An informative panel discussion at our Solent Freeport webinar outlined some of the steps businesses should consider if they want to benefit from the area's new trading status.
Keynote speaker Cllr Daniel Fitzhenry, Leader of Southampton City Council, emphasised the business opportunities for the city and the wider region. Hosted by The Business Magazine, the panel of tax, real estate and corporate specialists from accounting and business advisory firm BDO and law firm Shoosmiths covered what is currently known about the scale, timing and practicalities of the Solent Freeport initiative.
• Paula Swain, Board member of Solent Freeport Consortium & Solent LEP (Chair)
• Glynn Woodhouse, VAT regional partner, BDO
• Stuart Lisle, Senior Tax Partner, BDO
• Steve Porter, National head of Corporate division, Shoosmiths
• Kirsten Hewson, National head of Real Estate, Shoosmiths
Fitzhenry said the government was expected to sign off the Solent Freeport Consortium’s full business plan by the second quarter of 2022.
“The freeport is a fantastic moment for our city and the wider region,” he said. “We need to think how we can be a hotbed for the green economy, science and technology – the entire economic platform moving forward.”
Inward investment will be vital to the success of the freeport. “It’s not just about public money, it’s about leveraging the private sector to invest so we can drive forward. This is a great moment for anyone who wants to be part of the freeport and come along on this journey.”
Change is already underway in the area, with the City and County councils investing £63m from the government’s Transforming Cities Fund in sustainable transport and mass transit initiatives, as well as spending half a billion pounds transforming Southampton’s retail areas. Southampton is also on the 2025 City of Culture shortlist.
“We want to show how the Solent area can be the gateway into UK plc,” said Fitzhenry.
Swain noted that the area already has a strong track record for translating innovation into success.
Panel members summarised the main objectives of the freeport and the positive impact it should have on the Solent area:
Woodhouse: “To establish the freeport as a national hub, delivering diverse investment.”
Lisle: “Becoming a hotbed of innovation, creating new markets for UK products and services. With our universities and science park we already have an environment that encourages collaboration.”
Hewson: “Regeneration by creating high-skilled jobs and sustainable economic growth. The local economy will grow as the freeport’s tax measures drive investment.”
“If we can help every business in the Solent area to scale up, for example by recruiting one extra employee or upskilling one member of staff, then this will have a massive ripple effect across the supply chain,” said Fitzhenry.
He added that increased links with India, the Middle East and the US are benefiting the city. “Real jobs and opportunities are already coming in. People are investing here and coming to live here.”
Businesses should consider their future plans and how they can benefit from the freeport, urged the panel.
“The freeport encourages trade and innovation, so businesses need to think whether it is the right place for them and if it will give them the right benefits. They need to consider all the pros and cons,” said Lisle.
Porter confirmed that private equity firms and venture capitalists are beginning to eye up the opportunities. “It’s early days - we need to encourage private equity firms to think beyond short- and medium-term objectives.”
Lisle outlined how incentives will apply in designated tax and customs areas within the freeport zone. “Direct tax benefits include reliefs on capital expenditure if you are building new facilities in these areas. If you are based in a designed site and take on new employees from April 2022 then there will be zero employers’ national insurance on up to around £50,000 of income. And if you are buying land in a freeport site then there is no land tax.
“I think that Chancellor Rishi Sunak has got it right on driving the benefits of freeports. However, it is important to understand that the designated tax and customs sites within the freeport will not include the entire area.”
On the VAT front, Woodhouse explained that VAT on goods entering the freezone is suspended. “There will also be a brand new zero rate of VAT for goods worked on and then sold within the confines of the freeport.”
Hewson expects to see the real estate planning process speed up so buildings in the freeport can be constructed and the tax benefits can begin to flow. “We are looking for the political will and a supportive environment to increase the planning speed. If councils work together they can adapt local development orders so things get done more quickly,” she said. “We would encourage the private sector to get more involved with the public sector – tell councils what you need and the timescales you are working to.”
Fitzhenry confirmed that plans for the Solent Freeport include Southampton Airport. “This will add a uniqueness to this new development. Having the international airport, Southampton port and Portsmouth’s connections is a phenomenal opportunity.”
Lisle explained: “It depends where your current business is. If it is already in one of the designated customs or tax sites, you can apply to register that site.”
“First, we all need to shout about the opportunities we have as a region beyond just the freeport. Then, we need to look at the specifics and understand the dynamics of a freeport and the real estate opportunities,” said Fitzhenry.
Hewson added: “We are at the starting point of the freeport and need to build on the momentum it is creating to attract inward investment. We have to combine local consultation, how to address the environmental challenges and how to speed up the planning process. It is up to the real estate industry to work together on solutions.”
“Businesses should try and get their authorisation from HMRC by the second quarter of 2022 so they are ready to take advantage as soon as the designated tax and customs sites are up and running,” said Lisle.
Lisle: “Bear in mind that the freeport does not offer all of the tax and customs benefits universally. It will only be at specific sites that are going to be announced, so businesses need to look carefully at the details.”
Hewson: “Think about the wider benefits for businesses and the public sector of collaborating to make the planning process work better.”
Woodhouse: “There are potentially very valuable VAT tax benefits. Look at all of them and also the costs. Businesses need to be clear on both.”
Porter: “At this stage, no one is sure where the freeport will take us, so we need to keep having conversations like this webinar. Start engaging with others in the freeport discussion. As more people understand the benefits it will create a snowball effect. We can all play a part in our future by talking about the Solent Freeport.”