Written submission from Aberdeen Harbour Board (FRP0009)
Q: What benefits might freeports bring to the UK – and how should these be measured?
- The potential benefits of a traditional tariff-based freeport model are widely acknowledged and evidenced in freeports around the world. The establishment of such a status at a port has the ability to attract new trade and manufacturing activity, to stimulate growth in the local service and supply chain sectors, and to provide economic benefits in terms of investment and employment.
- C21 declarations would mean equipment moving back and forth could be landed, maintained, and sent out again without the need for full C88 declarations, whilst still providing HMRC and the port increased visibility on these movements within both CHIEF (and CDS going forward), and the inventory-linked system. Such a simplified system would represent an attractive model to our existing customers, in particular in the energy sector, and has the potential to transform Aberdeen into a key transition hub for new markets and international trade.
- Tax incentives for a proposed Freeport and surrounding zone are vital in attracting new investment, particularly in supporting the development of the infrastructure required for new business opportunities. There is no doubt that Business Rate discounts are a key part of that equation, and the experience in existing Enterprise Zones clearly show that this is an attraction to start-up businesses. Any new Freeport model and associated Enterprise Zone would benefit from such discounts. In Scotland, however, this will require the devolved administrations to follow the model available in other parts of the United Kingdom if Scottish Ports are to have the same chance of success as one in any other part of the country.
- Enhanced Capital Allowances, particularly those focussed on industrial buildings, plant and machinery and technological innovation/ development, are also key to attracting the necessary new business to support the considerable investment required for successful establishment of a Freeport. Capital Allowances also give scope to support the development of green energy and alternative fuel technologies and infrastructure through research and development tax incentives. These would not only support the wider climate change agenda but would assist in the transition of existing oil and gas related ports and industries towards carbon zero targets and the overall energy transition initiative.
- To allow existing ports to make the infrastructural changes required to attract new industries and technologies, enhanced Industrial Buildings Allowances, Capital Allowances focussed on green energy and alternative fuels infrastructure, together with associated research and development incentives, would be useful. Ports can encourage new start-up businesses through offering economies of scale or clustering supported by the necessary infrastructure to develop through a form of Energy Transition zone.
- Specific tax allowances, aimed at maintaining existing skill bases and retraining to support new technologies will encourage employment, and the provision of new personal tax allowances focussed on supporting the development of use of green energy, alternative fuels for public transport or purchase of greener vehicles for those based in an Energy Transition zone, would all attract new employment.
- The potential for the introduction of greater planning freedoms is, we believe, an important element of the proposal. Aberdeen Harbour would encourage investigation into the possibility for any planning mechanism which could augment port operators’ existing permitted development rights for operational uses – especially increased flexibility in the development of warehousing capacity in the post-Brexit context. Indeed, we would encourage proposals for further planning freedoms to be considered, beyond those currently proposed.
- In more general terms, the introduction of a freeport to Aberdeen has the capacity to attract value-added manufacturing and the significant benefits of a free port environment. In particular the introduction of manufacturing within an Aberdeen free port zone, and its accompanying positive tax implications for customers, has the capacity create significant export potential.
Q: What negative impacts could freeports have – and how might these be mitigated?
- The potential for negative impacts resulting from a Freeports model flow from its proposed administrative framework. Setting port authorities up as Freeport Operators, as defined in the Government’s proposal, is not impossible, but the investment in terms of time, resource, and cost, for UK ports should not be underestimated. The level of scrutiny that operators would be responsible for would add a significant workstream for any port, and there is a risk that this burden could outweigh any upside that the port was experiencing, especially in the early years of freeport operation.
- Aberdeen Harbour is an Authorised Economic Operator (AEOC) and so in many respects has a good foundation for taking on this responsibility. It is a mature, state-of-the-art facility, providing bases for internationally recognised oil & gas operators, and so has advanced security measures and facilities. This secure environment could, paradoxically, represent a context for more flexible thinking in terms of how a freeport could operate, and consideration could be given to the development of ‘virtual’ freeports, where port business were afforded the ability to opt in, or out, of the virtual freeports scheme.
- Despite simplified customs procedures, a potential disincentive to new markets and new customers considering a freeport as a manufacturing base, can take the form of increased red tape. The tax regimes associated with, in particular, the reimportation of components, in their end-product state, back into a host country can often be over-complex and restrictive. It is essential that such processes are clear and relatively streamlined.
- It is also key that consideration is given to the ease with which the designation of ports as freeports around the country aligns with the various legal frameworks under which UK ports currently operate. Beyond the complication of sitting across two national legal systems, a chosen freeport model would need to align with the various statutory contexts which underpin Trust ports, private ports and local authority ports to avoid ports of a particular status being placed at a disadvantage.
Q: 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?
- Aberdeen Harbour Board would welcome a flexible approach by the government in terms of Freeport definition, allowing various models to be developed and adopted. We would propose that freeports will be most effective where their design is tailored to the economic, social and commercial context of the local area, the local port, and its customers.
- As indicated above, Aberdeen Harbour would welcome greater detail on tariff flexibility, simplified customs processes, tax measures, planning reforms, and targeted funding.
Q: 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?
- The proposed criteria for selecting sites are both comprehensive and appropriate, providing a balance between current capability and future potential. Indeed, it is important that applications consider port capabilities that will result from development and expansion already under construction.
- The selection process could also give consideration, through input by the Department for International Trade, to ports which have the potential to facilitate local economic regeneration opportunities derived from changing, post-Brexit, international trading relationships. Freeports potentially represent an opportunity to rebalance trading activity across the UK, and the potential for ports to attract new business through the development of policy-inspired shifts in the traditional trading route-map could play a role in the government’s selection process.
- There is also the opportunity for the criteria to include a measure of the wider transformational benefits that a free port could stimulate for a particular region – whether these be social and/or economic, rather than a measure that is purely transactional in its nature.
Q: 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?
- Aberdeen Harbour believe that freeports could provide regeneration of industrial areas in the widest sense. Not only could regeneration be achieved in terms of attracting new, but traditional, markets and economic growth, it could also act as a catalyst for growth generated from activity associated with the commercial delivery of net zero solutions and low-carbon technologies, contributing to environmental regeneration, as well as economic. This could be through innovation and R&D incentives or through the encouragement of renewable-energy manufacturing activities. As a result, the introduction of a Freeport to Aberdeen has the potential to help secure inward investment whilst also helping to drive the economic benefit of Energy Transition in the Region.