Written submission from The Freeport Steering Group (FRP0001)

Parliamentary Committee Freeports Consultation

Introduction The Freeport Steering Group is a consortium of the following organisations working together around a common goal to regenerate the Inner region in the Scottish Highlands. Becoming a freeport will be the springboard for this region to attract a sustainable 30- year pipeline of work for local companies, high quality jobs for workers across our remote region, environmental advances which raise everyone’s standard of living, and enhanced transport connectivity. More broadly the initiative will attract advanced manufacturing and innovative technologies to the UK, speed up the energy transition and decarbonisation of oil and gas sector, position the UK at the forefront of the global floating offshore wind sector, broadening our export focus, and facilitate the emerging Carbon Capture and hydrogen production and export sectors as we play a role in ensuring the UK and achieve their net zero ambitions.

Private Sector/Trust Public Sector Academia / Third Sector Port of Cromarty Firth Highlands & Islands Enterprise University of the Highlands & Global Energy Group Council Islands Semco Maritime Skills Development Scotland Scottish Maritime Cluster RigQuip HiTrans

The members have input into the submission and what follows is our combined response.

Executive Summary

Freeports have the opportunity, if well implemented, to be the catalysts for regional regeneration in remote and/or deprived areas of our country, especially those which are dependent on one large industry. Post-Covid-19 and post-Brexit, they can ensure the UK remains an attractive place to do business and ease trade and investment.

In order to maximise this opportunity, ensure equality and mitigate against negative impacts, freeport status must only be awarded to port’s attracting new business and associated jobs to the UK, and not bestowed upon those who will displace activity from neighbouring ports, or are simply hoping to benefit from a higher return on their private land value.

Submission

What benefits might freeports bring to the UK – and how should these be measured? 1. Freeports will attract additional trade to the UK, collaborations with international ports and partners, and inward investment opportunities (as has been demonstrated by some of the Enterprise Zones). They will also ease trade post-Brexit. The model could attract advanced manufacturing opportunities and innovative technologies to the UK by levelling the playing Written submission from The Cromarty Firth Freeport Steering Group (FRP0001)

field with international competitors; enhancing local content, and reducing the environmental impacts of shipping components half way around the world. This could also lead to expanding our export focus and increasing the opportunity for gender/ethnic/disability equality, where less physical labour activities are conducted. Managed properly, they should transform historically erratic workflows which create the ‘boom and bust’ patterns common with most ports around the UK into sustainable pipelines of high quality work that deliver local content and local jobs for the long term. 2. The tariff-free movement of components which serve to make up larger pieces of equipment will minimise delays, improve efficiency and productivity; making the UK more attractive as a base from which to manufacture and maintain equipment and infrastructure. 3. These factors could be measured on:  The number of FTE jobs created  Regional unemployment and local housing figures (which reflect whether local or transient labour is predominant)  New business start ups  Local investment (expansion of local companies)  Wider investment (UK and foreign inward investment into the freeport)  New academic courses reflecting the skills and competencies needed by businesses expanding in the freeport region  Work experience / apprenticeship / sandwich courses 4. In addition, Freeports provide a major opportunity to co-ordinate, focus and amplify the efforts of regeneration stakeholders (industry sectors and their supply chains, ports, enterprise and skills agencies, local government, academia) on a localised project that has both regional and national benefits. There is a potential agglomeration effect through greater concentration of activities for different key sectors; generating growth in opportunities for skilled (and unskilled) workers; greater public and private sector collaboration; regional regeneration; stimulate innovation in technologies, manufacturing and sustainability. 5. Regulations within a freeport could be implemented to promote clean energy / net zero initiatives and potentially incentivise the trialling and testing of products which will directly assist the UK to meet its decarbonisation targets. What negative impacts could freeports have – and how might these be mitigated?

6. The most worrying negative impact is the potential for displacement of activity from neighbouring ports and simply moving business around the UK without adding additional business and opportunities. This must be mitigated, as it is a major threat; particularly to remote ports in disadvantaged areas. It could easily be mitigated by expanding the number of locations awarded freeport status and/or ensuring that only ports in areas of deprivation and which are attracting additional business to the UK are awarded freeport status. 7. With the increase in economic activity around a freeport comes the need to ensure that local infrastructure is sufficient (transport, internet, etc.) and there is sufficient housing to support any predicted shifts in population. Training and education must be accessible and appropriate to allow for labour pool development and access to the skills required. The strategic, long term view should be considered, with a focus on sustainable projects that have long term financial viability. Written submission from The Cromarty Firth Freeport Steering Group (FRP0001)

8. Any model also needs to ensure that existing businesses don't simply appropriate freeport activities to benefit from tax or other incentives, as this would mean that those organisations are no longer contributing to the local economy in the same way. This would need to be achieved without disincentivising local businesses from investing and/or expanding using the freeport and is probably best addressed through policy.

How comprehensive is the package of measures proposed by the Government in its freeport model – and what others, if any, should be considered? How should these measures be adapted for different locations?

9. The current package lacks ambition and appeared to originally be focused on land value benefit and/or cargo ports; both of which add little value to UK GDP. Freeport models could achieve so much more, such as:  Returning manufacturing to the UK and improving workforce diversity and quality of jobs by ensuring such manufacturing is advanced and takes advantage of innovative technologies e.g. artificial intelligence. This could increase our ability to compete internationally and expand the UK’s narrow export focus.  Attracting the most highly skilled individuals working in key sectors through using innovative immigration incentives combined with knowledge transfer requirements to embed key skills and expertise in the local workforce in critical industries such as the energy sector  A simplified approach to planning across the UK, including devolved administrations which addresses the speed at which the planning system takes to respond to market opportunities. Many foreign ports are Government run and able to more quickly construct new infrastructure

Are the proposed criteria for selecting sites to become freeports appropriate?

10. Freeport selection criteria should incorporate:  Environmental sustainability, mirroring the Government’s net zero ambitions across their supply chain (by at least 2045)  Academic/industry partnerships in terms of skills/knowledge/KTP/Research. This is inferred but not specified.  New business and/or value added to UK GDP specifically by the Freeport itself. Port areas which focus on import/storage/export are simply conduits and often do not add value. They are characterised by low wages in the surrounding areas. Ports which generate their own value e.g. by servicing offshore resources, have the opportunity to attract additional investment and opportunity for the country.  Future reinvestment of profits generated through the freeport for the benefit of local stakeholders, as embodied in the Trust Port model.

When evaluating proposals, should greater weight be given to certain criteria? 11. We believe the following criteria should carry greater weight: Written submission from The Cromarty Firth Freeport Steering Group (FRP0001)

 Applications from Trust Ports where all profits are reinvested, thus providing an ongoing cycle of reinvestment and equality. (No private shareholders benefitting from public investment.)  Additionality of business for the supply chain (as opposed to displacement of business)  Ability to create a sustainable pipeline of work which maximises benefits to the supply chain and local workers  Applications which can be used as a springboard to wider regeneration and job creation projects within their regions. Geographical location is important in this regard, along with the context of the impact on the area and the cohesion of the multi agency response to the project  Sustainability elements e.g. net-zero ambitions of the freeport, contribution to industry- related and regional decarbonisation  Contribution to upskilling and reskilling the workforce e.g. digital skills, Industry4.0.  Deprivation should also be weighted, however the measures (SMID for example) used to apply this weighting need to reflect the actual area of project impact.

What role will the Department for International Trade play in this process?

12. Supporting inward investment strategies e.g. encouraging offshore wind OEMs to operate, recruit and train workers within the freeport region and to increase local content by collaborating with other developers to create a sustainable pipeline of work.

What impact could freeports have on the overall regeneration and expansion of industrial areas? Is there a risk of displacement and economic disadvantage to areas not selected – and how could this be mitigated?

13. Freeports could provide a catalyst to regeneration and expansion in regions surrounding strategic ports, particularly for those located in deprived areas where there is an opportunity to level up the UK economy. They provide a major opportunity to co-ordinate, focus and amplify the efforts of regeneration stakeholders (industry sectors and their supply chains, ports, enterprise and skills agencies, local government, academia) on a localised project that has both regional and national benefits. 14. By making it easier to trade with the UK (post-Brexit) they can attract additional business from other economies, along with inward investment and migration. Rural areas often suffer from depopulation as local people flock to cities for greater economic opportunity. The freeport model has the opportunity to reverse this trend (assuming employment opportunities created and associated economic advantages benefit local people and local businesses) and also attract inward migration of skilled workers who can enhance the local workforce by transferring and embedding their knowledge. 15. There is significant risk of displacement based on only 10 ports being selected. This could be mitigated by awarding more than 10 or only accepting applications from ports committing to add new business to UK GDP and not simply displace existing business from neighbours. This is particularly critical for ports located in areas of deprivation. An associated risk is that Written submission from The Cromarty Firth Freeport Steering Group (FRP0001)

activities are relocated/diverted to a freeport site rather than other regional areas which would have otherwise benefitted.

What can the UK learn, and what competition will it face, from established freeports around the world?

16. Ports often have to respond relatively quickly to customer requirements / emerging industries. In many countries the ports are owned/operated by the Governments and this facilitates a quicker response. A national approach to our critical strategic assets would be of benefit to many sectors.