Freeports and Wales Contents


The UK Government’s freeports consultation

1.The UK Government, in its 2019 Manifesto, committed to creating “up to ten” freeports with the aim of ensuring that new freeports benefit all four nations of the UK and some of the most deprived communities by “levelling up the nation”. The Manifesto stated that a number of locations across the UK could be “successful innovative hubs for global trade” as the UK Government seek opportunities post-Brexit.1

2.Freeports had also been discussed by the UK Government during the previous Parliament.2 The Rt Hon Liz Truss MP, Secretary of State for International Trade, highlighted freeports as one of her top three priorities. According to Ms Truss:

Freedoms transformed London’s Docklands in the 1980s, and freeports will do the same for towns and cities across the UK. They will onshore enterprise and manufacturing as the gateway to our future prosperity, creating thousands of jobs.3

3.The UK Government launched a Freeports Advisory Panel, which will include ministers and experts, and in February 2020 announced a 10-week consultation on freeports. The Government has the following objectives for freeports:

4.The consultation stated that the UK Government are working with the devolved administrations to develop proposals to create freeports in Scotland, Wales and Northern Ireland, as well as those in England. There have been no freeports in the UK since 2012 (although one exists on the Isle of Man, which is a UK Crown-dependent territory). The UK Government has said that it hopes to establish up to 10 freeports which would have “different customs rules to the rest of the country, that are innovative hubs, [would] boost global trade, attract inward investment, and increase productivity”.5

5.During the 2019 Conservative leadership campaign, Boris Johnson referred to the following locations as potential sites for freeports: Liverpool, Teesport, Bristol, Grimsby, Hull and Belfast.6 The UK Government has made a commitment to announcing locations this year to enable the first freeport to be opened in 2021.

Ports in Wales

Ports and the devolution boundary

6.As a result of the Wales Act 2017, most powers in relation to the regulation and supervision of ports and harbours in Wales, with the exception of reserved trust ports, are devolved to the Welsh Government and National Assembly for Wales.7 Milford Haven is the only reserved trust port in Wales and responsibility for regulation and supervision of that port is therefore reserved to the UK Government and Parliament.8

7.In terms of related issues such as transport connections to ports and the planning system, there is a complex web of devolved and reserved competence. Responsibility for the railways in Wales is shared between the UK and Welsh Governments: legislative competence in relation to both British rail infrastructure and franchising are reserved to Westminster, but the procurement and management of the Wales and Borders franchise was devolved to Welsh Ministers in 2018.

8.The road transport policy field also sees a blend of devolved and reserved competence: the Welsh Government has responsibility for all trunk roads in Wales, but local authorities have responsibility for non-trunk roads in Wales and road traffic offences, driver licensing, exemptions from speed limits, vehicle insurance and vehicle registration are reserved to Westminster.

9.Finally, in terms of the planning process, most functions in the planning Acts have been devolved to the Welsh Ministers and the responsibility for port development has also been devolved, with the exception of reserved trust ports (Milford Haven).

The state of the port sector in Wales

10.The three most important ports in Wales are Milford Haven, Port Talbot and Holyhead, which have specialised shipping needs. Milford Haven, the UK’s largest energy port and Wales’s largest port by volume of trade, handles mainly crude oil, oil products and liquefied natural gas; Port Talbot imports iron ore and coal mostly for the adjacent steelworks; and Holyhead, the UK’s second busiest ferry port after Dover, is the main port for freight and sea passenger transport with the Irish Republic. The other major ports include Fishguard, Swansea, Cardiff, and Newport, and there are also a number of minor ports in Wales: Barry, Mostyn, Neath, Llanddulas, Port Penrhyn and Burry Port.9 The map below shows the locations of the major ports in Wales:10

Map: Major sea ports locations in Wales, 2018

11.Freight traffic at Welsh ports declined by 4.8 per cent in 2018 to 49.2 million tonnes (Mt). This is the lowest level since comparable records began in 1976. Traffic at major ports in Wales includes 84% of foreign traffic, with 60.1% being foreign imports. Most foreign imports and exports comprise bulk products such as crude oil, oil products, liquefied gas and ores.11

12.The importance of ports to the Welsh economy was underlined in a 2017 report by the National Assembly’s External Affairs and Additional Legislation Committee, Inquiry into the implications of Brexit for Welsh ports. According to the Committee’s report, a 2011 Welsh Government commissioned study found that Welsh ports “directly supported 18,400 jobs”, while a 2017 study funded by Associated British Ports found that their five South Wales ports “contributed £1.4 billion a year to the UK economy, including nearly £1 billion within Wales, and supported 15,000 Welsh jobs”. As the Committee notes, that three of the Welsh Government’s eight Enterprise Zones (Anglesey, Haven Waterway, and Port Talbot Waterfront) contain ports is a reflection of their economic significance to Wales.12

What is a freeport?

13.There is no fixed definition of a freeport, and its form can vary between different countries. According to a House of Commons Library paper:

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.

While being within a country’s geographical borders, freeports are effectively outside a country’s customs borders. Goods imported into a freeport are generally exempt from customs duties until they leave the freeport and enter the domestic market. No duty is payable if they are re-exported.13

14.The UK Government’s consultation on freeports adopted the following definition:

Freeports are secure customs zones located at ports where business can be carried out inside a country’s land border, but where different customs rules apply. They can reduce administrative burdens and tariff controls, provide relief from duties and import taxes, and ease tax and planning regulations.14

15.In an article on free zones, published on 7 October 2018, Professor Catherine Barnard and Emilija Leinarte, academics from Cambridge University, explained that there are three main categories of free zones:

free trade zones (FTZ), which provide for a duty-free area for the purpose of warehousing and distribution for re-exports;

export processing zones (EPZ), which offer incentives for manufacturing and related activities to be processed in the free zone (mainly for export of goods with value added);

special economic zones (SEZ), which are designed to promote foreign direct investments in defined areas.15

16.In an explainer article on freeports and free zones, the Institute for Government drew attention to the main differences between freeports and free zones or enterprise zones:

Freeports are similar to free zones, or ‘enterprise zones’, which are designated areas subject to a broad array of special regulatory requirements, tax breaks and government support. The difference is that a freeport is designed to specifically encourage businesses that import, process and then re-export goods, rather than more general business support or regeneration objectives.16

Our inquiry

17.In light of the UK Government’s freeports consultation, we decided to hold a one-off oral evidence session to examine the arguments for and against introducing freeports to Wales. However, as the session was postponed due to the Covid-19 situation, we accepted written evidence from proposed witnesses. We received evidence from trade and economic experts, port operators and port associations and a think tank.

18.We have sought carefully to weigh up the arguments for and against introducing freeports to Wales. This report will therefore start by looking at the main arguments we heard for the establishment of freeports in Wales. It will then consider the main arguments we heard against creating freeports in Wales. We will also examine the potential operation of freeports and possible locations in Wales, as well as the issues for the UK Government to consider if it chooses to take forward freeports as official policy. This report is the Committee’s submission to the UK Government’s consultation.

2 The Prime Minister, in his first speech in the office, stated: “as we prepare for a post-Brexit future it is time we looked not at the risks but at the opportunities that are upon us so let us begin work now to create freeports that will drive growth and thousands of high-skilled jobs in left behind areas” (24 July 2019).

4 UK Government, Freeports consultation, 10 February 2020, p 10

5 UK Government, Freeports consultation, 10 February 2020, p 9

7 Wales Act 2017, s.29, 32

9 Welsh Government, Sea transport 2018, 27 November 2019

10 Welsh Government, Sea transport 2018, 27 November 2019

11 Welsh Government, Sea transport 2018, 27 November 2019

12 National Assembly for Wales External Affairs and Additional Legislation Committee, Inquiry into the implications of Brexit for Welsh ports, August 2017, p.10; Associated British Ports, Ports take centre stage in South Wales economy, 1 November 2017

13 House of Commons Library, Freeports, 21 February 2020, p 3

14 UK Government, Freeports consultation, 10 February 2020, p 9

15 The UK in a Changing Europe, Free zones, 7 October 2018

16 Institute for Government, Trade: freeports and free zones, 10 February 2020

Published: 8 May 2020