Free ports can help rebalance the economy

Figure 6: Regional distribution of UK freight tonnage in 2013

East Midlands, 0%

Eastern, 7%

London, 9%

Yorkshire & the Humber, 17%
Wales, 12%

North West, 9%
Scotland, 14%

Northern Ireland, 5%

North East, 9%

South East, 15%

South West, 3%
Source: Oxford Economics, The Economic Impact of the UK Maritime Services Sector: Ports, 2015, p. 16

Figure 7: UK ports by cargo,^* 2014.

Source: Department for Transport, 2015
Furthermore, on a local level large ports are disproportionately located in areas that perform relatively poorly economically, meaning that a port- centred Free Zone programme would automatically be targeted to areas of higher unemployment and deprivation. Of the UK’s 30 largest ports, 17 are in the bottom quartile of local authorities when ranked by the ONS’s Index of Multiple Deprivation. In total, three quarters of these ports are located in ‘below average’ local authorities.

Growing Manufacturing.

Despite being the world’s 5^th largest economy Britain ranks only 9^th for its manufacturing output, putting it behind both Italy and South Korea. Manufacturing’s contribution to the UK economy has been on a long-term pattern decline, falling from 30% of national output in the 1970s to just 10% of today, among the lowest of all OECD countries. This decline has tangible negative impacts for the economy: lower productivity and wages, less overall job creation and reduced investment in R&D and the nation’s ability to capitalise on future innovation.
As services are not traded in containers or subject to customs and duties in the same way as goods, a Free Ports programme, almost by definition, targets manufacturers handling tangible goods rather than the services sector. Thus, Free Ports can contribute to an economic rebalancing by encouraging manufacturing growth.
Manufacturing growth would help drive up UK productivity and thus wages. In 2014, UK productivity was 19% below the G7 average for per-worker output. Part of the explanation for this is an over-reliance on the services sector where productivity is 20% lower than in manufacturing sectors. Furthermore, services productivity has historically grown less quickly. Generally, the manufacturing sector has benefitted from advancements in technology in a way that other sectors, particularly the service sectors, have not. The lower productivity exhibited by services jobs means average wages fall as workers move from manufacturing sectors to employment in services.