‘Green freeports’ will allow Britain to achieve growth and net-zero goals
As the UK’s net-zero deadlines draw ever closer, the government must look for more opportunities to empower the private sector to innovate, and make the necessary leaps needed to meet those targets. So-called “green freeports” could be the answer.
By developing a new “green freeport scheme” where all UK ports are equipped with tax incentives for renewable infrastructure, the UK could unlock significant sustainable economic growth, decarbonisation, and energy security. It would enable offshore energy projects to be connected to the grid more cost effectively. This scheme could put the UK at the forefront of innovation in green fuels, boats, and other technology.
Of course, there is a treasury cost associated with the lost tax receipts, but this is mitigated by the significant investment return. By 2023, the freeport scheme under the previous government had attracted substantial investment commitments, totalling £2.9 billion and creating over 6,000 jobs. Given the government’s focus on developing new, greener technologies, green freeports would be a highly effective way to stimulate growth in that sector.
Currently, freeports operate with tax and customs reliefs which stimulate trade and economic growth and provide jobs. Freeports are a significant win for businesses and jobs, while ordinary ports and business hubs are not always able to leverage the significant benefits of them, leaving potential innovation and business growth unrealised. In our failure to expand freeport principles across UK ports and innovation hubs, the UK is failing to capitalise on significant opportunities for business.
Even without the benefits that would come from a programme of significant tax and regulatory relief, ports are already hubs for green innovation, particularly for offshore wind, hydrogen, and battery storage. Ports play a key role in supporting renewable infrastructure, from assembly and deployment of offshore wind turbines to housing green hydrogen facilities.
The economic potential of designating all UK ports as green freeports is huge. Eliminating tax burdens on renewable energy infrastructure and innovation would align with the government’s environmental targets and represent a significant vote of confidence in the UK business community.
The international private investment green freeports would bring would be a meaningful boost to local communities and jobs in regions which have historically depended on declining industries like fossil fuels and shipping. Many UK port towns are socio-economically disadvantaged and would benefit hugely from the investment.
Alongside the economic benefits, by decentralising renewable energy hubs and making the most of extensive UK coastline (which includes 120 cargo handling ports and over 400 non-cargo handling ports and harbours) Britain could reduce throttled transmission in renewable energy proficient regions and support a resilient energy network which reaches both urban centres and rural areas.
There are significant problems in connecting new renewables projects to the grid in areas of the UK with a high concentration of new energy production, which requires huge capital spending to fix. Diversifying renewable energy generation and land connection for offshore renewables across the UK would be a meaningful way to support the long term resilience of the energy network.
Green freeports could also position UK ports as a leader in global sustainable trade and logistics. Ports and international trade are a significant source of emissions. Opportunities to address that are significant in achieving global net-zero goals. Innovation in, for example, green hydrogen refuelling stations, could be a major step forward in decarbonising the shipping industry, enabling UK ports to serve as a global leader in the sector.
Innovation would need to be at the core of any green freeport, and it would be important to ensure the tax incentives in place were effective in promoting that. It would be productive to expand the SME research and development tax relief programme (86% of qualifying costs from a business’s trading profit, as well as the normal 100% deduction) for any business operating within the green freeport programme in the environment space.
This would amount to a potential 186% deductible for their taxable profits, providing significant incentives to the business community. This could be coupled with a full VAT reduction on renewable energy equipment and infrastructure, as well as changes to employer national insurance, to enable businesses to offer higher wages to bring the best and most innovative minds to the UK.
In a rapidly evolving global landscape, the UK needs to position itself as a leader in sustainable innovation by empowering the market and the business community. By implementing green freeports and stimulating green investment in the UK, we can trigger significant economic and environmental benefits globally and at home.
Noah Khogali is a Conservative Councillor in Perth and Kinross; and writes with Young Voices UK.
