A few weeks ago, the Leader of the Council addressed a Havant Borough Council Cabinet meeting and expressed enthusiasm for the opportunities that the Solent Freeport would bring to Havant. In the absence of anything published since, I thought I’d take a closer look at what this might mean. (Warning, this is a longish read, particularly if you open the two documents which accompany it. You might want to put the kettle on first).
The Freeport bidding process
In the March Budget, the Solent was ‘shortlisted’ as the site for one of eight Freeports to be set up in the United Kingdom. In this article, I’ll try to explain what a ‘Solent Freeport’ might mean to our area, drawing from the detail content of the two documents shown below.
The three high level objectives set out in the Government’s ‘Bidding Prospectus’ were, at best, woolly:
- Establishing national hubs for global trade and investment across the UK
- Regeneration and levelling up
- Creating hotbeds of innovation
In their Response, the Solent Local Enterprise Partnership answered the ‘exam questions’ set in the Bidding Prospectus and concentrated on the opportunities.
The two source documents for this article, the government’s Bidding Prospectus and the Solent LEP’s response, are both available here: click the images and they will open in separate browser tabs. At less than 50 pages each, they’re fairly digestible to anyone with experience of reading or writing commercial engagement documents. I’ve put a few hours into reading them both and this article summarises my personal thoughts.
The first document, the ‘Bidding Prospectus’, set out the government’s ambition for Freeports, the core Freeport objectives, and how they expected bidders to respond. The document set out the format in which the response should be written, and explained the marking scheme by which ‘competing bids’ would be judged. It provided additional detail on the UK’s Freeports model, including clear geographic guidelines on site design and size, and how ‘Freeport economic levers’ relating to customs, tax, planning, regeneration and innovation would work. The first three of these are discussed briefly at the end of this post.)
The ‘Response’ by Solent LEP covered all points in the required format, while identifying differentiators unique to the Solent – i.e. selling the reasons why the reviewer should choose their ‘proposal’.
In reality, the first document was a ‘Request for Information’ which simply painted a vision of what a Freeport might be, giving some high level technical ideas which might be applicable, but containing a number of questions aimed at soliciting more realistic solution ideas from potential freeport teams; an opportunity to put some meat on the bare bones of what is little more than an idea. The real competitive bid process will be some way down the line once the government have taken on board all the free consulting that the eight freeport bid submissions have provided.
Just where would the Solent Freeport be?
In summary, the UK Government document sets out the overall scale of a Freeport and demonstrates for a ‘multi-port’ model how the maximum outer boundary could fit with the local geography of the port facilities, regeneration sites, existing storage facilities and the motorway infrastructure that services them.
The bidders were required to “set out on a map the area where they propose the Freeport tax measures should apply in compliance with the government’s requirements”. This presumably is in an appendix to the Solent LEP response still deemed ‘commercially sensitive’ since it’s not yet been made public.
An interpretation of a possible ‘Freeport outer boundary’, drawn using the rules set out in the ‘Bidding Prospectus’, is shown below. It might be out by a mile or two in either direction, but would certainly take in the Havant Borough employment areas.
So what is a Solent Freeport?
The Solent Freeport would be an area designated by the government where companies associated with the freeport have distinct tax advantages. Companies that operate within freeports don’t have to pay import taxes (tariffs) on products until they move them outside the circle and into the full UK market. They can avoid paying certain taxes altogether if they bring in goods through the ports and airports to store or manufacture on sites within the circle before they export them again.
In the case of the Solent Freeport, this could allow for collaboration between the port areas on both sides of Southampton Water, those within Portsmouth Harbour and those on the north coast of the Isle of Wight. There are also intriguing opportunities for the smaller ports and harbours scattered around the Solent shore, within the ‘magic circle’. Since the northern part of the IoW and parts of Portsmouth already benefit from UK Assisted Area status, the definition of Freeport status would provide further incentive to businesses to locate and expand in those areas.
The key to making a Freeport work across the 1,500 square kilometres is in the strict control of movement of products between the various sites – factories, warehousing, customs points and port areas – using RFID technology and ANPR cameras. While the underlying technologies are well known, RFID tags to control inventory movements in shops and warehouses and ANPR cameras to manage speeding on motorways, there is a significant body of evidence concerning criminal risks in freeports and factors that give rise to those risks. Like other freeports across the world, the new UK freeports could also be used to store – without tax – high-value goods, including art, precious metals and fine wine. Such tax-free perks have transformed some freeports into self-storage units for many of the world’s wealthiest people with Geneva’s freeport alone estimated to house over a million works of art, including 1,000 Picassos.
So how might all this affect Havant?
In their response to the bid, the Solent LEP mention Havant only twice, in the same context as Gosport as a ‘significant pocket of deprivation’. Southampton, by contrast, is mentioned thirty-one times to Portsmouth’s tally of five and the Isle of Wight’s total of three.
But within this heavy Southampton bias, there are still opportunities for Havant Borough:
Dunsbury Park, alongside the A3(M) between Bedhampton and Waterlooville, could provide secure warehousing and distribution space within easily controlled reach of the Portsmouth International Port via the M275/M27 motorways. The main beneficiary of this would be Portsmouth City Council who own both the port and the Dunsbury Park site.
The proposed development of Brockhampton West, might also provide employment for warehousing or secure storage, though since Havant Borough Council decided to sell that gilded goose recently, the only financial beneficiary would be the new owners.
Langstone Technology Park and the New Lane Employment Area, intelligently redeveloped, could also attract secure storage and high end manufacturing businesses which could benefit from the tax advantages of location within the freeport boundary and the ability to import and export through Southampton and Portsmouth ports, or Southampton airport. Existing businesses on these sites, particularly those already in the import / storage / export business like De’Longhi, will also be carefully considering the advantages of the freeport offer. Kingsbridge Estates’ expanding New Lane property portfolio will benefit from careful tenant selection while other New Lane landowners will be carefully monitoring the potential ‘freeport bonus’ their asset values should attract.
The Freeport ‘Economic Levers’
The ‘Freeport levers’ are the changes that will be made by the UK Government to streamline customs rules, tax rules and planning regulations to aid ‘regeneration’ and ‘innovation’.
The customs and tax levers are not for the faint hearted and I’m grateful to our Treasurer for pointing me to this article by BDO, a global accounting organisation, which provides a few pointers to those changes
The subject that probably comes closest to affecting us is planning, where changes to Local Development Orders and Permitted Development Rights will be made at a national level to remove restrictions and delays for associated development within the new freeport outer boundary.
In their response, the Solent Freeport team welcomes the use of Local Development Orders (LDOs) as they “establish a clear framework for development, giving certainty to applicants, businesses and communities”. However, the process for securing an LDO is often “time intensive and requires skills that many Councils do not possess” and also “require the support of a wide range of stakeholders”. The Solent LEP response suggests that the Government improve the Local Development Order process by imposing strict time limits on their delivery. To achieve this, they suggest the establishment of service level agreements between relevant local government authorities committing to a reasonable decision period for various approvals relevant for a given site. Given the large number of local authorities across the Solent freeport region, they go on to propose “the establishment of a special Virtual Planning Authority that is facilitated by a coordinating institution with the cooperation of relevant local authorities.”
The Solent LEP response also proposes extending the permitted development rights accorded to ports to include assembly and manufacturing though they believe this would still not improve the planning environment enough to act as an incentive to potential investors. While the expansion of permitted development rights would simplify development processes on seaport land, it would still not allow for the greater freedoms or coordination in higher-level planning required to ensure Freeport success.
In what might seem to some a worrying threat to environmental standards, the Solent LEP go further, suggesting that “existing environmental regulations along much of the UK coastline supersede Permitted Development Rights, further limiting their additional value as an incentive”.
If you thought that public scrutiny of planning and development is already inadequate and ineffective, it’s liable to get a lot more interesting in the future.
Don’t hold your breath though. Freeports are not a new idea in the UK. The country had a couple of them as recently as 2012 before the government abandoned them for failing to deliver the expected benefits.