The huge derelict site of Lancashire’s last deep coal mine, unused for 30 years, is coming back to life. Although it’s 20 miles from Liverpool docks, it’s part of the new Liverpool freeport. What can it teach us about the risks and opportunities of this new type of enterprise zone? Although freeports are promoted by Brexit supporters – notably including Rishi Sunak in a paper for the Centre for Policy Studies, the Liverpool freeport is enthusiastically backed by Labour’s Steve Rotheram metro mayor of the Liverpool city region (LCR).
The story of Parkside
Parkside Colliery operated near Newton-le-Willows, Merseyside between 1957 and 1993. Up to 1,600 people worked at the mine at its peak. It was the last deep coal mine to survive in Lancashire and its closure marked the end of 700 years of industrial history. The site is huge and is close to the M6 and M62 motorways and the railway network. Despite this potential, the site has lain unused for 30 years. There were proposals to make it a strategic railway hub, but these came to nothing.
Today, a joint venture between St Helen’s council and commercial property developers Langtree has received planning permission to develop phase 1. Construction of a new road to link the site to the M6 has begun.
The hope is that advanced manufacturing and logistics businesses will be attracted to locate at the new site, which will have 93,000 square metres of new build premises.
How will Parkside benefit from being a part of the Liverpool freeport?
The new type of freeport (or free trade zone) being implemented by the UK Government has some distinct features. These are claimed to be enabled by the UK’s departure from the EU, which does allow freeports, but restricts their scope.
Each freeport has a defined area 45km across, within which sites can be granted special tax and customs status. Business rates are waived, capital allowances are enhanced, employment taxes are lower and planning procedures are simplified. Technically these customs sites are within the UK, but outside its customs area. Goods can be imported without duty being paid until they enter the UK. They must be fenced to provide physical security. There are special arrangements for receipt and transfer of goods between the main port and the designated tax and customs sites.
It’s easy to understand the incentives provided by lower taxes, but it’s not so easy to appreciate the significance of the customs arrangements. There are three scenarios where freeports (of which there are thousands around the world) can provide advantages to businesses located there.
- Retailers can import goods in bulk but not pay any customs tariffs until they “import” them into the UK. This has significant advantages in terms of cash flow and the cost of holding inventory.
- Manufacturers can import components duty free and assemble them into finished goods and pay duty on them on “import” into the UK. This is beneficial if tariffs on the components are much higher than on the finished product.
- Manufacturers can import components, assemble them and then re-export, without paying any duty.
Businesses based at the new Parkside facility will be able to benefit from all the above, but it is not clear at this stage which, if any, will prove to be attractive.
While some of the concerns about freeports relate to lower environmental and employment standards, it is important to know that these are not features of the current implementation. Unless part of one of these designated sites, the rest of the freeport’s 45km region is subject to the exact same laws, taxes, and planning regime as the rest of the country.
Freeports – supping with the devil?
There’s undoubtedly great suspicion about what the freeports initiative might lead to. The usual suspects who support de-regulation, Brexit and low taxes – such as the Institute for Economic Affairs and Centre for Policy Studies – are proponents. Others are concerned that the end game involves the dismantling of more and more of the environmental, health and safety and employment rights in a relentless race to the bottom. If freeports don’t work at first, will the government double down in a belief that they simply haven’t been radical enough?
In his 2016 paper on freeports, Rishi Sunak predicted “It is easy to see Labour mayors of regional port cities partnering with a pro-enterprise, pro-trade Conservative government to make free ports successful.”
And indeed, Steve Rotheram, metro mayor of Liverpool is clear about the benefits of the freeport in his region (while being realistic about the risks):
In fact, local media seems broadly supportive, although there are concerns about the impact of construction and increased traffic.
Would the derelict site of Parkside Colliery remain unused for the next 30 years without the Liverpool freeport? It’s impossible to know, but planning permission for it was granted in November 2021, a year or more before the Liverpool freeport was given the green light, suggesting the business case was already strong. However, embracing the freeport leads to new government money.
Is this a good use of taxpayer money? One valid criticism of all freeports is that they simply move employment from one part of the UK to another, as businesses relocate and investments that would happen anyway move to the lower cost zones. Another acknowledged risk is that criminal enterprises misuse the zones to hide property and avoid taxes and duties.
Putting the ideology to one side, who could fail to support a revival in manufacturing in the UK, a new emphasis on green technology and better links between universities, industry and government leading to greater innovation?
The question is whether this model is the most effective way of delivering change. And even if we allow that Brexit has enabled new freedom to establish freeports, has anyone quantified the cost / benefit trade off involved in leaving the single market and customs union to achieve this?