Boris Johnson has promised to introduce freeports to the UK after Brexit, saying they were an “excellent” way to boost investment in left-behind parts of the country.
His proposals met with scepticism from experts, however, who said the idea was more likely to shift activity around the country rather than generate new business.
It has emerged that six weeks ago Mr Johnson, the frontrunner to become prime minister later this month, received a £25,000 donation for his leadership campaign from the Bristol Port Company. Bristol is one of the six sites Mr Johnson proposed for a freeport.
The plans would create new customs barriers around any freeports, undermining Mr Johnson’s view that customs borders within the UK were unacceptable, particularly between Great Britain and Northern Ireland.
Mr Johnson said he would establish pilot freeports as soon as possible after the UK left the EU, which is scheduled for October 31. They were an “excellent way to boost businesses and trade in regions that Westminster has neglected to pay attention to for far too long”, Mr Johnson said in a statement.
Freeports, which are possible in limited form under existing EU regulations, would lie outside the UK’s customs borders but within the country, allowing companies to import goods and process them without paying customs duties. Some products would then be exported while others would face normal UK customs controls when they enter the rest of the country.
Mr Johnson said he had been persuaded by Ben Houchen, the Tees Valley mayor, of the advantages of the idea, especially as the establishment of freeports is currently subject to strict EU rules.
Teesport has been lobbying to receive such a status for many years, having historically struggled to attract big, long-distance vessels sailing from the Far East.
The other five locations Mr Johnson suggested were Bristol, Grimsby, Hull, Liverpool and Belfast.
On May 22, Mr Johnson’s leadership campaign received £25,000 from First Corporate Shipping, which trades as the Bristol Port Company — the enterprise that runs the city’s port. It was co-founded by David Ord, a Eurosceptic businessman who has given more than £1.1m to the Conservative party.
The Bristol Port Company was unavailable for comment on Friday. Tim Morris, chief executive of the UK Major Ports Group, said the idea of any link between the donation and the new proposals seemed “tenuous”.
First Corporate Shipping has also donated £25,000 to the leadership campaign of Mr Johnson’s rival, Jeremy Hunt. On Friday, Mr Hunt gave more muted support to the idea of freeports, saying: “It has potential.”
Port and trade experts predicted that any benefits of free ports in the UK were likely to be small. Peter Holmes, reader in economics at Sussex University who recently produced a report on freeports, said the main effect was to divert activity into the port from the surrounding region rather than create new jobs.
If the government added extra subsidies for those operating from UK freeports, he said “the EU could invoke anti-dumping or countervailing duties” to eliminate what it saw as unfair state aid.
Neil Davidson, ports analyst at Drewry Shipping Consultants, said it was hard to understand the logic of building freeports in the UK because there was no obvious market for the re-exported goods.
“The obvious places are nearby, which is the EU,” he said. “I can’t see the logic of bringing goods into the UK to do a re-export that would then go to the EU anyway. They’d just go straight to Rotterdam.”
Where freeports were successful, they depended not just on being free of customs and tariffs, said Mr Davidson.
“It’s about the cost of land and labour and taxation in these places,” said Mr Davidson. Land and labour were both expensive in the UK, while it was unclear what tax breaks there would be for activity in any UK freeport, Mr Davidson added. Companies operating in many freeports worldwide are exempt from corporation tax.
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