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Felixstowe & Harwich Bid for FreePort Status – What Does It All Mean?

In these uncertain times mid pandemic and post Brexit you would be forgiven for thinking we are short on good news – especially in the area of trade. Love it or loath it, with the demise of local manufacturers and now the decimation of the retail industry, job security  in our region relies to a great extent on the prosperity of our ports – and over Christmas the news seemed to be increasingly dire – with backed up lorries, shipping logistic systems failing, containers of PPE and empty units clogging up the system  and Brexit impacting heavily on moving anything anywhere.

There were even whispers that Felixstowe could close down as a port altogether as shipping lines seemed increasingly inclined to shift their business to the new DP World London Gateway complex.

But there may be hope on the horizon with the news this week that East Suffolk Council have given approval for Hutchinson, who own Harwich & Felixstowe Ports, to submit their bid to become one of the new government designated  ‘freeports’ .

Freeport East would be a partnership project encompassing the Port of Felixstowe, Bathside Bay at Harwich and the proposed Gateway 14 business development site at Stowmarket.

At Felixstowe port, the project would see the development of a new logistics park on a 68-acre brown field land site in the midst of the port complex with up to 1,400,000 sq ft of build-to-suit distribution warehouses .

Over at Harwich,  Bathside Bay could be transformed into a new terminal, while plans have just been submitted for the Mid Suffolk District Council-owned Gateway 14 site where the council and private developers Jaynic want to build a 2.45m sq ft business, warehousing and industrial centre on a 42-acre site off Junction 50 of the A14 near Stowmarket.

East Suffolk Council have unanimously backed the bid for the Port of Felixstowe and Harwich International to become one of 10 freeport facilities across the UK and scheme approvals will be announced by the government in March.

If successful Freeport East would see owners Hutchinson operate a single custom zone covering both coastal ports.

Hutchinson said the status would help bring “lasting regeneration” to Felixstowe and Harwich  and it is claimed it could create up to 13,500 new jobs for the area over 10 years.

It should be noted though that Tilbury & DP London have also put in a joint bid for Freeport status, so if both bids are successful the impact may not be as great as is assumed. And if the award goes to the former bid and not Freeport East – where does that leave us?

So what are free ports?

Also called free trade zones, they are designated areas where the normal tax and tariff rules of the country in which they are based do not apply.  

While located geographically within a country, they essentially exist outside its borders for tax purposes.

Companies operating within free ports can benefit from deferring the payment of taxes until their products are moved elsewhere, or can avoid them altogether if they bring in goods to store or manufacture on site before exporting them again.

This means raw materials can be imported, then engineered into whole products for export.

But critics argue they simply defer the point when import tariffs are paid, which then still need to be paid at some stage.

And Labour has said the move involves no new investment and could attract money launderers and tax dodgers.

The other criticism is that areas of the country without Freeport status will suffer, as businesses are drawn to the freeports to take advantage of the tax break benefits.

Are Freeports a New Thing?

No they are not. Free ports have existed for centuries. The medieval Cinque Ports of southern England and the northern European Hanseatic League benefited from special privileges, while bonded warehouses in the 19th century handed out tax breaks on alcohol and tobacco.

Ireland created the Shannon free zone in 1959 to encourage activity at its struggling airport.

The UK had seven of them at various points between 1984 and 2012, but the legislation establishing them was not renewed at the time.

They included Liverpool, Southampton, the Port of Tilbury, the Port of Sheerness and Prestwick Airport. A free port remains in operation on the Isle of Man – a crown dependency and therefore not part of the EU or UK.

There are around 80 free ports in the EU, mostly in nations that joined the bloc after 2004.

 

Around 135 countries, mostly in the Far East, have free trade zones – a 2013 US Congressional report estimated there were about 3,500 worldwide.

The EU does not encourage them, arguing it creates unfair competition between firms operating within them and those adhering to normal EU rules. But supporters argue that after Brexit, their creation could bring greater benefits to the UK if the country no longer has to follow EU rules on subsidies.

Eamonn Butler, a member of both free market think-tank the Adam Smith Institute and the government’s new free ports advisory panel, said the zones would set the UK “on the right course” after Brexit.

He said they would “provide safe harbour for trade in turbulent times and show that hi-tech hubs of enterprise, low taxes, deregulation and trade without restriction can rebalance the economy”.

In a report earlier this month, however, the European Commission said free ports “pose a risk as regards to counterfeiting”.

 

It said they allowed counterfeiters to import goods, tamper with them and then re-export them without the intervention of customs officials.

Responding to the government announcement, shadow international trade secretary Barry Gardiner said the planned UK zones did not constitute new investment.

“It is a race to the bottom that will have money launderers and tax dodgers rubbing their hands with glee,” he said.

“Free ports and free enterprise zones risk companies shutting up shop in one part of the country in order to exploit tax breaks elsewhere, and, worst of all, lower employment rights”.

So – the jury is still out on whether this is a good thing or a bad thing. What is certain is that it gives some assurances that Hutchinsons, The Port’s Hong Kong based owners,  are still serious about continuing  investing in Felixstowe & Harwich, which in turn protects jobs and livelihoods,  but will that still be the case if the bid is turned down?

And if it is successful of course the downside as always is a changing landscape, impact on an already threatened fragile eco system,  and more potential traffic in and out of  a peninsular that is getting increasingly clogged up,  with an inadequate road and rail system that is already straining at the seams.

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