Solent Freeport set to make waves: what we know so far about the Freeport

Louis Archer and Poppy Ford from law firm Irwin Mitchell discuss the opportunities offered by Freeports.

What links Bremerhaven, Germany and Le Verdon-sur-mere, France?

The answer is that both regions enjoy free port or free zone status. That same status will soon be afforded to the Solent region; the Solent Local Enterprise Partnership’s (Solent LEP) bid for Freeport status has been shortlisted by Government in the 2021 budget.            

Southampton previously held Freeport status up until 2012 when the UK Government discontinued the initiative. Now, nine years later, it has regained this status. What does this mean in practical terms?

A Freeport, according to Full Fact, is “… an area that is inside the geographic boundary of a country, but which is legally considered outside the country for customs purposes.”  Freeports operate both as reduced tax sites that offer business rates relief, and as customs sites that facilitate the tariff free movement of goods. This means that goods that arrive into Freeports from abroad avoid the usual tariffs; the same goes for goods that are exported from the Freeport. By lowering duty and paperwork costs Freeports encourage imports, thus stimulating economic activity.          

To give a real-world example, Freeports allow manufacturing businesses to import the materials necessary for production, make finished goods and export them - all whilst benefitting from cheaper imported inputs/components in comparison to those businesses located outside the free zone.

An additional benefit of the Freeport initiative is that businesses within the free zone which intend to export goods within the UK will benefit from tax-free storage; this enables businesses to defer customs payments. Storage in the area will therefore become increasingly appealing; recently DP World has announced a £40 million investment in a major programme for improvement of the container terminal in Southampton.

Increased manufacturing opportunities will in turn create new employment spaces. By the Solent LEP’s own estimations, the Freeport has the potential to create 52,000 jobs. The Solent Freeport initiative will be a positive force for the city of Southampton specifically which is expecting a fall in employment as a result of the Covid-19 pandemic.

The Solent 2050 economic strategy, created by the Solent LEP, proposes that the Solent will be at the forefront of the UK’s coastal renaissance harnessing new technologies and approaches to revitalise the coastal communities. With a predicted £2billion investment the Solent will build on its sustainable technology development, e.g. enzyme centres for the breakdown of plastic and approaches to decarbonisation. It is envisaged that universities in the region will contribute research to the Freeport scheme and it is hoped that the enterprise will catalyse innovation in maritime, autonomy and green growth.

Logistically, the Solent Freeport will be comprised of three areas, the ports of Southampton and Portsmouth and the Southampton Airport.  The theory is that free zones that include inland sites expand the diversity of sites available, thus giving more options to investors. Additionally, the inclusion of inland sites within a free zone enables linking of regional supply chain inputs, thereby increasing the attractiveness and effectiveness of free port incentives. It is thought that the Freeport will be facilitated through the deployment of innovative customs procedures and technologies to track the secure movement of goods between sites.

Some have voiced concerns that Freeports merely divert business to a specific area rather than generating new business opportunities within a given region. However the Solent LEP remains hopeful that this once-in-a-generation opportunity will revitalise the region with its new opportunities and that the initiative will push for sustainable practices which will support the Solent in the race to net zero.

Our Webinar, Freeports and the Opportunities They Offer beyond Logistics, is taking place on Tuesday 11 May 2021, 10:00am - 11:00am. To register, pleaseclick on the following link here.