Written evidence from Atkins (FRP0018)             

UK Freeports Enquiry

Atkins Response to Call to Evidence

International Trade Select Committee

21 May 2020

 

 

 

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Written evidence from Atkins (FRP0018)

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Notice

This document and its contents have been prepared and are intended solely as information for International Trade Select Committee and use in relation to Click here to enter purpose.

Atkins assumes no responsibility to any other party in respect of or arising out of or in connection with this document and/or its contents.

This document has 23 pages including the cover.

 

Document history

Document title: Atkins Response to Call to Evidence

 

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Contents

Chapter              Page

Executive Summary

Executive Summary

Introduction to Atkins

Introduction

Response to call to evidence questions

1.              What benefits might freeports bring to the UK – and how should these be measured?

1.1.              Freeports will trigger economic growth

1.2.              Freeports stimulate regeneration

1.3.              Freeports drive innovation

1.4.              How might the benefits of Freeports be measured?

2.              What negative impacts could freeports have – and how might these be mitigated?

3.              How comprehensive is the package of measures proposed by the Government in its freeport model – and what others, if any, should be considered? How should these measures be adapted for different locations?

3.1.              The existing package of measures

3.2.              Customs and Tariffs

3.3.              Enterprise Zone measures

3.4.              Planning Reform

3.5.              Suggested additions to the Freeport package

4.              Are the proposed criteria for selecting sites to become freeports appropriate? When evaluating proposals, should greater weight be given to certain criteria? What role will the Department for International Trade play in this process?

4.1.              Selection criteria and weighting

4.2.              Criteria 2: Levelling Up

4.3.              Evaluating proposals:

4.4.              The role of the Department for International Trade (DIT)

5.              What impact could freeports have on the overall regeneration and expansion of industrial areas? Is there a risk of displacement and economic disadvantage to areas not selected – and how could this be mitigated?

5.1.              The impact on regeneration and expansion

5.2.              The risk of displacement

6.              What can the UK learn, and what competition will it face, from established freeports around the world?

6.1.              Location is key.

6.2.              There is a significant risk of illicit activity.

6.3.              Freeports need to adapt to create and maintain their competitive advantage.

 

 

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Executive Summary

 

 

 

 

 

 

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Executive Summary

Freeports can help trigger economic growth, stimulate regeneration and drive innovation as the UK transitions to the 4th Industrial Age and pursues Net Zero. A government package of alternative arrangements for import duty, taxation and regulation will incentivise business and stimulate exports, which will boost trade to create jobs and wealth around the whole of the UK but focus their benefits in towns and cities that require levelling up.

Government’s Freeport package is not just there to create competitive advantage, but to help transform the way business is done by promoting innovation and embracing change. This is a chance to kick-start automation, digitisation and Net Zero – using Freeports as a catalyst for both economic growth and the wider transformation of our economy.

This depends on selecting Freeports in the right places, based on comprehensive applications that show how consortia made up of port operators, local authorities, business, educators and innovators will work together to develop modern, sustainable port that sit at the heart of the local economy.

Hence, the way Government selects ten new Freeports is vital. The process must be clear about selection criteria and how they will be weighted, but this clarity is not yet available. Applicants must go beyond listing their aspirations and submit credible evidence-based plans that show how and when they will deliver across the whole range of criteria laid out by Government.

Once selected, UK Freeports should continue to be assessed on the volume of extra trade and jobs they generate as well as their wider impact on communities and the environment. These assessment processes must be meaningful, challenging and credible, overseen and assured by an independent body and used to reassign Freeport status, if necessary.

This initiative will stand or fall on its ability to generate sustainable increases in international trade and, for this reason, should be led by the Department for International Trade (DIT). To make rapid progress, both government and Freeport consortia should harness the skills and capacity of subject matter experts who can help deliver both the selection process itself and then the dynamic, digitally-enabled and sustainable ports and supply chains this initiative is designed to deliver.

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Introduction to Atkins

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Written evidence from Atkins (FRP0018)

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Introduction

 

Atkins, a part of the SNC-Lavalin group, is one of the world’s most respected engineering and project management consultancies. Atkins have worked successfully with UK Government and industry over many years, to build safe, secure and modern solutions. Atkins has the capability, capacity and expertise to help Government and industry deliver across all areas of the Freeport initiative.

Atkins are uniquely placed in this field, having the optimal combination of digital and infrastructure skills and experience, and over 30 years’ experience working with ports. The future of ports depends on the integration of digital systems across and beyond the port infrastructure to deliver efficiency and security. Atkins are well placed to assist Government and ports by:

      designing Freeports using Digital Twins

      delivering engineering upgrades at scale

      embracing automation, machine learning and artificial intelligence

      building in resilience and cyber security

      transitioning to sustainable technologies and environmental net gain

Atkins believe that the Freeport initiative should be accelerated to drive the recovery of the UK. We would welcome the opportunity to discuss our ideas and the role we might play with Government.

 

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Response to call to evidence questions

 

 

 

 

 

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1.                     What benefits might freeports bring to the UK – and how should these be measured?

1.1.                  Freeports will trigger economic growth

 

The primary mechanism for triggering economic growth is the reduction in administrative and cost overheads attached to the manufacture and movement of goods for export. This is achieved through the removal of duty on imported products and the simplification of customs procedures for goods that enter, can be manufactured in and are exported from the freeport.

Whilst all freeports are based on this policy, many have further measures which drive their use and growth. It is vital that the UK Government delivers on the wider package of measures to make the scheme a success.

Measures could include streamlined and simplified planning procedures, Net Zero investment and incentives, business rate reductions, coordination with education institutions for training and innovation, and incentives for the kinds of housing that will make Freeports an attractive place to live and work. All these factors will trigger economic growth and an improvement in wellbeing for residents of the hinterland of the Freeport.

 

1.2.                  Freeports stimulate regeneration

Some coastal communities and industrial heartlands were left behind over recent years and need to level-up with the rest of the economy.

Freeports can be a key catalyst for driving growth in their hinterlands by developing high levels of physical, virtual and economic connectivity and coordinating efforts to drive export manufacturing. To achieve this there is need for collaboration between Freeports, local and regional authorities and investment partnerships, education institutions and local businesses.

Plans should be clearly focussed on delivering growth through trade. To do this they must scale-up on-site business, use Freeport facilities to enhance the local industrial base, make the best of the land and other natural resources that are available and develop the local skills and infrastructure.

The way regeneration is delivered must be carefully managed. It is a chance to ensure the needs of industry are balanced against those of the workforce for supporting facilities, and to ensure that choices that are made around design and technology are all aimed at driving local and national Net Zero outcomes.

 

1.3.                  Freeports drive innovation

Freeports should be the natural home for businesses at the forefront of the UK’s economic, social and environmental transformation. This means providing the modern infrastructure and collaborative environment that attracts, enables and inspires business to invest in the future – a future of automation, digitisation and migration to Net Zero technology.

In practice this means setting Freeports up to succeed by providing 5G coverage, green-energy supplies, electric vehicle charging stations, research facilities and a regulatory regime that stimulates innovation whilst penalising harmful or outdated processes and behaviours.

Freeports should be encouraged to apply for government funding through schemes that promote innovation, particularly those with a modernising or sustainability theme. This will make Freeports a hot-house for innovation and a catalyst for the whole economy as its transitions to the 4th Industrial Age and Net Zero.

 

1.4.                  How might the benefits of Freeports be measured?

The performance of Freeports must be reported on annually to build public confidence and demonstrate the benefits to the business community. Performance data will allow policies to be adapted, allow failing Freeports to be removed from the scheme and replaced, and allow lessons to be learned and shared.

Assessment should be based on consultation with stakeholders, promote desirable behaviours by ensuring that they are explicitly measured, and report on what is important even if it is difficult. The process must;

a)      Comprise of primary measures that relate directly to the stated goals of the Freeport initiative to increase international trade, stimulate regeneration and drive innovation. This might include an assessment of;

      Turnover and profit compare to pre-Freeport

      The number of Freeport business start-ups compared to closures

      Increase in international trade done through UK Freeports

      Local and sectoral regeneration, by monitoring job creation and employment levels in and around the Freeport Zone/s

      Innovation – increase in successful local initiatives.

b)      Use secondary measures to monitor societal impacts such as;

      The number of businesses that relocate into the Freeport and the level of unemployment or other negative outcomes this has created,

      The impact of Freeports on local pollution and congestion,

      The number of local people entering the Freeport workforce versus leaving the region to find work,

      Levels of business confidence amongst exporters,

      Take up of Net Zero facilities and the impact they have in the hinterland.

Performance data should be integrated into the operation of Freeports or use existing sources such as the Office of National Statistics (ONS), to ensure it is easy to gather and assess. It should be validated by an independent body.

Performance data will ultimately be used to judge the success of individual freeports and the overall initiative.

Performance data should be augmented by a periodic wider assessment with key stakeholders to report on the qualitative aspects of performance, including investigation into freeport failure where appropriate.

2.                     What negative impacts could freeports have – and how might these be mitigated?

The key risks attached to the operation of Freeports are that;

a)      They take business from other UK Ports, causing them to decline with adverse effects on their stakeholders and hinterlands.

b)      They cause existing UK businesses to relocate in order to take advantage of the Freeport package, but don’t create new exports or jobs. This would negate the intended benefits of the initiative, disrupt workers and their families for little net gain to the wider economy and risk creating pockets of unemployment and economic decline.

The mitigation of risks a) and b) are discussed in Question 5 below.

c)      They could encourage or enable criminal activity and tax evasion, undermine public confidence and overstretch law enforcement resources.

A robust agency enforcement regime is required to supplement self-enforcement measures taken by Freeport operators, and must be planned and funded. Enabling common data standards will support better data integration, better agency targeting and seamless journeys, all of which will help to prevent, disrupt and detect illegal activity

d)      They distort the market and create an excessive dependency on Freeport advantages for the viability of some businesses, storing up problems for the future.

The inherent viability of Freeport plans should be taken into account and only applicants whose business case is robust and capable of being made self-sustaining should be considered.

e)      The Freeport package is deemed to offer UK business an unfair advantage using state aid, and this hampers trade negotiations.

Possible reactions to the Freeport package should be carefully considered and alternatives should be sought to the measures that seem most likely to trigger unhelpful repercussions.

f)        The ability of Freeports to innovate might not reap the intended rewards for the wider UK economy if progress is not shared openly and immediately

Innovation in Freeports should be overseen by a suitable authority and successful applicants in the selection process should be required to sign up to an Innovation Code of Conduct as a condition of being awarded Freeport status.

g)      Freeports may develop into a back door for goods “dumped” onto the international market, undermining other suppliers.

This risk can be mitigated by ensuring such activity is clearly prohibited and that the enforcement of applicable regulations in Freeports is no less robust than in other UK ports.


 

3.                     How comprehensive is the package of measures proposed by the Government in its freeport model – and what others, if any, should be considered? How should these measures be adapted for different locations?

3.1.                  The existing package of measures

The Freeport package consists of UK-wide policy on;

      Removal, reduction or deferral of tariffs on imported goods intended for re-export or delayed entry to the UK economy

      Simplified Customs procedures that reduce administrative overheads on goods that stay inside the Freeport

and policy falling to the devolved administrations covering;

      Tax incentives and other measures linked to Enterprise Zones

      Planning reforms making it cheaper, easier and quicker to invest in development

This combination of measures is adequate to stimulate general forms of international trade and export manufacturing. Bespoke measures might be considered based on opportunities for specialised Freeports.

For instance, where a Freeport specialised in exporting products or providing services tailored to one sector, such as renewable off-shore energy (tidal power, wave-energy, wind turbines etc), a range of Net Zero themed incentives that would offer very focussed support that would gain very little traction at a Freeport specialising in the import, processing and re-export of high-tech consumer goods. Industry should advise Government on the package of measures that they think would help the most. 

 

3.2.                  Customs and Tariffs

The Government’s proposals for changes to tariffs and Customs arrangements are typical of measures traditionally associated with Freeports and will deliver advantages to businesses that focus on transhipping or manufacturing for export using imported materials. No significant changes are required.

The key to the delivery of growth and regeneration lies in how Freeports are chosen, how other incentives are framed. Local authorities and devolved administrations must be free to finetune the way in which they deliver those parts of the Freeport package, in a way that best meets local needs.

Freeports will operate under different rules to other ports and the way that difference is maintained is critical. Government aims for light touch regulation by devolving responsibility for enforcement to Freeport Operators. However, responsibility for security, public confidence and the mitigation of any negative impact Freeports could have on other UK ports ultimately rests with Government, and all of this requires effective enforcement. It cannot simply be left to Freeport operators or market forces and it would be a mistake to believe Freeports come without a cost overhead for extending border agency capacity. A plan for their funding and delivery should be set out in the Freeport package.

 

3.3.                  Enterprise Zone measures

Various tax incentives, funding streams and collaborative schemes already exist around the UK under devolved governance to promote Enterprise Zones. These should be accessed by Freeport stakeholders acting in partnership in order to make the most of the additional strengths that Freeport consortia can bring, over and above what is achievable when businesses operate individually within an Enterprise Zone.

It is important that each of the devolved administrations provide clarity around the selection approach they will take as early as possible so that applicants for Freeport status know where they stand and variations in the detailed composition of local Freeport packages can be taken into account during selection.

 

3.4.                  Planning Reform

Planning is particularly important to ports of all kinds. Reform will be welcomed warmly if it simplifies and speeds up decisions. The rationale for denying other UK ports a similarly favourable planning environment is not clear and adds to the risk of them being disadvantaged when compared to Freeports.

The alignment of maritime and aviation policy on permitted development will be helpful. That said, there is a question of whether it is appropriate for planning freedoms to be extended to ventures that would not be sanctioned elsewhere if they have scant connection to traditional port-based activity. Business should not locate into a Freeport merely to evade proper planning controls and some mechanism for ensuring legitimacy is required.

It should be expected that planning applications will highlight difficult policy choices, not least around development of ports in residential areas where industrial activity may impact on quality-of-life, though it may also be found that many communities would welcome the growth that Freeport status could bring. Government should confront the issue now to ensure its view on Urban versus Out-of-Town Freeports is clear so that it can be reflected in Freeport selection decisions.

There may be Freeport bids where business cases are contingent on planning decisions that won’t be taken until long after selections decisions are taken. A method is needed to evaluate the impact of planning decisions so bids that depend upon them are not disadvantaged within the process. If not, it could have the unintended effect of penalising the most ambitious and transformative proposals.

 

3.5.                  Suggested additions to the Freeport package

3.5.1.             Redefining Security

Government is clear that Freeport sites must be secure. Apart from building fences this means making provisions for digital virtual security barriers as goods move between remote sites under Customs Guarantee. Without such measures, aspirations for engaging the UKs inland industrial heartlands in the Freeport initiative will be hard to realise and this will make it harder for Freeports to be an effective mechanism for levelling-up. The use of technology ought to allow any port and industrial base that can establish appropriate physical and digital connectivity to combine in a virtual Freeport consortium

The requirement for whole-supply-chain security should be explicit in Freeport provisions that build on the legislation that already stipulates the physical security arrangements for UK Ports. The government should consider how to encourage and enable the successful applicants to create secure virtual Freeports, perhaps through funding or technical support and guidance.

 

3.5.2.             Promoting Automation, Digitisation and Integration

Automation is one potential route to efficiency, safety and competitive advantage. The UKs transition to the 4th Industrial Age in an increasingly connected global economy will be driven by digitisation and data exchange, however, this is hindered by the lack of data standards. Integrating the management systems that collate data at countless points along the cargo journey and international supply chain, creating one version of the truth and sharing it with commercial stakeholders, immigration authorities and customs, would increase efficiency, support early targeting by border agencies and promote seamless journeys for goods and people. Enabling “just-in-time” journeys and deliveries would mean Freeports needed smaller warehouses and parking and double-handled products and shipments less often, cutting cost and pollution.

The UK could take a lead in these areas by establishing and rolling out a Port & Logistics data standard to support supplier-agnostic technology and enable data to be collected and processed more easily. This would encourage development of next generation Port Community Systems to track goods beyond the Freeport zone, upstream to suppliers and downstream into distribution networks.

The Freeport package could offer specific incentives for Freeports to contribute to this innovation or make access to Freeport benefits conditional upon them doing so.

Government could also support Freeports in the development and implementation of automation and digitisation strategies. This might be done by prioritising or subsidising the roll out of 5G to Freeports, providing guidance and technical support or aiming funding government schemes at Freeport-based projects working on these challenges.

Taken together, this combination of existing and suggested provisions would provide both the core elements of a Freeport package and a more nuanced stimulus to the particular changes that the UK needs from its ports at this time, linking in with the wider transformation that is needed across the whole economy.


4.                     Are the proposed criteria for selecting sites to become freeports appropriate? When evaluating proposals, should greater weight be given to certain criteria? What role will the Department for International Trade play in this process?

4.1.                  Selection criteria and weighting

A good initiative is open to all who might succeed on merit, whilst a good selection process enables sound, evidence-based decisions and inspires confidence amongst stakeholders. This requires clarity about how different strategic aims will be prioritised, the criteria upon which bids will be assessed and how they will be weighted, the format for evidence presentation and mechanism for its evaluation.

The consultation document makes clear Government’s desire for the initiative to boost exports, for the allocation of Freeports to be geared towards areas of greatest need and a catalyst for innovation, and that they want all the nations of the UK to share in the benefits of Freeports.

However, there is not yet clarity around how the precise criteria will be applied to selection or how those criteria will be weighted within the process, or the nature of the evidence that must be provided or how it will be evaluated. The sooner this clarity is provided the better the outcomes the process is likely to generate.

To achieve optimal outcome the process requires Freeport consortia to engage port operators, local authorities, local business communities and enterprise partnerships, as well the education and innovation sectors, in comprehensive bids that will address all government objectives. Applicants should be clear about the resources they will commit to delivering their Freeport design, as well as their roadmap for the future.

Different criteria should be weighted to reflect their relative importance, and minimum viability-scores should be set to ensure that applications that score badly in certain key areas do not go any further in the process.

There should be four general criteria, three of which align to the Government’s strategic objectives and the final one qualifies the credibility of the bid. These criteria should be comprised of sub-criteria that enable a more precise score to be developed. The criteria should be considered in sequence.

 

4.1.1.                Criteria 1: Economic Viability

Freeport plans must be economically viable. If this requirement is not met the application should not proceed, as it will never deliver the sustainable economic benefits needed to support regeneration or innovation and instead will be a net drain on the exchequer.

Sub criteria might include the number of well-paid jobs that will be created within the Freeport Zone, the value of new exports that will take place, the projected impact on overall tax revenues to the exchequer, the value of other benefits or disbenefits that are anticipated and the level of dependency of each applicant on government subsidy or tax incentives.

 

4.2.                      Criteria 2: Levelling Up

The Freeport plan should deliver benefits that support levelling-up.

Sub-criteria could include a measure of the degree of local economic disadvantage to be addressed, the number of well-paid jobs that well be created on-site and in the hinterland, the extent to which new jobs will be taken by local workers and lead to reductions in unemployment, as opposed to bringing in new workers but doing nothing directly for the local community.

Freeport site selection decisions should favour those applications that are configured to win new business from abroad, rather than relocate businesses around the UK.

 

4.2.1.                Criteria 3: Environment

If the UK is to hit Net Zero by 2050 then transport and logistics must play their part. UK ports and all the business done through them must transition to clean technology therefore applicants should set out a plan for achieving a range of specific milestones in carbon reduction.

Sub-criteria might measure the reduction and eventual elimination of emissions from on-site activity and business, levels of on-site renewable energy production and storage, the amount of vessels, planes, trains, lorries and cars re-powered with green energy generated on site and the eventual exclusion of polluting vehicles from the port environment, reducing congestion and recycling. Freeports that build capability at scale and extend these benefits to the local community would score best, while those that don’t achieve the minimum required scores around Net Zero should drop out of contention.

 

4.2.2.              Criteria 4: Credibility, UK investment and Early Benefit Realisation

Freeport applications must be clear, convincing and evidence based. They should comprise credible plans and timelines for achieving milestone levels of attainment against each of the required selection criteria. Early benefit realisation is important, and the UK should aim to be a market and technology leader, not a follower.

The development of Freeports should lead directly to the success of UK business and job-creation. The UK Government is committed to Free Trade, but now, as a fully independent nation, the whole-life benefit of this initiative to the UK should be taken into account and the selection process should, wherever it is consistent with delivering world-class products and services, favour bids where investment in capacity building also impacts the domestic economy.

Likewise, benefit realisation calculations should be based on net calculations. If a particular Freeport wins business by causing  jobs and opportunities to be displaced from other parts of the UK, particularly other areas in need of regeneration, then the overall impact is what should be taken into account and this should include any funding that government has inject in order to counter the negative effects of such relocation.  

 


4.3.                  Evaluating proposals:

This complex evaluation can be simplified into a two-step process, and an optimal decision will select an application that would sit in the centre of both diagrams;

 

oportunuity source - Word

 

Regenration 1 v2 - Word

 

The selection process must enable applicants to succeed on merit whilst allowing government the flexibility it needs to achieve the mix of Freeport types and locations that best serves national and regional interests. A sensible approach to achieve this aim would be to run an iterative process including the following steps:

4.3.1.              Stage 1: Market Sounding

This phase will assess the way important choices are being approached by Ports and business communities and encourage them to make changes before proceeding to Stage 2. The key considerations in Stage 1 include;

4.3.1.1.                                                                                                                                                      Are Ports bidding individually or as Port Groups?

Ports may default to approaching the Freeport initiative as individual businesses, but regeneration may be more likely if Ports collaborate in a regional Freeport partnership

 

4.3.1.2.                                                                                                                                                      Are Ports bidding in isolation or within local consortia?

Directly involving port users, engineering suppliers, local authorities and universities from the outset will ensure joined-up thinking and improve hinterland connectivity.

 

4.3.1.3.                                                                                                                                                      What is the interest amongst regions & modes of transport?

If key regions are unrepresented or bids are too narrow the chance to encourage wider participation will be useful.

4.3.2.                Stage 2: Expressions of Interest

This phase will inform potential applicants about the selection process, require them to begin their engagement with the process in earnest and allow government to assemble resources and fine tune its planning for the remainder of the process. 

4.3.3.                Stage 3: Application

In this phase applicants will submit a written response against a clear framework of selection-criteria.

4.3.4.                Stage 4: Evaluation

This phase will begin with an assessment of viability, to ensure applicant-ports have the essential qualities that make a Freeport economically viable in the long-run. Only viable bids should progress.

Government should engage subject matter experts to guide them in their evaluation of the evidence around technical issues, and the way the package of measures made available by Government will be applied to each Freeport bid should also be taken into account.

4.3.5.                Stage 5:  Decisions and Awards

In this phase government should write to applicants explaining how their bids have been marked and provide an appeals process, the resolutions of which should lie entirely with government.

4.4.                  The role of the Department for International Trade (DIT)

The primary aim of the Freeport initiative is to support UK Ports as catalysts for increased international trade. The scope for Freeports to deliver on other important government aims like levelling up, innovation and achieving Net Zero all depend on delivering this primary aim. Therefore, DIT should lead on the selection of Freeports and the way they are incentivised and assessed, with close cooperation of other departments.

The scale and complexity of the task to select and monitor the UKs Freeports, its specialised nature, the time-criticality in a post-Brexit and post-pandemic world, all suggest that the DIT would be greatly assisted by bringing in support from relevant subject matter experts and consultancy providers. This will help ensure that selection and monitoring are robust, fit-for-purpose and delivered on time and shorten the lead-time to the realisation of Freeport benefits.


5.                     What impact could freeports have on the overall regeneration and expansion of industrial areas? Is there a risk of displacement and economic disadvantage to areas not selected – and how could this be mitigated?

Freeports direct investment and opportunity into their hinterlands and, with collaboration and effective planning, this can be shaped towards regeneration and levelling up. However, the purpose of the Freeport package is to win new business and investment and there is a risk it will come from other areas of the UK. This should eb mitigated by encouraging net-positive decisions and allowing virtual freeports, with enterprise zones linked digitally which are away from the port.

This question is partially addressed in Question 2, concerning the potential negative impacts of Freeports and their mitigation.

 

5.1.                  The impact on regeneration and expansion

If Freeports generate more transhipments, this could lead to more jobs in roles concerned with the management of cargo and the port operator’s supply chain. If Freeports generate more on-site, and in-zone, manufacturing this could lead to new businesses setting up, more businesses becoming involved in export and more jobs in the manufacturing process and their supply chains.

The businesses driving this growth will need resources. They will need access to land, power, water, a skilled workforce and transport links that enable the efficient flow of goods and people into and out of the port.

As many as possible of the jobs created in Freeports should go to workers from the immediate hinterland if the full benefits of levelling up are to be realised. This may require early effort in engaging and retraining local people, working with the education sector to ensure the necessary skills continue to be developed. The spending of new workers will inject money into the local economy, but they will need housing, training, education, health services, public transport and parking. They will drive cars on local roads and consume power, water and space but won’t want to be affected by pollution or congestion.

So, whilst many of these outcomes help to level up, they do mean that investment in infrastructure is required in parallel with the expansion of Freeports and the businesses they serve. If this is not done strain on local facilities will arise.

The likely outcomes will be a net increase in economic output, jobs and affluence, and a shift away from services, traditional industries and manufacturing for the domestic market. There will be growth in manufacturing for export in industries where global demand is growing, or the UK has a competitive position that can be built upon.

 

5.2.                  The risk of displacement

The reality is that UK Freeports won’t just be competing with ports and Freeports in other countries, they will be competing with other UK ports and inland industrial bases too. Hence there is a clear risk that other UK Ports and inland regions will lose out to Freeports based on the advantages they gain from the Freeport package. This can be partially mitigated by extending the non-taxation and non-customs-based advantages enjoyed by Freeports across the whole UK port sector, but it won’t do anything to assist inland Enterprise Zones. UK ports will fear the loss of transhipment business and on-site manufacturers, whilst Enterprise Zones will fear the loss of businesses that focus on exports.

It will not be practicable to prohibit business from relocating into a Freeport as such decisions might be taken for compelling reasons or necessary to achieving desirable net gains, such as higher turnover or more jobs. Additional incentives or provisions could be offered to businesses that would not leave an economic ‘hole’ behind them, such as start-ups, or where there is clear evidence that the move to a Freeport will generate growth.

Nor will it be practicable to regulate the investment decisions made by Port Groups, who operate multiple ports around the UK. In order to make rapid progress in developing their Freeports they may divert investment that would otherwise have been made in their other ports. Going forward this could impact the competitiveness of those other ports.

However, where Freeports act as hot-houses for port-related innovation this could balance out the negative impacts of concentrating investment into Freeports by enabling modernising and cost-saving solutions to be rolled out around the UK port sector.

Two aspects of the Freeport initiative from the public consultation, are essential to mitigating the potential negative impacts;

a)      Applications are permissible from multiple ports, to enable integrated systems of ports and businesses to form.

b)      Virtual connectivity and security should be allowed to extend the freeport to inland Enterprise Zones.

In both cases the aim is to achieve economic benefits whilst removing the need for businesses to relocate.


6.                     What can the UK learn, and what competition will it face, from established freeports around the world?

Freeports operate in many countries around the world and have done so in one form or another for thousands of years. The way those Freeports have evolved provide some valuable lessons;

6.1.                  Location is key.

 

Singapore became a successful port because of its position at the intersection of global trade routes, opening up Asia to Europe and Africa, as a way station for Chinese goods and as a central trading post for island nations in the region.

6.2.                  There is a significant risk of illicit activity.

 

As recently as 2020 the EU clamped down in its dealings with Freeports due to suspicions about criminal and terrorist money laundering, as well as fears over tax evasion. These problems were particularly common in the Art storage market, which has been excluded from UK’s Freeports.

6.3.                  Freeports need to adapt to create and maintain their competitive advantage.

 

For example, Singapore was one of the most successful ports in Asia but declined due to the rise of competitors in the Malacca Sultanate. It regained prominence by becoming a Freeport and cutting bureaucracy compared to regional revivals, being the first to adapt when steam replaced sail by building the facilities it needed to become the regional re-coaling centre, and by working with  government to build roads into the hinterland so goods could be moved in and out of Singapore port more efficiently than they could be through other ports in the region – giving local industry (their customers) an advantage.

Even today Singapore is adapting to maintain its position, by scaling up its facilities to service the largest vessels and leading the global port sector in the adoption of automated cranes and autonomous vehicles

The history indicates UK Freeports must have a combination of several of the following characteristics;

      A beneficial position on a trade route

      A gateway position and connectivity to a hinterland

      Modern technology for delivery of efficient port operations

      A benign regulatory environment

      Robust governance to ensure Freeport benefits are not abused

      The ability to adapt to changes in the market and technology

UK Freeports will have a complex business model and it would be a mistake to believe they will only compete with their international counterparts. Instead, UK Freeports will compete on different levels with other UK ports, overseas ports and Freeports and Enterprise Zones at home and abroad. The nature of this competition will vary, depending upon the business opportunity in question and the proximity of the competitor to the Freeport and to the UK.

Competition is generally based on;

      Price – cheaper generally sells

      Quality – people prefer better products and services

      Support – people value good service and after care

The Freeport package needs to incentivise benefits beyond price, to encourage investment in leading technology, quality and skills.

The package should enable UK Freeports and manufacturers to invest in new technology to reduce operating costs and enhance quality.

For Freeport operators this might mean investing in automation, offering green re-powering, reducing unloading times and enabling just-in-time deliveries. If shippers and exporters find it more convenient and efficient to use a UK Freeport they will transfer business and custom to the Freeport, or might be willing to pay a premium for the improved services they receive.

For in-zone manufacturers there will also be an opportunity to invest in better technology and automation to drive down cost and increase quality, or to use better materials, invest more in finishing or offer better after-care.

Some of the other Freeport package measures, such as streamlined planning procedures or support for innovation, would help by enabling UK Freeports and in-zone manufacturers to be more agile and swifter to respond to changes in the market than their overseas competitors.

At this time the opportunity to compete by being the first to offer green re-powering at scale would be very attractive because of its resonance with global concern and government policy, as well as the significant collateral benefits that would accrue. On the journey to 2050 the market is likely to favour businesses who can demonstrate their environmental credentials and it makes sense for UK Freeports to be on the right side of history.

Likewise, if UK Freeports are simply cleaner, more secure, better designed and equipped with better infrastructure this may be enough to win business from competitors who cannot offer comparable facilities. This would be an attractive way to compete because of the inherent quality of life benefits it would bring to UK workers and those living in the vicinity of UK Freeports.

It is up to UK business to make the most of these diverse opportunities in a way that will best enable them to compete across a range of markets.

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Written evidence from Atkins (FRP0018)

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