near Liverpool and Plymouth are hoping to be launched over the summer and Southampton and
Portsmouth will also be sharing a Freeport site, based near the Solent.
How 3CS can help
If you need help setting up a business in the UK or with any commercial legal matter, we are here to support you. Please get in touch with your usual 3CS contact for more information.