UK’s proposed network of free ports is unlikely to pay off

UK Prime Minister Boris Johnson. Picture: REUTERS/MATT DUNHAM

It’s a neat idea, but one with serious limitations and which is nothing like the Brexit dividend that the government’s suggesting. Governments can also use other enticements to get people to use their free ports, from tax breaks to fewer regulations. That all sounds fine, but Sunak’s analysis overstates the relevance of the US experience, while glossing over the limits of non-tariff barriers that would remain in the new hubs. To arrive at his figure of 86,000 new jobs, Sunak used the total number of jobs across the US FTZs and scaled it to the UK labour force. That assumes these were all new US jobs rather than ones that were shifted from elsewhere, which isn’t the case.

The researchers looked at the five UK goods categories in which the inversion is greatest — that is, the difference in the saving from the levy paid on the imported component and what’s paid on the final exported product. They found that, while there’s scope for some savings, the impact on the economy would be minimal. Together, the five categories comprise 1.14% of UK imports.

Some job creation around the free ports can be expected, but what kind of jobs and will they simply be displaced from elsewhere? The US experience suggests that there are modest employment and wage benefits eventually, but most free port jobs tend to be manual labour.

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