Are businesses in East Anglia looking towards Freeports to support future growth?
Tax Partner, Richard Dalton
discusses our recent Rethinking the Economy research, where we asked the companies in our region whether Government's introduction of regional Freeports are likely to change investment plans.
In the last Budget, the Chancellor announced that the Government would be introducing eight regional Freeports in England, including a Freeport East bid which focuses on Bathside Bay at Harwich and the Port of Felixstowe Logistics Park. But the question remained – has this policy – which still requires a lot more detail to be released – resonated with businesses in East Anglia?
Our latest Rethinking the Economy survey of 500 mid-sized businesses has revealed that 60% are planning new investments on the back of this news, while 10% are reconsidering their existing investment plans as a result.
As well as businesses making a statement of intent to invest, the positive ripple effect across the region could help boost the wider economy. According to recent reports, it is estimated that a Freeport in the East would create 13,500 jobs and could attract £650 million to the region. The East bid also includes proposals for tax and customs sites, including the planned new development at Gateway 14 near Stowmarket and Port One in Great Blakenham.
What does it mean?
There is still a percentage of businesses not sure what Freeports mean for them – 10% of companies surveyed in East Anglia felt this and the remaining 30% don’t think this is an effective policy. It is, of course, more relevant to some sectors such as logistics, supply chain and anyone importing or exporting. Freeports have historically worked as secure customs zones. Found at ports and airports, they enable business to be carried out within borders, but through different customs rules.
Their revival comes with a bespoke Freeport model, along with a number of additional tax incentives and reliefs for organisations. These incentives are intended to encourage business investment in capital assets and employment within these locations, which should then have the knock-on effect of encouraging regeneration and boosting the local economy which supports the Government’s ‘levelling up’ agenda.
The tax implications
While the proposals for reliefs from business taxes haven’t yet been approved, if they do get the go-ahead, then the following can be expected (provided that such activities are within the Freeport tax sites):
- Stamp Duty Land Tax (SDLT) Relief – This will be offered on land purchases, on the provision that they will be utilised for qualifying trade pursuits.
- Enhanced Structures and Buildings Allowance (SBA) – The SBA will offer enhanced relief for those firms either constructing or redeveloping structures and buildings for non-residential use.
- Enhanced Capital Allowance (ECA) – This assistance will apply to businesses investing in certified new plant and machinery assets.
- Employer National Insurance Contributions (NICs) Rate Relief – Through this, employers could pay 0% employer NICs on the salaries of new employees, provided they are working in the Freeport tax site for at least 60% of their working hours.
- Business Rates Relief – Newly established businesses and those relocating to a Freeport may be able to gain up to 100% relief from business rates on specific premises.
- Local retention of business rates – Councils will keep the business rates growth for their specific location above an agreed baseline. This would be for 25 years, giving them the assurance they can borrow to fund their local regeneration and infrastructure programmes
Beyond tax, many companies have been adapting their supply chain throughout the Brexit transition period and beyond. With Brexit, COVID-19 and issues such as the Ever Given incident, this has been a challenging time for those managing international movement of goods. The prospect of Freeports will feel like positive news to the shipping and logistics that look to benefit the most, as well as businesses who have import or export operations.
It is encouraging to see such a high proportion of businesses in East Anglia rethinking their plans because of a local Freeport. This demonstrates the ambitious mindset of the region’s mid-sized businesses as they invest in the long-term growth of their own company and the positive impact that this will have on the region’s economic recovery.
If you have any questions or for further information about the tax incentives of Freeports, talk to our team today.