It's the early 1980s, a Conservative government is in power and struggling through a period of economic volatility following the "winter of discontent" during which widespread public and private sector strikes gripped the nation. Soaring inflation, rising oil costs and outspoken demands for increased wages are contributing to a sense of national crisis.
Sound familiar?
Now, as then, freeports – special economic areas which benefit from different economic regulations – are being lauded as one of the solutions, with the promise of new jobs and stimulated investment heralding "a golden age of prosperity", as contemplated by our current Prime Minister in his 2016 report on the subject.
Under Margaret Thatcher, six freeports were set up across the UK and remained in operation until 2012, when David Cameron chose not to renew their licences. However, freeports are being given a new lease of life under the current government with 10 freeports either currently operating or in the process of being established (with eight located in England, two in Scotland and the outcome of the Wales competition to be published shortly, at the time of writing).
The Government's case for the re-introduction of freeports forms part of its "levelling-up" agenda, with the expectation that these areas will rejuvenate local communities and boost regional economies.
To realise this goal, there are the much-publicised features of relaxed customs procedures and tax incentives for businesses operating within the freeports. However, what benefits are available for those who wish to purchase land in a "freeport in an economic storm"?
Simplified planning procedures
The government is allowing a simpler and more certain planning environment to operate in freeports, to encourage swift investment and development into these sites.
Consequently, any purchaser of land within a freeport site would benefit from planning reforms which would broadly:
- allow specific developments at seaports to be undertaken without requiring planning permission, the same permitted development rights as those currently available to airports; and
- encourage local authorities to use local development orders to grant planning permission for defined types of development in freeports.
Stamp Duty Land Tax (SDLT) Relief
The purchase of freehold or leasehold land within freeport tax sites may be eligible for SDLT relief if the land is used in a "qualifying manner" (ie for commercial use).
Relief can be claimed on a sliding scale, with full relief available if at least 90% of the purchase price is for qualifying land, reducing to zero relief where less than 10% of the purchase price is for qualifying land.
Any purchaser must be aware of the requirement to use the land for three years from the date of purchase in a qualifying manner, otherwise the relief may be withdrawn, and tax become payable.
Business Rates Relief
Up to 100% business rates relief may be available to all new and existing businesses operating in freeport tax sites for a period of five years from the date relief is first claimed (provided that the business first received relief before 30 September 2026).
On the surface, the government's policy on freeports in the UK seems to be appealing from a real estate perspective – certainly they've sought to identify and alleviate three of the largest expenses that can arise when purchasing and developing land (other than the costs of constructing the development itself but even then, enhanced structures and buildings allowance is available). However, there are concerns that existing businesses may seek to take advantage of these benefits by simply relocating to freeports. Could this displacement temper the much-hyped financial boost of more jobs, more trade and more innovation at freeports? Only time will tell, but there is genuine hope that freeports could help to propel the economy from its winter of discontent into a more promising spring of opportunity.
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