Freeports: an opportunity to level up?

February 3, 2021

Paul Jennings, chief executive of North P&I, highlights the potential of freeports and their impact on the North East.

The North East has a strong maritime prowess and a rich history to go with it.

Our region’s ports have been an important part of the story – bringing prosperity locally, and helping to drive it across the country.

This year, we might be about to embark on the next chapter of that story.

When the Government’s bidding process for freeports closes in early February, we’ll know whether the North East will host one of at least seven such models in the UK.

The Chancellor has promised they’ll be “national hubs for trade, innovation and commerce” and their impact will be “levelling up communities across the UK, creating new jobs, and turbo-charging our economic recovery.”

What’s certain is a freeport for the North East must build in multiplier effects to make sure the benefits are felt right across our regional economy, not just certain pockets.

The virtual freeport model mooted for the North East could be the answer.

This would link different parts of the supply chain that aren’t necessarily located at ports. So, a manufacturer with facilities 25 miles away could enjoy the same tax and customs advantages as those dockside.

This is an attractive option for the North East where we’ve a strong network of suppliers, research and development locations and advanced manufacturing sites that are dispersed across the region.

For example, it could allow some of our world- leading automotive supply chain, based inland, to bypass duties.

A digitally-enabled freeport would mean multiple sites could benefit from the freeport incentives, encouraging more of our existing businesses to become export-focused.

In practice it would mean internet-linked components and products, and logistics providers, monitored by a governing body that ensures organisations are compliant.

We’d also need to invest in infrastructure to support the model – including high-speed internet connectivity, road and rail upgrades – which would ultimately benefit the wider economy.

And digital technology could play another important role in the success of freeports.

Last year’s Government consultation on freeports called for port operators to answer a series of questions, one of which was about how technology could solve efficiency challenges.

Congestion is a challenge that North’s network of global correspondents – our representatives in port locations around the world – sometimes report to our shipowner members.

The knock-on effects of being unable to dock can be severe, from exports of perishable food going to waste, to seafarers not being able to get on shore.

Assuming freeports could attract more marine traffic, and the need to make these international hubs as productive as possible, technology can help on two fronts.

Firstly, huge volumes of traffic data combined with machine learning could help port operators automate decisions and better predict busy times.

Secondly, enhanced digital cargo management tools could reduce the turnaround time for ships in port.

Interestingly, the UK performs well in world rankings of time container ships spend in port, but we’ve still got some way to go before we reach top turnaround countries such as Taiwan and Japan – locations our freeports will be competing against.

In fact, this focus on digital innovation makes up a key part of the Government’s own Maritime 2050 strategy launched in 2019 – a report that sets out its ambitions for the British maritime sector during the next 30 years.

Innovative customs arrangements are noted as potential tools to encourage investment in UK ports, along with digital technologies to streamline and enhance security when it comes to the extensive documentation required of shipping operators.

Better still, building these technology solutions could represent the next set of projects for our region’s impressive digital innovators.

North’s chief information officer James Holmes is a board member of Dynamo, the North East’s industry- led group championing growth of IT and digital businesses.

Through his involvement we know there are highly- skilled digital problem solvers that could tackle the challenge. This could be a great way to extend the freeport opportunities into the wider regional economy.

Environmental drivers could also create opportunities.

In the midst of last year’s springtime lockdown, the British Ports Association (BPA) published an economic recovery plan, which set out how ports could help the country’s post-COVID-19 recovery.

It called for a ‘Green Maritime Fund’ that would provide capital funding for new technologies – chiefly in the likes of the offshore renewable energy sector – which it argues would provide a double boost in helping meet long-term environmental targets, as well as stimulating the economy.

Those economic benefits would be most keenly felt in port areas where those renewables technologies are being installed and serviced.

Teaming a Green Maritime Fund with the freeports model could really drive significant benefits for our region, where we already have a burgeoning offshore wind cluster.

Companies are building a reputation for development of wind turbine components, installation and maintenance of wind farms.

Research from Energi Coast, the representative body for the cluster, shows it has the potential to support up to 9000 jobs by 2025 and establish an international reputation for innovation.

As that international reputation grows, it will be important to create a simple, flexible system in which operators can be sure components from outside of the UK-EU zero-tariff agreement do not incur tariffs.

This would simultaneously support the Government’s Green Industrial Revolution Plan – announced in November 2019 – and strengthen the business case for international operators to set up here and use the North East as a springboard to domestic and overseas energy markets.

At North, we’re supportive of efforts to drive regional prosperity, and as a maritime sector business, it would be great to see freeports play an influential role in the levelling up agenda.

Let’s make sure we make the best of this new chapter, however it unfolds.