G7, trade and the Plymouth Freeport
Leaders at the G7 summit in Cornwall this month addressed the shared challenges the world faces, from beating Covid-19, net zero targets, trade initiatives to technology and science.
One of the conference aims was 'promoting future prosperity of the region by championing free and fair trade' and these goals may be furthered by the establishment of the Plymouth Freeport.
The March 2021 Budget saw the UK government announce the intention to create eight new freeports. Plymouth City Council's successful bid has been credited to the city’s commitment to high tech marine innovation with a focus on carbon zero technology. Plymouth has dubbed the area a 'freezone' because the benefits extend beyond the designated port.
What is a freeport?
Historically, a freeport was an area where goods in transit benefit from no or minimal tax, essentially treated as outside the 'host' country's borders in order to encourage economic activity. It is a historic concept that dates as far back as the favoured five medieval Cinque ports during the reign of Edward the Confessor which evolved into hubs of both commercial and military importance. Afforded freedom from tax as well as diminished geographical trade restrictions and even judicial autonomy, their favoured status bred fractious relations with their less fortunate neighbours. Enduring examples of historic 'freeports' can still be found in areas such as Copenhagen.
Whilst the government's vision for these freeports in the 21st century differs they do have common aims: to boost trade, jobs and investment. It is proposed this will be done through streamlined customs processes, revised planning rule and accelerated housing delivery in and around the zones. In addition to this, and perhaps most importantly, a wide-ranging set of tax measures to encourage business.
Plymouth and South Devon Freeport
Each freeport identified by the government in the Spring Budget includes a port, where customs and tariffs benefits and "custom sites" are applicable. Beyond this, zones can stretch as far as 45km and link other areas in designated “tax sites”. Plymouth City Council led a partnership with Devon Country, South Hams District Council and the Heart of the South West LEP and in the bid noted the following sites will be included, Devonport South Yard, Langage Energy Zone and Sherford Business Park. The Council have confirmed that they are working on a more detailed business case and should all go according to plan the freeport should be in place by Summer 2022.
Freeport investment advantages
Other than the customs changes that are expected within the freeport areas, which intend to streamline import procedures by providing tariff benefits and removing import VAT on overseas goods until the enter the UK market, there are several tax incentives for investors such as:
- SDLT relief where the property is to be used for qualifying commercial activity until 30 September 2026.
- 10% enhanced Structures and Buildings Allowance rates (an increase of 7%) for those constructing or renovating qualifying structures and buildings that are brought into use by 30 September 2026.
- 100% enhanced Capital Allowances for expenditure incurred with respect to qualifying plant and machinery up to 30 September 2026.
- 100% relief from business rates for five years until 30 September 2026 for new businesses and qualifying existing businesses which have expanded.
- 0% employer NICs rate on the salaries of eligible employees working within the Freeport potentially until 2031, subject to review by the UK government.
Another key advantage of the freeport are the amendments to General Permitted Development Rights similar to that of existing rights for airports. This will allow development activities to take place in port areas and will allow development of buildings for purposes connected with the operation of the port to be developed more quickly and efficiently.
Effect on the South West?
Plymouth City Council is understandably positive on the effect this could have on the area. The bid was credited to high tech marine innovation and carbon zero technology and it is expected that the freeport will build on these strengths. It has been reported that Babcock and Princess Yachts are backing the bid and will contribute to the stated 1,000 new jobs over the first two years of the program. Plymouth City Council has cited up to '9,000 over the next 10 years and 50 new apprenticeships and 10 internships every year by 2027' and a forecast of £100 million investment in the next six years.
Opponents to such schemes suggest incentives are likely to move activity in the locality into these areas rather than creating new economic activity but Plymouth remain positive on the potential impact.
The stated aims of the bid were 'to increase export trade and direct foreign investment' along with the increasing the 'calibre' of jobs through innovation opportunities. Although research by Centre for Cities published in 2019 found this is not always the case and many jobs created in such zones are unlikely to be high skill jobs, something to be considered in the next phase of planning.
One of the aims of the bid is to unlock surrounding development land and enable Devon County Council to bring forward works at the Deep Lane junction on the A38, unlocking housing at Sherford.
What is next?
There is still much to consider. Whilst freeport bids have been successful the next planning and development stage poses many questions. With Plymouth's successful bid earlier this year the Council is now onto the next stage of outline business planning. The expectation is all freeports will have access to a share of £175 million of seed capital funding which can be allocated to development of underdeveloped sites such as brownfield sites, site remediation and transport infrastructure to connect sites within the Freeport.
Following the G7 in the South West this month it serves as a reminder of what the initiative is hoping to achieve. Will freeports promote future prosperity of the region? The raft of customs, tax and planning changes will certainly serve as an economic boost to the region, although many commentators have suggested they are not a silver bullet to solving all issues and the next step, delivery of the freeport, will undoubtedly be interesting to follow and we will bring a more in depth analysis when business plans have been drafted.