Will the UK’s free ports project survive Covid-19?

The Brexiteers' dream may be merely delayed – but it could be washed away altogether.

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The controversial free ports project has already been affected by a delay to its consultation timeline. Now, however, the question is to what extent the Covid-19 crisis is going to affect the project, heralded by many Brexiteers as one of the major upsides to the UK leaving the EU.

A Greek tragedy?

When, in 2016, now Chancellor of the Exchequer Rishi Sunak evoked the ancient Greek port of Delos in a romantic opener to his report building the case for free ports in a post-Brexit UK, not even the Delphic Oracle could have warned him that a global pandemic would threaten its progress.

A free port is a zone with little or no taxation, as designated by a country’s government. Sunak’s report described the creation of free ports as a new trade opportunity post-Brexit, stating: “EU law has long held back the potential of British ports.” 

Many of the prominent supporters of the UK leaving the EU have been advocates of free ports, arguing that independence from Europe will allow the UK to establish these zones without restrictions over state aid being poured into them, deemed by the EU as being disadvantageous to businesses operating outside free ports.

So far, Covid-19’s sole tangible impact on the free ports consultation has been to its timeline. Opened on 10 February, the closing date moved to 13 July from the original 20 April to give potential stakeholders affected by the pandemic more time to respond. The government consultation concerns establishing up to ten such zones in the UK, with areas such as Hull, Teesport and Manchester Airport believed to be potential locations.

The British Ports Association CEO, Richard Ballantyne, remains optimistic. “My initial reaction is that the government will stay committed to these policies, but it may be more difficult for organisations such as ours to request that the benefits are spread wider than that ten [free ports],” Ballantyne says.

A spokesperson for the UK Treasury stated Sunak was still committed to the project, saying: “The Chancellor has been a long-standing supporter of free ports, and this government remains committed to establishing them to bring trade, jobs and investment to regions across the country.”

Reaching the disadvantaged?

Free ports are often heralded as a way of providing an economic boost to disadvantaged areas, such as those in the north of England. With this in mind, Tees Valley Mayor Ben Houchen – a Conservative who is also a member of the national free ports advisory panel – hopes these areas are included in any government plans to restore economic growth after the worst of the Covid-19 crisis is over.

“I think the government will see free ports as playing a key role in the economic recovery from the coronavirus,” Houchen says. "Just over 40 per cent of all the jobs in the whole of the Tees Valley are low-paid service jobs." Houchen sees the establishment of free ports in the area as a way of creating more sustainable employment opportunities.

“If free zones were put on the back-burner as part of the economic recovery, that would be a mistake because they could be an important tool, one of many that could help with the recovery that is going to happen hopefully in the not too distant future.”

Infrastructure hopes

Another mayor in the north-east of England, the Labour Party’s Jamie Driscoll of the North of Tyne Combined Authority, is aware of the controversies surrounding free ports. He points to the need to pour money into the surrounding infrastructure. “Free ports are a bit like levelling up,” he says. “Ask two people and you will get three different perceptions of what it means.

“The basic idea of investing in manufacturing and exporting is sound – who wouldn't want that? Coming out of the Covid-19 crisis, we will need all the economic resilience we can get. But, as always, the devil is in the detail. If there is government investment in supply chain technology and in green infrastructure that would be good. This has to be part of a regeneration agenda.”

Coronavirus complications

However, investing public money into infrastructure for the free ports project amid the Covid-19 crisis adds a new layer to the debate over the feasibility of free ports in high-income economies such as the UK. There is now also controversy regarding the timeliness of such a project and its place within economic recuperation plans.

"The free ports initiative was a little bit about what kind of new activity can we create in Britain as we move forward with new kinds of relationships with other countries around the world, and as we look forward and think about trade agreements,” says Dr Meredith Crowley, international trade economist from the University of Cambridge and a member of the national free ports advisory panel.

“But if I were asked what should the priorities be, I would not put free ports at the top of the list because I think that the Treasury has overwhelming and urgent needs to try to keep as much of the economy alive as possible. As we face these challenges with Covid-19, there is a kind of pressing need to understand how the virus is going to affect economic activity in the short term."

A narrow focus?

If free ports are set up in just ten locations, Crowley believes the economic benefits will be too concentrated. She says that if the Treasury wants to encourage foreign direct investment, a better way of doing that would be to provide financial incentives, such as larger and longer tax breaks, for firms that are building new facilities.

"I don't see much benefit to limiting these projects to a narrowly defined geographic region,” Crowley adds. “My first concern is that we need to preserve as much of the intellectual, physical and human knowledge capital that exists in the UK right now – and it would be a tragedy if that gets destroyed by good firms being put out of business by a recession. The Treasury's first priority should be to think about what types of programmes will keep as much of the normal economy going.”

As all efforts are put towards minimising the impact of Covid-19, with its full impact still unclear, only time will tell whether the UK’s plans for the creation of several free ports will hit their deadline, be delayed by the Covid-19 crisis – or be washed away altogether.

Marina Leiva is a senior reporter for the New Statesman Media Group

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