How the big Tory idea to make Brexit work spectacularly failed

They were supposed to be one of the great benefits of Brexit. In 2019, Boris Johnson claimed: “The UK does not have freeports because of its membership of the EU”. And in the same year, Rishi Sunak said: “The EU is the only place where these [freeports] really don’t exist.”

As it happened, as was typical with the Brexit argument and the claims being made to justify Britain’s exit, both statements were incorrect. There was nothing to stop Britain creating freeports while being a member of the EU. And, as of 2020, there were 80 “free zones” in 21 EU member countries.

Still, let us stick with the script, untrue as it is. The Johnson government trumpeted the new freeports, typically, in no uncertain terms: “Leaving the EU means that we have an opportunity to do things differently. We have developed an ambitious new Freeport model to ensure that towns and cities across the UK will benefit from fantastic new international trade opportunities, attracting new investment and employment in left behind communities across the UK.”

The official trailer went on: “Freeports will be national hubs for international trade, innovation and commerce, regenerating communities across the UK by attracting new businesses, spreading jobs, investment and opportunity to towns and cities up and down the country.”

In all, from 2021, eight freeports opened in England and two each in Scotland and Wales. Each one focuses on an area of specialisation, coupled with relaxed customs regimes and tax breaks to set up for business there. The tax advantages cover the cost of investment in new buildings and hiring employees. These incentives had their lifespans extended by a further five years in Autumn 2023, by the then chancellor Jeremy Hunt.

The freeports had their supporters outside the Brexiteers. The ports sector for one championed them as a potential boost after decades of decline, hailing them as creators of jobs and catalysts for new industries such as the making of wind turbines. Local councils and other bodies were also enthusiastic, regarding it as a matter of pride that their region had been selected to house one of the new zones.

Sad to report then that only six companies have taken advantage of what’s on offer in England – three in Liverpool and one each in Teesside, Solent and Thames.

This is the same Teesside freeport that was repeatedly singled out by Rishi Sunak as prime minister and then on the campaign trail, as applying some sort of Tory-inspired, post-Brexit, economic elixir to the struggling northeast.

There were those prepared to speak up against the constant drumbeating. The Office for Budget Responsibility (OBR) said in 2021 it expected the impact of freeports on UK GDP to be so small that “it would be difficult to discern, even in retrospect”.

Trade organisations questioned whether the convoluted and increasingly archaic British tax code would enable the promised tax breaks to materialise. Tax experts asked if the system of UK customs tariffs could be made to work sufficiently to the freeport companies’ advantage.

Others highlighted how their relative lack of policing and regulation would encourage corruption and criminality. Their ability to override local planning controls also led to criticism.

Analysis from the UK Trade Policy Observatory at Sussex University said that only 1 per cent of UK imports by value would benefit from the freeports model. This 1 per cent was itself limited to niche industries such as the manufacturing of dog and cat foods.

Sure enough, there were signs of a loss of faith by the Tories, even when they were in power. The ex-levelling up secretary, Michael Gove, chose to describe them as key regional industrial investment hubs rather than as places to avoid customs charges.

It was a subtle shift, a case of blink and you’ve missed it, but Whitehall-watchers, well-versed in discreet changes of emphasis and nuance, spotted the switch. Gove was clearer when he told the House of Commons business and trade select committee it remained to be determined whether the customs sites based in the freeports were vital to the future of the freeports programme or if they were simply a “nice to have”.

It’s likely that freeports are destined to become enterprise zones populated by squeaky clean, modern buildings and act as centres for coastal environment and alternative energy projects. The much-heralded lower customs tariffs aspect and of course, their injection of lifeblood into the national economy will be quietly forgotten.

Labour maintains it will stick with them, for now. They don’t want to discourage the existing few investors. Meanwhile, to the annoyance of many, they are intent on making cuts to projects that will genuinely strengthen the UK economy, such as scrapping the building of a new £800m supercomputer in Edinburgh.

Within Whitehall there is growing annoyance that the failing freeports continue to enjoy tax breaks while government departments are ordered to find savings and agree to heavy cuts in the run-up to Sir Keir Starmer’s first Budget on 30 October.

In time, the freeports will be marked down as a Brexit benefit that never was. In that, at least, they will not be alone.