Originally Posted by
ZULUBOY
Genuine question for the Freeport supporters. Why were the last lot scrapped in 2012?
There's a simple answer to that; they didn't (and don't) work. They are a gimmick that government used after a previous recession. Why don't they work? To understand that you have to understand what the purposes of a "freeport" actually are.
Import and storage of goods free of liability for customs duties and VAT
Really does what it says on the tin. Importers can bring goods into the UK and hold them without paying import duties and VAT until they are sold in the UK, and at that stage the duties and taxes are accounted for. Those same goods can also be re-exported perhaps to the EU, and in that scenario when the shipments is released from the freeport it is shipped directly to the destination country without paying UK customs duties and AVT, so import duty is only applicable in the country of final destination. This could prove advantageous for businesses that were set up in the UK as distribution centres for the EU, when the UK was a member, and certainly there is the potential for some benefit to be derived by business in the Brexit era, as if they continued to act as a DC serving EU countries without going down this route (of storing imported goods without payment of UK duties and taxes) the good arriving, say, from China would be subject to UK duties on arrival here, and then, because the UK / EU (not) free trade agreement requires goods to have originated in UK they would be subject all over again for customs duties on import to the destination country - double customs duty, and totally uncompetitive. All that said there are alternatives where companies can take any secure warehouse and apply for it to be bonded, say, a distributor could take their current warehouse, outside of any freeport facility, and bond all or part of it and achieve pretty much the same as they could in the freeport. Many of the remaining larger distributors may go down such a route, time alone will tell.
Importing goods and further processing them before delivering them on.
In this scenario part completed products could be brought into the freeport warehouse, and further engineered (processed) to make completed, or new products then be delivered either domestically or internationally, exactly as with the distribution model, with no UK duties and taxes payable until the products leave the freeport area. If they are exported then no duties and taxes are paid in UK.
For the new freeports so much is going to depend on the size of the freeports, be they in Southampton or East Midlands Airport. If as they were in the 1970s / 1980s, hey are on too small a scale, while they may benefit a few smaller businesses they will be irrelevant to large traders, and as it is many of the large European distribution businesses have moved their facilities on to the European mainland before Brexit finally happened.
It is very difficult to see how SOU will benefit in any way shape or form from a freeport in Southampton; the container port may well gain some benefit, however chances are bureaucracy and red tape will make freeports too much hassle to operate from. I remember trying to get in and out of the pathetic excuse for a freeport at BHX back in the day, the security was ridiculous. The real issue for freeports is that almost everything you can do in a freeport you can arrange outside one, rendering them largely superfluous, as I mentioned at the top, a political gimmick.