Sultan’s Key Gold and Base Metals Portfolio in the Yilgarn Craton of WA

Summary

• The UK government is mulling overhaul of planning laws in upcoming 10 freeports, in a rush to make itself fully ready for December 2020, EU common tariff expiry deadline
• The government believes, such freeports could become international hubs of innovation and manufacturing, with the accompanying economic and regulatory incentives being rolled out
• The current situation of the UK economy, battered by the pandemic makes it ill-prepared to meet the new challenges once the free market transition period deadline passes

The Boris Johnson government is contemplating an overhaul of planning laws in upcoming 10 freeports in the country to give a boost to the country's economic growth. These ports which will be outside of UK customs jurisdiction would create employment and business opportunities for Britons at an accelerated pace while also being a major destination for foreign investments. The country which is currently in a rush to make itself fully ready for December 2020, EU common tariff expiry deadline, is finding itself well short of the adequate preparedness because of the economic jolt that it received by the coronavirus pandemic. The government though is hard at work negotiating an appropriate deal with the EU side, but there is still sharp difference among the negotiators which are slowing down the process. The proposed new measures, which will also come with new trade deals which the UK is currently negotiating with countries outside of EU, will give British businesses an opportunity to diversify into other markets and reduce their dependence on the EU.

The concept of freeport and how they will benefit the British economy

A freeport is a designated place in a country, where businesses can import raw materials or semi-manufactured goods from outside add value by manufacturing or assembling and re-export without attracting any custom duty. Such a concept has been prevalent for long and has been the reason of immense employment and wealth creation in the developing countries like China, India, smaller South-east Asian countries, UAE and South- American countries like Brazil, Argentina, Mexico, Chile, and Uruguay. The United Kingdom which is currently reeling under a severe unemployment crisis could very well use these hubs to hasten its economic recovery, which is currently predicted to take a very long time, given the massive shock it has received because of the pandemic.

The government will start bidding for towns, cities, and regions in the country to become freeports once the 31 December 2020 EU common area tariff regimen expires, which would be set up within a year. These freeport economic zones would not only be outside the UK customs jurisdiction but will also not attract any other national tariffs and import VAT until the goods manufactured enters the British economy.

The bidding for the territories which will start after the government presents this proposal in the parliament during its autumn budget session scheduled later this year, would be concluded before spring next year. The territories which would be successful would see major tax and regulatory changes taking place for them, along with generous capital allowances, research & development tax credits, cut to house purchase taxes, stamp duty, business rates and liberalisation of local planning laws to attract more enterprises to set up business there. These set of measures will, however, only be the first tranche with more such measures like cut in the national insurance contribution to be followed in April 2022, making the freeports fully operational within 18 months of the UK fully coming out of the EU common area tariff regimen.

The impact of the pandemic on the preparedness of the country to meet the 31 December 2020 deadline

The sudden emergence of the coronavirus pandemic had a drastic impact on the preparedness of both the UK and EU to adequately protect the interests of businesses on both sides. Logistical bottlenecks and increase in import tariffs that were already threatening the bottom-line of businesses because of the Brexit, were now additionally pressured by the lockdown and social distancing measures that slowed down their production lines. Negotiations between the two sides now had to factor in the additional burden of the pandemic to extend the scope of the new tariffs and new regulations to help businesses on both sides.

The entire European continent, which is still deep in the clutches of the pandemic, is expected to see its economy shrink by about 8.3 per cent in 2020, before recovering by 5.8 per cent next year. While the United Kingdom is expected to shrink this year by nearly 10 per cent other large EU economies like Italy, France and Spain are expected to shrink by 11.2 per cent, 10.9 per cent and 10.6 per cent, respectively. Thus, the EU common area tariff regimen expiry date of 31 December 2020 would only bring in additional economic pressure for each of these economies.

Other measures that have been taken by the government to boost international trade and commerce

Since the beginning of the year, when the UK officially pulled out of the EU, the British government-initiated trade negotiations with a number of countries to create new opportunities and expand the market reach of its businesses. United States of America, Australia, New Zealand and other countries like Japan and former British colonies in south-east Asia will provide a large and a ready market for British companies who are not only on the lookout to sell their products, but also to source raw materials and skilled manpower. These negotiations are also important from the point of view of the pandemic induced global economic situation, as it will open up markets for the UK, where different governments are increasingly becoming protectionist due to the slowdown.

Conclusion

The freeport proposal being proposed by the current government is directed towards turning around the British economy that is facing a recession that it has not seen in centuries. This measure which will benefit the manufacturing industries more than other industries will also go a long way in reducing the country’s dependence on foreign suppliers of components and semi-finished goods which British companies imported from free-trade-zones of other countries till now. The proposal thus will help the UK resolve supply chain disruption problems to a large extent that its businesses have been facing since for some time now.