Summary
In February 2020, the UK Government launched a consultation on its proposals to establish up to ten freeports across the UK. Freeports are designated areas where goods can be imported from outside the UK without paying customs duties (duties would apply when the goods leave the freeport and enter the domestic market) and are designed to attract businesses which import, process and then export goods.
Our report, which represents our submission to the UK Government’s consultation has sought to examine the arguments for, and against, freeports, the possible sites in Wales which would lend themselves to freeport status and the issues that the UK Government will need to work through if it wishes to proceed with establishing freeports in the UK.
Arguments for and against introducing freeports to Wales
There are competing arguments about the potential economic benefits of freeports. However, we note that the major Welsh ports have, in their written evidence to our inquiry, responded positively to the proposals.
Based on the balance of the evidence we have received, our report suggests that freeports could play an important role in stimulating economic development and regeneration, but that they are not, in themselves, a silver bullet. Instead, they need to fit alongside other policy measures to boost productivity and economic growth, especially if we are to avoid freeports becoming an activity in economic displacement.
We also argue that, if freeports are to make a lasting contribution to ‘levelling up’ the poorest regions and nations, freeport bids should be assessed for the additional economic and social gains envisaged for the communities nearby.
Accordingly, our report recommends that the UK Government should set out in greater detail its assessments of the economic potential of freeports and how it intends to use freeports as one tool among a broader set of policies to promote economic and regional development and to ‘level up’ the regions and nations of the UK. The Government should also detail the lessons it has learnt from the experience of enterprise zones, and from the previous incarnation of freeports from 1984 until 2012.
A number of sites in Wales could be considered as locations for freeports, including seaports, airports and rail terminals. We have not sought to argue in favour of any specific Welsh location, or locations, as potential freeports.
However, if freeports are to be introduced in Wales, then it will entail close working between the UK and Welsh Governments. As our report notes, much of port policy and connected policy areas is devolved, or sees responsibility shared between the two Governments.
We make the following recommendations on possible freeports in Wales:
- The UK Government must not allow the complexities created by the devolution settlement to disadvantage the bids submitted by Welsh ports. For its part, the Welsh Government should recognise the potential opportunities provided by the Freeports concept and work constructively with the Welsh ports to deliver outstanding bids to the UK Government.
- The UK Government must neither artificially cap the number of potential Freeports in Wales, nor create a ‘Welsh Freeport’ purely for optical or political purposes. All bids should be assessed on their merits even if that results in no Freeports, or several, being awarded to Wales.
Issues for consideration going forward
The final section of our report looks at a number of issues which require further consideration by the UK Government:
- Bidding process and governance: our report calls for greater clarity about how the bidding process will work and the governance structures that will be required for freeports. We recommend that if the UK Government proceeds with freeports after the consultation exercise then it should, as a priority, publish these details and explain what role bodies such as city regions and enterprise zones could expect to play
- Infrastructure, customs and planning implications: we observe that the establishment of freeports will have implications for port infrastructure and for customs, and planning, processes. We recommend that, ahead of any bidding process, clarity is provided as to the customs processes, and infrastructure, that will be required at freeport locations.
Freeports could offer benefits to the Welsh, and broader UK, economy, but they are not an economic panacea. As our report makes clear, if freeports are to be implemented effectively then they should form one of a broader number of measures to ‘level up’ the UK economy.
Published: 8 May 2020