Joint Cooperation To Deliver Two New Green Freeports In Firth Of Forth And Inverness And Cromarty Firth

14th January 2023

The UK and Scottish governments jointly confirm that Inverness and Cromarty Firth Green Freeport and Forth Green Freeport have been successful in their bids

The UK and Scottish governments jointly confirm that Inverness and Cromarty Firth Green Freeport and Forth Green Freeport have been successful in their bids to establish a new Green Freeport.

Backed by up to £52 million in UK Government funding, Green Freeports will help to level up Scotland and bring new, high-skilled jobs to successful areas.

New sites are expected to bring forward an estimated £10.8 billion of private and public investment and create over 75,000 new, high-skilled jobs.

Two new Green Freeports will be established in Inverness and Cromarty Firth and Firth of Forth, the UK and Scottish governments have jointly announced today (Friday 13 January 2023), helping to create jobs, drive growth and level up the country.

Backed by up to £52 million in UK Government funding, the new sites are expected to bring forward an estimated £10.8 billion of private and public investment and create over 75,000 new, high-skilled jobs.

Bidding opened earlier this year and consortiums submitted their bids for their share of the cash, which were jointly considered by the UK and Scottish governments. As part of the process, the successful locations had to demonstrate to officials and ministers from both governments how they would regenerate local communities, deliver decarbonisation, establish hubs for global trade and foster an innovative environment to support levelling up.

Prime Minister Rishi Sunak said, "Working together delivers results - and I am absolutely delighted that the First Minister and I can announce the delivery of our shared ambition for people in Scotland today with not one but two excellent Green Freeport areas.

In extending the benefits of freeports to Scotland, we are unleashing the potential of the Firth of Forth and Inverness and Cromarty Firth - backing the delivery of thousands of high-quality green jobs for future generations, as we continue to make gains on our commitments to transition to net zero.

Levelling Up Secretary Michael Gove said, "Scotland has areas of outstanding opportunity but there are also places that can benefit from more investment to truly level up communities that have been overlooked.

This is a shared challenge faced by us all across the UK, which is why I'm delighted the UK and Scottish Governments have collaborated to deliver two Green Freeports in Scotland, which will undoubtedly be transformative for future generations to come.

Inverness and Cromarty Firth and the Firth of Forth are fantastic areas for these new Green Freeports to set up, ensuring the benefits are felt right across Scotland. This will help to create exciting new jobs, boost business and encourage investment in the local areas and beyond.

Deputy First Minister John Swinney said, "This is a milestone achievement in the process to deliver Green Freeports for Scotland. Inverness and Cromarty Firth Green Freeport and Forth Green Freeport will support businesses to create high-quality, well-paid new jobs, promote growth and regeneration, and make a significant contribution to achieving our net zero ambitions.

A rigorous joint selection process has been followed. The successful applicants showed a strong determination to embed fair work practices, including payment of the Real Living Wage, and to enshrine net zero initiatives in their work.

We look forward to working closely with them to ensure they deliver maximum positive impact and become operational as soon as possible. We will also work with the unsuccessful bidders to consider how they can build on the plans set out in their bids to deliver jobs and growth in their regions outside the Green Freeports programme.

Scotland has a rich history of innovation, trade and manufacturing and as we look to seize the many opportunities achieving net zero offers, the creation of these internationally competitive clusters of excellence will help us to create new green jobs, deliver a just transition and support our economic transformation.

Following a joint assessment process, UK and Scottish Government have selected Inverness and Cromarty Firth Green Freeport and Forth Green Freeport as the winning bids. Each will now be granted up to £26 million in funding over the next few years, primarily to address infrastructure gaps which are currently holding back investment.

The Forth Green Freeport aims to drive a transition to net zero by 2045 through attracting up to £6bn worth of investment and creating 50,000 jobs, generating £4.2bn in additional Gross Value Added in the first 5 years. The Green Freeport will have a focus on renewables manufacturing, alternative fuels, carbon capture utilisation and storage and shipbuilding, as well as the development of a new creative hub. The site includes the ports at Grangemouth, Rosyth and Leith, Edinburgh Airport, and a site at Burntisland.

The Inverness and Cromarty Firth Green Freeport aims to create 25,000 jobs and generate £4.8bn in investment for the area, with a focus on floating offshore wind, nuclear and hydrogen that will drive a transition to net zero by 2045. An expansion of the Inverness Campus and Powerhouse is also planned, along with proposals to deliver innovation and skills support. The site includes the Ports of Inverness, Cromarty Firth and Nigg and Inverness Airport.

We expect both Green Freeports to become operational in late 2023.

Scottish Secretary Alister Jack said, "I'm delighted to see Inverness and Cromarty Firth and Firth of Forth awarded Green Freeport status. Each can now be granted up to £26m in UK Government funding that will spark innovation, create high-quality jobs and encourage regeneration for the benefit of the whole of Scotland.

UK Freeports are a key part of the UK Government's Levelling Up strategy - they will bring prosperity and growth that is crucial as we tackle the challenges associated with rising energy prices and the increased cost of living.

Working jointly with the Scottish Government, we had some very strong and creative bids to consider. We are excited about the opportunities the Green Freeports will bring to improve infrastructure and generate investment, all while taking a step closer to our Net Zero goals.

This builds on the UK Government's successful Freeport programme in England, where are all 8 Freeports are open for business, and sites in Plymouth and South Devon, Solent, Teesside, Liverpool and East Anglia recently being granted final government approval.

The Forth Green Freeport bid aspires to deliver up to an additional 50,000 jobs across the UK, generate £6 billion in investment and contribute over £4 billion in GVA across sites in Grangemouth, Rosyth, Leith, Burntisland and Edinburgh Airport. Its activities will focus on renewables, advanced manufacturing, alternative fuels, carbon capture utilisation and storage, shipbuilding, logistics and the creative industries.

The Inverness and Cromarty Firth bid aims to build a world-beating floating offshore wind manufacturing sector, with sites in the Cromarty Firth, Invergordon, Nigg, and Inverness. It expects to create up to 25,000 new jobs and attract £2.6 billion in inward investment. In addition to offshore wind manufacturing, it will focus on green hydrogen and creating a new innovation cluster.

The Downside of Freeports
The secrecy and relative anonymity surrounding these mini tax havens can create a host of unwanted problems, however, such as money laundering and tax evasion - there's no escaping the fact that import tariffs on goods will still need to be paid at some stage.

Tax Watch
The secrecy and relative anonymity surrounding these mini tax havens can create a host of unwanted problems, however, such as money laundering and tax evasion - there's no escaping the fact that import tariffs on goods will still need to be paid at some stage.

The European Union published a report in 2018 titled "Money laundering and tax evasion risks in free ports".25 The report went on to state that Free Ports are "conducive to secrecy", and that:

"In their preferential treatment, they resemble offshore financial centres, offering both high security and discretion and allowing transactions to be made without attracting attention of regulators and direct tax authorities"

One issue raised that there is often no time limit on how long goods can remain at Free Ports. Goods can be classed as "in transit" for an indefinite period of time, in which they can gain value, and be traded an unlimited number of times without ever having been taxed.

As well as the fact that goods entering Free Ports are not subject to customs duties, those sold are not subject to Value Added Tax, and no withholding tax is collected on capital gains.

The European Commission introduced a set of new rules in 2020 in order to clamp down on illicit activity at the Free Ports within the bloc. Member state authorities must now take extra measures to identify and report suspicious activities at Free Ports.26

The Financial Action Task Force on Money Laundering, a Paris based intergovernmental organisation, published a report in 2010, which claimed that free-trade zone, which includes Free Ports, present a “a unique money laundering and terrorist financing threat because of their special status within jurisdictions as areas where certain administrative and oversight procedures are reduced or eliminated”.27

In February 2020 Labour MP Tulip Siddiq raised some of these issues, questioning the Treasury28 :

“To ask the Chancellor of the Exchequer, what recent assessment his Department has made of the correlation between the operation of Free Ports and (a) tax evasion and (b) money laundering.”

The answer given by Steve Barclay MP was:

“The UK plays a key role in tackling cross-border illegal activity and this is not going to change. UK Free Ports will be innovative hubs that boost trade, attract inward investment and drive productive activity across the UK. HMRC have been closely involved in their design to ensure that everyone pays their fair share of tax towards funding our vital public services, while boosting growth in all regions of the UK.”

Conclusions
Free Ports are nothing new. The UK has had them before, and could continue to have them whilst still a member of the European Union. What is new is the ability for the UK to establish Free Ports that deviate further from the European standard, and no longer have to comply with EU State Aid rules.

Assessments as to how much Free Ports can benefit the UK economy vary widely. It is impossible to produce accurate assessments yet, as full details are yet to be revealed.

There are however legitimate concerns that Free Ports will simply cause existing businesses to relocate to Free Ports, rather than stimulate the growth of new business, and that Free Ports can be used to facilitate tax evasion and money laundering. The EU has recently begun clamping down these special economic zones. As to whether UK Free Ports will be susceptible to such abuses we simply don't know, but the risk is very real.