Out-Law News 4 min. read

UK government launches bidding process for freeports

The bidding process expected to create up to seven new ‘freeports’ in England has opened after the UK government published a prospectus last week outlining the requirements for designation as a freeport.

The government is hoping the freeports will act as “hubs of business and enterprise” to regenerate communities and increase economic and employment growth after Brexit. Areas designated as freeports will benefit from various tax reliefs and enhanced allowances, simplified customs procedures, streamlined planning procedures and wider government support.

Bidders must demonstrate (50 page / 982KB PDF) how they will achieve the government’s three main policy objectives: the establishment of freeports as national hubs for global trade and investment across the UK; the promotion of regeneration and job creation; and the creation of innovation hotbeds.

Infrastructure and planning law expert Robbie Owen of Pinsent Masons, the law firm behind Out-Law, said: “The government’s three objectives for freeports, and particularly its lead policy objective of promoting regeneration and job creation, are pointing to some clear front runners in the more deprived parts of the country, but bidders have certainly got their work cut out for them in the weeks ahead to respond in full to a detailed prospectus with a compliant bid. The sheer detail and complexity of the prospectus will certainly have come as quite a rude awakening to many.”

Infrastructure and planning law expert Francis Tyrrell of Pinsent Masons said proposals that identified particular industry sectors that would benefit from the freeport designation and were from deprived or vulnerable areas were the most likely to be successful.

“Clustering effects should be demonstrated. Significant economic evidence will be needed to demonstrate how a freeport will increase trade throughput through its area and bring new investment into the surrounding region – including how it will increase the impact of that enhanced investment,” Tyrrell said.

Bidders will have to provide technical evidence as to how the freeport designation would increase employment and average wages, or increase economic specialisation in higher gross value-added activities. Tyrrell said the requirement for innovation would generally point towards technology-orientated proposals, but skills development and start-ups could also satisfy that requirement.

Potential freeports will have to have a defined geographical boundary, but different specified sites within that boundary will be able to benefit from the proposed customs benefits or tax benefits or both.

There must be one air, sea or rail port within the outer boundary, and the government has imposed strict requirements on the size and location of the customs and tax sites within the outer boundary.

Tax sites will benefit from a range of reliefs and enhanced allowances and the local authorities within which the freeports are situated will retain any business rates growth over an agreed baseline for a period of 25 years. This is intended to give the authorities certainty to borrow to invest in regeneration and infrastructure that will support further growth.

Those sums can also be used to offset expected effects of displacement of local economic activity which is a recognised risk of the freeport designation.

“Some of the details of what is on offer in terms of economic levers and the design of interventions applying to freeports have yet to be fully worked out,” Owen said.

A new requirement made clear in the prospectus is that local authorities must be part of the bidding coalition and be prepared to make a local development order or similar mechanism to provide a suitably enhanced planning consent framework for the freeport.

Tyrrell said local authorities would have to consider the fit with local planning policies, bearing in mind that few local plans will currently have any reference to freeports. A range of other government policies also needs to be considered, particularly including the bid’s fit with the decarbonisation and net zero agenda.

“The more benevolent planning regime that will apply to freeports is effectively still in the melting pot, however, with the precise nature of the reform to seaports’ permitted development rights yet to be worked out, changes to environmental impact assessment procedures generally about to be consulted on by government and the procedures for making local development orders caught up in its controversial planning reforms heralded in its August white paper,” Owen said.

The government has not identified specific funding for the freeports and bidders are asked to identify which existing funding streams they intended to tap into.

“All this work, compiling evidence and reaching agreements with key stakeholders, in particular the local authority, is against a short timetable with the deadline for submissions being 5 February 2021, giving potential bidders only 12 weeks to put their bids together. This is over the Christmas period and against the backdrop of many ports being busy dealing with the Brexit transition in January,” Tyrrell said.

“In addition to workload constraints on the ports themselves, given that rival bids are in competition with each other, it is interesting to consider whether there will be sufficient professional experts to provide the necessary analysis and expert evidence in the timeframes available without running into conflicts,” Tyrrell said.

"Ultimately, this may be a rather contentious process. The government is contemplating 10 freeports across the UK, but it is plausible that more bids will be received. Whereas some bids will clearly stimulate new or enhanced economic activity, others may only serve to displace some activity from one location to another, pitting region against region. The government will need to tread carefully to avoid charges of preferring some locations over another for political reasons and challenges to the ultimate decisions can be expected,” Tyrrell said.

Pinsent Masons’ Owen said: “While the unexpected requirement for bidders to include local authorities in the bid will impose potentially quite a considerable extra burden in the bidding period, as bidders will now have to forge alliances with their local authorities and fully stitch them into their bids, it will no doubt have come as quite a relief that the freeport governance body itself will not have to actually be incorporated or formed until after the winning bids have been announced – although bids will still have to set out the overall governance framework proposed and so much of the work supporting a bid's governance proposals will still have to be done.”

The prospectus currently applies only to England and the UK government said it was “working constructively and collaboratively with the devolved administrations” to establish at least one freeport in each of their nations.

“The position in Wales, Northern Ireland and Scotland has still to be hammered out between the UK government and the governments of those three nations,” Owen said.

The prospectus follows a consultation on the freeports policy earlier this year and the government’s response to the consultation published last month.

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