It was announced yesterday that the UK government – which is pushing the concept of the special trading zones outside of the UK customs area has reached agreement with the Welsh government on a freeport. Eight have been agreed in England, with some having already been granted the necessary tax breaks, while there is an agreement for two in Scotland and plans in place for Northern Ireland.
Locations across Wales are now expected to start bidding to be the chosen location in the hope it will create high-quality jobs, attract new businesses and investment, and help regenerate communities. But Tegid Roberts, who has worked in research and development for Sony and who is an unpaid member of the secretary of state for Wales’ economic advisory board, said he doesn’t believe a freeport will deliver what its proponents claim it will.
Nothing for something
The Cardiff-based business leader responded to the announcement, by writing on Twitter, that “all Freeports do is suck economic activity from the surrounding area into its fold and the public purse gets to pay for it and loses tax income in the process”. When contacted by The National, Roberts confirmed his view that freeports amount to no more than he described and said: “I don’t see why a freeport is going to benefit Wales.”
He said he had given that opinion to the Wales Office but acknowledged his view is unlikely to be the mainstream one held by economists. Both governments are committed to tax incentives for the freeport. Roberts’ view is that a freeport will only serve to encourage existing businesses to relocate: “Rather than attract new entrants it is more likely you will have existing businesses moving into the freeport for tax purposes, it doesn’t help anyone.”
The announcement of a freeport in Wales has been held up by wrangling between the two governments with Cardiff having sought assurances the zone wouldn’t undermine its policies on fair work and environmental sustainability, including the commitment to becoming a net-zero carbon nation. The Welsh government also held out for UK ministers to provide at least £26mn of non-repayable starter funding, the same as that offered to English freeports.
Roberts said it was a success that Welsh ministers had convinced Westminster to up its initial “pitiful” offer of £8mn. But he questioned how far the funding will go. “It will need a lot more than £26mn, if you wanted to attract someone like Tesla to build a battery plant, it would barely cover the construction cost, you could easily burn that amount on the construction of a school. I don’t think it’s particularly exciting news at all.”
Freeports abandoned
While Conservative politicians, including Rishi Sunak as chancellor in 2016, have previously claimed freeports could be established as a result of Britain leaving the European Union there were, in 2019, 82 freeports or zones 21 in EU countries. The EU’s state aid rules limit tax incentives that can be offered by its freeports and Roberts thinks a tightening of the rules in the trading block would mean it viewing freeports established in the UK with suspicion. He questions how they could attract major firms while being outside of the European single market.
There has previously been a freeport in Wales as Cardiff held the status, from 1984, as one of seven across the UK with the final five abandoned in 2012. Roberts argued the Welsh capital suggests the status doesn’t bring the economic boom being claimed: “If you look at the average salary in Cardiff it’s about £30,000. I don’t think that’s booming, it’s pretty average.”
Officials from both the UK and Welsh governments will jointly assess the bids for freeport status, which is likely to attract interest from Holyhead and Port Talbot as well as Newport, while Roberts thinks selecting Cardiff would be “politically difficult.” More than one freeport could also be considered if a “compelling business case is made” while a multi-site freeport could also be considered.
Associated British Ports has confirmed it would look at securing freeport status covering all of its ports in South Wales, which are Port Talbot, Swansea, Newport, Cardiff and Barry. The Welsh Government has said in recognition of Wales’s unique economic geography and its aspirations for economic development in Wales, the UK government is willing to relax the 45km boundary limit for a multi-site freeport solution.
Relaxing boundaries
Both Port Talbot and Swansea, at 67km, are outside of the 45km boundary from Cardiff Airport in Rhoose which has also been touted as a likely bidder for freeport status and the area could also take advantage of existing links and a new rail terminal to the east of Cardiff. In Holyhead it’s considered a larger port, outside of the duty regime, could benefit its substantial trade with the Republic of Ireland as there it would be easier for goods to remain in storage until required.
Wales’s economy minister Vaughan Gething said: “I very much hope that the UK government’s willingness to work with the Welsh Government as equals on freeports can provide a positive model for future cooperation between our governments on other initiatives.”
Michael Gove, the UK minister for levelling up, said: “I am delighted that Wales is the latest area in the UK set to benefit from a new freeport. The UK government’s ambitious freeport agenda will help to level up our coastal communities and create new opportunities for people right across the country. Together with the Welsh Government, I look forward to seeing innovative proposals come forward that demonstrate tangible benefits for the people of Wales.”
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