Well-selected and carefully prepared freeport development projects could play an important role in achieving green growth and opening new social opportunities in deprived areas, says Paul Maliphant, UK Freeport Account Leader.
Worldwide there are 3500 free trade zones (FTZs), employing 66M people. Freeports are Special Economic Zones (SEZs) – entry/exit points for materials and goods created around shipping, air and/or rail hubs, that offer administrative, customs, development and tax benefits. The combination of strong transport and trade, access to commodities and a conducive financial environment make freeports an attractive proposition for business, enterprise, logistics, warehousing and manufacturing.
As the UK prepares to formally part from the EU, the government is seeking opportunities to boost international trade and attract investment, and is exploring the possibility of developing freeports at various locations around the country. If freeports can be developed, there could be diverse social benefits to pursue: new temporary jobs both in construction of facilities within the freeports’ boundaries and of connecting infrastructure, permanent employment in the new industries and businesses that take root and drive innovation and economic growth, urban regeneration and environmental improvements in neighbouring areas. In time, better local job prospects would bring housebuilding, better schooling, healthcare and amenities for local people. And jobs would be indirectly created in hospitality, retail and leisure, teaching and healthcare.
At Mott MacDonald, we believe that building a portfolio of aligned freeports across the UK highlights an opportunity to embed inclusive and low carbon growth, playing a part in both the government’s ‘levelling-up’ agenda, and in ‘building back better’.
A freeport’s value lies in its power to boost economic activity and create new opportunities for people in some of the UK’s most deprived areas: over half of the UK’s big ports are located in boroughs classed as among the most deprived in the country.
Industries thriving in freeports located in other countries include petroleum refining, automotive, electronics and pharmaceutical manufacturing. The UK could compete for a share of these markets – but could also develop exciting new industries aligned with a net-zero future: making electric vehicles, manufacturing renewable energy technologies, producing hydrogen and ammonia to fuel next-generation transport, fabricating components for modern methods of construction, and much more.
Manufacturing accounts for just 10% of UK GDP, among the lowest of all Organisation for Economic Co-operation and Development (OECD) countries. Increasing manufacturing could boost national earnings – more essential than ever in light of the huge sums spent to mitigate the effects of COVID-19.
Where should freeports be located? Links to sea ports will be of particular importance and they have specialisms – most deal in particular cargos and types of vessel, and serve particular markets. Decisions on where to situate a freeport SEZ must be informed by the relative cost, complexity and long-term sustainability of different types of trade. ‘Simple’ trade and logistics-based freeports can be located with huge social benefit in deprived areas.
However, those freeports intended to harbour innovation-based businesses will be best located where entrepreneurial growth is already happening, for example close to universities or businesses with strong research, development, innovation and enterprise hubs. In these areas, enhanced education and training are likely to be needed to provide the required employment skills.
Improving people’s lives, together
We understand that stakeholders – national, developed and local governments , port owners and operators, enterprise partnerships, city deals and developers – want to deliver better social value through their activities, either to comply with legislation or because they are motivated to deliver positive social outcomes as part of their corporate activities. We think freeports are an opportunity to go beyond compliance and involve local people in developing the vision for their future freeport, to achieve transformational change.
This is how.
Socially inclusive outcomes
We use a social outcomes framework to identify, manage and mitigate risks, and to identify ways in which the projects we work on can deliver the best possible outcomes for people. Our social outcomes framework addresses:
- Accessibility – to housing, transport and amenities
- Inclusion – no one left behind, participation, rights, freedoms and choice, and equality between people
- Empowerment – access to secure employment, education and training, information and communication
- Resilience – inclusive public realm and natural environment, climate resilient and sustainable communities, sustainable energy, water and sanitation
- Wellbeing – good mental and physical health, safety and security, high-quality health and social care
Vision-led decision making for an uncertain future
To aid decision-making in the face of change and deep uncertainty we have developed a tool called FUTURES, with the University of the West of England. It is designed to help organisations set a vision, plan and prioritise and can be used to set a short-term course of action as well as for long-term wayfinding.
1. Gearing up: Engage the right stakeholders and establish your objectives and needs. Stakeholders should include key information-holders, recognising that much knowledge about assets is ‘tacit’ – held by people.
2. Preferred futures: Define the outcomes you want to achieve at three, six and 18-months horizons, weighing service quality, safety, investment and revenue considerations alongside longer-term social, environmental, economic and technological goals, to produce a vision and high-level strategy that can guide you forward.
3. Opening out: Test the vision and high-level strategy against all plausible scenarios to assess risk. Consider demand, revenue, supply chain, staffing – and the effects of unexpected events like extreme flooding or summer heat, for example. This may involve tough investment, operational and staffing decisions, and negotiation with investors, lenders, insurers and regulators.
4. Options: Develop strong, realistic, forward-looking options for managing risks and realising the vision.
5. Closing down: With your stakeholders, examine how options would perform under different conditions – a second round of risk assessment – to develop a high level of confidence that selected options will deliver the desired outcomes.
6. Review: Monitor the situation and review your strategy regularly in light of changing conditions. Re-run selected stages 1-5 if necessary.
Looking beyond conventional cost-benefit analyses
We calculate and demonstrate the wider economic impacts of proposed infrastructure with the Transparent Economic Assessment Model (TEAM). The results are actual monetised values for any scheme’s impact on jobs, income and other variables. Using TEAM we recently calculated that a new UK road would deliver 5200 local jobs and £1bn gross value added over 30 years, demonstrating the case for investment. The calculations are compliant with UK government project appraisal guidance.
Mott MacDonald’s purpose is to improve society by considering social outcomes in everything we do; relentlessly focusing on excellence and digital innovation, transforming our clients' businesses, our communities and employee opportunities. Helping drive forward an inspirational, inclusive, innovative, sustainable, and low carbon freeport agenda will boost economic, social, and environmental value for current and future generations.