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Update 1: On 7 October 2020, the Government published its response to the freeports consultation and set out its next steps.

Update 2: On 16 November 2020, the Government announced that the bidding process in England was open for applications. See Freeports Bidding Prospectus

This note will be updated in due to course to take account of these developments.

What are freeports?

Freeports are designated areas where goods can be imported from outside the UK without paying customs duties. Customs duty becomes payable only when the goods, possibly after processing, enter the domestic market. Other incentives on tax, planning and reduced red tape may also be available.

There are over 70 freeports in the EU and freeports existed in the UK before 2012. Supporters of freeports argue that their effectiveness is reduced by EU rules on state aid. They go on to argue that leaving the EU means freeports will be able to provide greater opportunities for the UK. The Government has said that the UK will not be subject to EU state aid rules but this is likely to be one of the most difficult areas in the negotiations over the UK’s future relationship with the EU.

Government policy on freeports

The Conservative Party Manifesto included a commitment to create up to ten freeports around the UK. According to the Government, the aim of the policy is to “boost trade, jobs and investment with a view to building innovative business clusters that benefit the local area and level up the economy across the UK.”

The Government published a consultation paper in February 2020. This sought views on the Government’s proposals, including policies on customs, tax, planning, regeneration and innovation. Some of these policy areas are reserved to the UK government but others include areas which are devolved. The Government has said it intends to work with the devolved administrations so that freeports can be created in Northern Ireland, Scotland and Wales.

According to the Government’s consultation, airports, rail ports and sea ports could be considered. Freeports could be located next to ports or inland. Two or more ports could collaborate to form a freeport.

Criticisms of freeports

Critics of freeports point to the risk that they will simply transfer business away from other areas of the UK without increasing the overall size of the economy. There have also been concerns about risks relating to money laundering and tax evasion.

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