No such thing as a free port?

The new plans for Liverpool may have hidden costs

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Will freeports give Liverpool's economy the injection of new businesses and capital it so badly needs? A freeport is a simple idea — create a zone around a port with reduced burden of customs and taxation, and let the new firms roll in. The freeport plans for this city sound great in theory. But when Daniel Timms investigated, he found alongside lots of support for the scheme, some people are anxious about freeports chipping away at labour protections, while others worry that freeports will enable crime. Read on below.

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By Daniel Timms

"Brexit will provide the UK with new economic freedom, and the Government should take the opportunity to create Free Ports across the nation."

Those were the words of one backbench Conservative MP, in a report published a few months after the Brexit referendum. 

Seven years later, that same MP — one Rishi Sunak, not sure if you’ll have heard of him — is Prime Minister. His proposals were given the green light by Boris Johnson, and after a few years of competition and business case design, the UK’s freeports are open for business. One of them is right here, in Liverpool. So what’s the idea — and is it likely to work?

Freeports are nothing new — in fact, our first record of one dates back to Ancient Greece. There are 293 in the US alone. The concept is simple — you create a zone around a port where you significantly reduce the burden of customs and taxation. This is meant to make that area more competitive, especially in the market for “intermediate goods” — those which are part of an industrial process, such as an engine to be added to a chassis, before the car is finished off elsewhere. If a business can ship it in, carry out the next step of the process, then ship it out without having to pay any duties, they’re more likely to base themselves in the freeport area. The hope is that that will attract high-end companies (currently underrepresented in Liverpool) creating well-paying jobs for locals.

Those longer in the tooth might be feeling a creeping sense of déjà vu. Wasn’t Liverpool previously a freeport? Yes, it was, and it was wrapped up in 2012. Yet the supporters of the new freeports believe they’re not simply reheating a failed idea — but that these new freeports are quite a different proposition. 

Image credit: Clare Bonthrone via Getty Images.

Firstly, they argue, after Brexit, you can do quite a lot more. We are no longer under the EU’s state aid rules — which made it tricky to do anything that would disproportionately benefit British firms. We have more freedom over customs now, so we can make a more generous offer. Secondly, the new freeports offer their business tenants a broader array of benefits that go beyond customs — including tax reliefs such as not having to pay stamp duty on buildings or national insurance on new employees, as well as expedited planning permission. And finally, the new freeports are meant to be part of a broader package to regenerate an area — targeting specific companies and sectors (we’ll get there, don’t worry) rather than leaving it to chance. The government is even chipping in £25m per freeport to help get them off the ground.

St Helens by the sea?

There’s one other notable difference to the freeports of old — most of the places receiving the benefits aren’t actually ports. One of them is based around East Midlands airport, about as far from the sea as it’s possible to be in the UK. And while the Port of Liverpool is part of our city region’s freeport, many of the sites are inland, including the biggest — Parkside in St Helens. The former colliery just off the M6 is almost an hour’s drive away from the port — but it will host one of the major tax relief and customs benefit sites.

Freeports embody a tension at the heart of today’s Conservative Party. On the one hand, they reflect the neoliberal instinct to deregulate, cut tax, and let business boom (the Truss formula, if you will). But that’s been merged with the core creed of the Johnson years — “levelling up”, meaning these interventions need to support struggling places. Hence the areas that have been chosen (Teesside and Humberside also make the list), and a clear focus on regeneration. In Teesside, where the freeport is well established, the activity is all about reviving the former steelworks. As for Parkside: where better than a closed colliery to symbolise the revival of industrial fortunes?

The freeport plans in Liverpool prioritise four sectors: advanced manufacturing, food manufacturing, maritime, and logistics. But in terms of what’s concretely happening now at Parkside, it’s all about the last on that list, with the first phase delivering 1 million sq. ft. of logistics space. When you look at the site, you can see why an Amazon or a DHL would want to go there — it’s right next to the M62 and M6, while the West Coast Mainline and a smaller rail route form two of its borders. In fact, so confident is the joint venture responsible (a 50:50 split between the developer Langtree, and St Helens Council) that they’re bringing it forward without yet having an agreed end user.

Plans for the Parkside site. Source: https://thisisparkside.co.uk/

Nationwide, the logistics industry has boomed as online shopping has taken off. There are two things the sector prizes: cheap land (which you’ll generally find in less prosperous areas), and good transport links. St Helens fits the bill perfectly. In fact, the borough has a strong claim to be the logistics capital of the North West — almost one in eight jobs are in the sector, a long way ahead of any other area.

Whether this is ultimately to be welcomed — and indeed, given massive government support via a freeport — is a conundrum.