Only six businesses sign up to customs sites in UK freeports

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Just six businesses are using customs sites at “freeports” across the UK, more than three years after the tax-free import scheme was announced as a way to bolster Britain’s economy after leaving the EU. 

The introduction of freeports was a flagship post-Brexit policy by the Conservative government that Boris Johnson promised would “boost” the country’s economy. Under the scheme, businesses are able to import materials tariff-free into the freeport area, and only pay duty on finished products when they are exported into the domestic economy.

Yet figures circulated by HM Revenue & Customs around government departments — and shared with the Financial Times — show that only six companies have taken up customs sites across eight English freeports; three in Liverpool and one each in Solent, Thames and Teesside.

The meagre take-up of the customs sites has raised questions in Whitehall about why the Treasury is continuing to support freeport tax breaks while demanding government departments make swingeing cuts ahead of the October 30 budget.

Since taking office, Labour ministers have indicated privately that they plan to stick with the freeports policy in order to provide stability to investors, while also announcing budget cuts that include axing an £800mn supercomputer project in Edinburgh university. 

The previous Conservative government estimated that freeports could cost the Exchequer £2bn over 10 years depending on uptake of the zones.

Since 2021 eight have been opened in England and two each in Scotland and Wales, with each port focusing on areas of specialisation backed by a broad package of tax breaks that also cover investment in buildings and hiring new employees. These were extended by five years in autumn 2023 by former chancellor Jeremy Hunt.

Freeports have attracted strong support from the UK port industry as anchors of regional regeneration, with areas such as Anglesey hoping to use the ports to reverse industrial decline and attract new green investments in solar and tidal power.

However, the Office for Budget Responsibility, the independent fiscal watchdog, said in 2021 it expected the impact of freeports on UK GDP to be so small it would be “difficult to discern even in retrospect”.

Trade experts warned before the ports were launched that the UK’s system of tariffs made opportunities for so-called tariff-inversion “almost non-existent”. 

Analysis by the UK Trade Policy Observatory at Sussex university found only 1 per cent of UK imports by value could benefit from the freeports programme, covering only a tiny handful of sectors including ingredients for dog and cat food.

More recently, Conservative ministers such as the former levelling up secretary Michael Gove have instead focused on the potential of freeports as regional industrial investment hubs rather than opportunity for customs arbitrage. 

Speaking to the House of Commons business and trade select committee in January, Gove said it was still to be determined whether the customs sites located in freeports were vital to the future of the programme, or merely just a “nice to have”.

UKTPO fellow Peter Holmes, who conducted the original analysis, said the low interest in customs sites indicated that the real potential benefit of freeports was likely to be elements such as building bonded warehouses or as hubs for coastal environmental projects.

“As the dog food example seems to have shown, they were not even very ‘nice to have’. Some of the investment zone elements were probably helpful, but the freeport label was probably a costly distraction,” he told the FT.

HMRC said there had been up to £2.9bn of investment committed into freeports, which could create up to 6,000 jobs, adding that the freeports were working with the department to attract new tenants to customs sites.

“Movements of goods into freeport customs sites have steadily increased since 2023, across various sectors such as logistics and manufacturing,” it added.