Are freeports tariffic news for business?

The Queen's Speech on 11 May 2021 announced that the government will establish eight new freeports in Plymouth, Teesside, London Gateway, Liverpool City Region, Humber, Felixstowe, Southampton, and East Midlands Airport.

This follows on from the 3 March 2021 Budget announcement.

When the cons of an idea are pros, it’s time to accept that you’re on to a winner.

The anticipated introduction of eight freeports in the UK later this year, including one in Plymouth, has ignited the usual debate of good news, bad news, often leading to a suitably inconclusive answer. 

Tax breaks

With tax breaks and reduced paperwork on offer, operating within a freeport can be a very attractive proposition. 

The concept suits the manufacturing sector most, with imported goods being processed to add value, before then being exported, all without paying the usual tariffs.

There are other tax breaks on offer too for businesses operating in freeports, including possible reductions in tax companies pay on their property and reduced national insurance contributions for new staff.

In this regard, the Queen's Speech on 11 May announced a new National Insurance Contributions Bill - to give relief from secondary NICs for employers of eligible employees in freeports from April 2022 until at least April 2026.

Pros and cons

The main argument for them is the increased economic activity in the freeport area, resulting in job creation driven by the subsidised business environment. 

The counter case is that this economic activity is not created but is rather a movement of existing activity; a negative compounded by the cost to the taxpayer of businesses moving to a lower taxed region.

Helping poorer regions

Looking through a different lens, part of the criteria for the freeport application process was a demonstration of how economic opportunity could be brought to poorer regions. 

Thus, it is argued that freeports contribute to a positive “levelling up” around the country, whether they create new economic activity or simply move it from one place to another.

Taken at face value therefore, the message from government that freeports will give areas of deprivation a much-welcomed lifeline allows businesses to explore the opportunities with peace of mind.

Details and advice matter

Understanding the details and assessing the opportunities presented by freeports will be the next steps for businesses. 

Cost implications will play their role in the decision-making process. 

Whether relocating or expanding, a business establishing a presence in a freeport region will benefit from practical and commercial advice on such matters as suitability, securing the right premises, funding, labour issues, and the impact on the wider business.

The level of interest in freeports and the scale of business activity that their introduction will create will be determined in time. 

But this is an opportunity for businesses to grow, innovate and build resilience within their trading activities. 

And with freeports covering distances of up to 27 miles, there should be plenty of opportunity for all wanting to play their part.

There are always difficult decisions to be made in running a business, but having the taxpayer holding part of the bill helps to ease the way forward.

Given recent times, the pros and cons of freeports may well balance the ship to ensure a smooth passage ahead.

Further help available

If your business requires a review and some possible restructuring in order to be more effective and efficient, please contact our Restructuring Team for a conversation.

You can also check out our articles and guides in our Restructuring Knowledge Hub.