What Will Freeports Mean for Workers?

With years of experience working at Prestwick freeport, Peter Henderson sees dangerous signs in the latest blueprints and sets out nine questions which demand urgent answers.

Freeports (or Green Freeports in Scotland) are not a new concept. Last introduced in the UK by the Thatcher Government, they achieved little as they were subject to EU rules and regulations which were rigidly enforced. A freeport is technically an area outwith the country, where normal rules do not apply. A company can import goods, manufacture items, and export goods without liability for tax and duties, and states provide incentives for companies to invest in these areas. The EU has recently placed further restrictions and rules on freeports, and are closing them where they can, but they do exist elsewhere in the world, such as in Dubai and in some small states in the Caribbean, where they are part of a chequered history of criminal activity and organised tax avoidance.

The UK Government and the Scottish Government have both promoted the Green Freeport agenda.

When previously operating in the UK, freeports were mainly controlled by HM Customs and Excise. The last operating freeport in the UK was at Prestwick Airport. The HMCE control team drew in several million pounds weekly in revenues, as companies imported and exported goods like computer parts. Under EU rules, if goods were diverted to ‘home use’, i.e. not exported outwith the EU but instead sold in the UK or EU, then all items were liable for duties and taxation. Computers in those days attracted high tariffs and duties, so revenue control work was important for benefitting the government and ensuring that goods did not undermine legitimate trade in the UK and EU. The Freeport Area at Prestwick was secure and controlled on one site, not spread over a wide area across different sites. This was to prevent goods going ‘missing’ or being diverted to the local area and markets, and undermining employment and local business.

The Conservative government stated that the reason that freeports were closed in the UK was “due to EU restrictions”. The concept was resurrected by the Conservative Government as a ‘Brexit Benefit’, along with Special Economic areas. This resurrection was surrounded by much ill-informed political spin in the press and media. It was sold as a way for certain economic areas to obtain investment and employment. Alongside the incentives described above, the UK government has also stated that companies in the area will be exempt from paying National Insurance for at least five years. This exemption raises concerns regarding workers’ state pension benefits and health and security benefits. If no contributions are paid by the companies, what happens to the individual rights of workers? 

Concerns around NI are one issue among many. When the concept of freeports was extended to include Scotland by the UK Government, the SNP Trade Union Group raised concerns with Scottish Government Ministers, which resulted in a motion being taken to SNP annual conference that established the official SNP position on Freeports/Greenports. This was three years ago and talks and representations involving the STUC and individual unions have followed.

The comprehensive SNP motion agreed a firm set of points, and underlined the importance of trade union recognition and bargaining rights. The agreed motion raised other questions:

1.    Will the companies operating in Freeports actually be based in the UK/Scotland? Will they have UK directors and secretaries and be registered at Companies House? Must they have actual shareholders or can they just be ‘on-paper’ companies?

The answer to date is that companies will follow the current model, i.e. be registered in the UK. This is of concern as a company based in a foreign entity can be registered in many ways, including simply as a brass plate in a third world regime or offshore tax haven.

2.     Will they fall under UK Law provisions, or be able to exploit loopholes in a Freeport?

P&O Ferries is a company based in Dubai that has no UK legal liability, and was recently exposed for seeking to exploit workers’ rights and terms and conditions. Besides exploiting the lack of liability, without proper controls in place the actual registration of the company can be open to abuse and used for criminal purposes such as money laundering. While the government states that companies will be registered in the UK, the Financial Commission and other government authorities often have no idea of the legitimacy of directors that are listed. They are often fictitious, listing individuals’ names and addresses without their knowledge.

3.     Will the living wage be guaranteed to workers?

Although the Scottish Government is discussing this question with the UK government, no guarantees have been given to date. Without a guarantee, those demanding rights for workers will not be reassured.

4.     Will companies be required to recognise trade unions?

The answer to date is no. Rather, there will be a requirement for something called “meaningful worker engagement” or, in Scotland, “Fair Work arrangements”. There has been limited consultation with the STUC and unions regarding this issue. Without trade union recognition enshrined as a right, workers are starting from a very weak position. Without recognition guarantees, how can workers’ terms and conditions, and health and safety, be ensured or negotiated?

5.     Will UK health and safety and environmental rules and laws be recognised and applied in Freeports?

As these are reserved issues, the UK government will determine and can change these regulations. As such, Scotland will have no say in determining these matters. This should be of grave concern for workers and wider society, particularly in regard to environmental matters. The Freeport development at Tees port in Yorkshire is accused of environmental and habitat destruction of the North Sea area with the dumping of waste during its construction phase. The question is: what controls will be used in Freeports? How do we enforce them?  How do we protect workers, wildlife, and the environment?

6.     Do local authorities have any authority in Freeports?

There is limited (if any) consultation with local authorities about Freeports, which will be exempt from rates and council tax. It is uncertain whether local authority planners will be involved in planning. At this stage there are many unanswered questions. If an incident like a fire or pollution spill occurs at a Freeport, what response will be required from the local authority, and who will meet the costs? Without COSLA or a local authority being involved how can local employment safeguards be put in place? What will the consequences be for local areas of the relocation or displacement of workers, in terms of education, employment, health, housing, and emergency services? What will be the local effect of the movement of workforces in and out of the area by companies that are given tax incentives to relocate them?

7.     Will government agencies be employed to control ports, protect revenues, prevent counterfeit goods and smuggling, uphold trademarks and intellectual property rights, and administer immigration (since Freeports could present opportunities for circumventing immigration controls),

The answer to these questions appears to be yes; however, no plans are evident to increase staffing or training that would be required. It is self-evident that criminal activity and evasion within Freeports will develop and grow. Yet there are no surplus trained staff in any department or agencies that are available. There is a major deficit of experienced staff in all areas of border control and customs control following Brexit. To avoid exploitation and unintended consequences, controls and laws must be put in place, before we experiment and count the cost to workers, society and the environment.

8.     How will security be maintained in Freeports?

A Freeport can be established anywhere, not just at ports. As such, there are now proposals to extend Freeport areas across multiple sites, from warehouses to airports, and in cities. Without secure sites, these proposals are recipes for fraud, tax evasion, crime, environmental damage, pollution and exploitation of local trade, workers and society.

9. Will Freeport areas be subject to government inspections, including unannounced visits?

There requires clarification and reassurance before the Freeports are developed and start operating. To try and address it after the fact will never succeed. The P&O Ferries scandal is a perfect example.

It is vital that unions and politicians urgently address these matters before they become complicit in exploiting and harming workers, families, local trade, government revenues, and the environment. Freeports are policies designed to benefit the rich by exploiting workers, diminishing employment law, and degrading terms and conditions. They can only benefit the few, at the expense of the workers.

Peter Henderson was Director General (Overseas Territories) of HM Customs and Excise, and a union representative throughout his career. He was Leader of South Ayrshire Council between 2020 and 2023, and is now retired.