Leigh Jones takes a closer look at Welsh Government’s recent announcements around freeports and asks if the policy will benefit Wales.
“Freeports are not a policy of the Welsh Government,” was what Mark Drakeford once said. “They have never been part of a manifesto that I have stood on, and I am not elected to introduce them. They are a manifesto commitment of the Conservative party at the UK level.”
However, recently, the Welsh First Minister was in Anglesey with the British PM to announce not one, but two new freeports in Wales. They’ve been a key part of Rishi Sunak’s political thinking since his time as a backbench MP, and are now a cornerstone of the UK Government’s post-Brexit economic policy.
Freeports are areas which are exempt from a country’s usual import taxes and tariffs. Theoretically it means that raw materials can be imported and turned into new products ready for export without added taxation costs. The theory being that it increases investment in an area, although critics argue that they can be used to facilitate crimes like tax evasion, trafficking and drug smuggling.
How is it, then, that Wales has announced two freeport sites? And can anything be learned from the largest and most prominent site in this new wave of freeports, in Teesside, in the north of England, to make a success of those in Wales?
The Teesside freeport site, operated by a company called Teesworks, plays an important political role for the UK government. It’s a prominent feature in the heart of ‘Red Wall’ territory where Conservative politicians sit in previously safe Labour seats. Here, five local councils have created a combined authority. This new authority’s Conservative mayor, Ben Houchen, was first elected in 2016, and re-elected in 2021 with a whopping 72.8% of the vote – largely on the promise of jobs to come from Teesside’s freeport.
When comparing this flagship freeport site with those in Wales, it’s important to see it in its appropriate local political context, as well as the wider picture of ‘levelling up’ and the Northern Powerhouse. These are ideas from the UK Government which exist, arguably, for securing votes and creating a narrative of job creation and new economic opportunities rather than exclusively being about the delivery of those positive outcomes that they promise at the outset.
As Westminster went full speed ahead with eight new freeports in England, a Senedd report recommended that freeports should be considered for Wales to mitigate the risks of economic activity being displaced from Wales to England.
While the Teesside freeport flexes its green credentials with each new potential project’s announcement, the announcement of the Welsh freeport sites, in contrast to the successful bids, seemed to mention their role in developing a green economy only in passing.
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The Teesworks site has attracted the interest of SeAH, a company committing to create monopiles – steel foundations driven into seabeds for offshore windfarms – as one of its key leaseholders. There have also been announcements from prospective tenants who plan to create “green” lithium – a key component for electric vehicles up the coast at Nissan’s Sunderland factory, as well as further north still at the beleaguered Blyth Britishvolt gigafactory (a project which was at one time mooted to make its home in the Vale of Glamorgan). Nissan’s enormous plant employs around 6,000 people in total, and has produced its own batteries for electric vehicles on-site since 2012.
There’s also the involvement of Net Zero Teesside (NZT), the UK’s first Carbon Capture, Utilisation and Storage (CCUS) project which is run by BP to store pressurised industrial carbon dioxide in a reservoir underneath the North Sea.
As the Welsh freeport projects are promising green industrial futures, the entire North East of England’s industrial present seems to already be on the path to becoming green
Another CCUS scheme was proposed in the successful Celtic Freeport bid; the freeport itself being split across two sites at Milford Haven and Port Talbot. BP’s involvement in NZT shows CCUS for what it is – not a solution to carbon emissions, but a sleight of hand to contribute to net-zero goals while fossil fuels are still extracted and carbon still released to the atmosphere.
As the Welsh freeport projects are promising green industrial futures, the entire North East of England’s industrial present seems to already be on the path to becoming green regardless of the existence of the Tees freeport. The aforementioned Blyth gigafactory may be reliant on raw materials being developed on Teesside, but the town has a highly-skilled local workforce in renewables that’s developed over a long time – Blyth was the location of the UK’s first offshore windfarm at the start of this century and remains a training hub for offshore energy workers.
While the Welsh freeports claim to be able to attract investment from green businesses, the truth is that they (and other freeports in England) are competing with a freeport site on Teesside that already has a fledgling green business supply chain and workforce as well as backing from the central government. The 4,500 acre Teesside freeport is not only huge in scale, its stature in policy means that it is too big to fail, making it arguably less risky and more attractive for investment than freeports in Wales.
How do the Anglesey and Celtic freeports compete with the North East of England’s rapidly developing green economy? They can’t offer tax benefits that aren’t available at other freeports in the UK.
The Milford Haven-Port Talbot joint venture is underpinned by the development of a new floating offshore windfarm. Steel produced at Port Talbot will be assembled at Milford Haven and taken offshore to create new wind turbines. There’s also the Morlais tidal stream project which provides an area for companies to develop tidal energy schemes, although a failed similar project at the nearby Ramsey Sound doesn’t inspire confidence in success here.
Anglesey Freeport’s bid, meanwhile, claimed the potential for a “once in a generation opportunity to become a clean energy powerhouse”. They use the word “clean” rather than “green” because it’s hoped that as part of decarbonisation of industry on the island new nuclear technology will be developed.
The ageing nuclear power plant at Hartlepool last month had its license extended for another two years to help provide power to the Teesside freeport, however, it’s hoped that newer and smaller nuclear technology can be developed on Anglesey to provide power for the freeport here as well as providing surplus for the grid.
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Small Modular Reactors (SMRs) are a fledgling technology which have yet to deliver on their promise of small nuclear reactors produced at scale, however there are at least four companies – a mix of start-ups and established players – hoping to use the Anglesey Freeport to develop their products.
There is a truly “green” project in development in Anglesey, with the Holyhead Hydrogen Hub hoping to provide hydrogen fuel for vehicles. Although with different ways of producing hydrogen – including some which produce carbon emissions – it remains to be seen whether this truly reduces emissions or simply offsets them.
Holyhead Hydrogen Hub has received £660k from the Welsh Government, and £4.8m has been pledged by the UK Government. These are not inconsequential amounts, and are the type of investment that’s needed to seriously develop these new technologies to a viable scale.
While Wales’ freeports might not be able to compete with the stature of Teesworks, it’s possible that they can learn from the impending issues that are troubling politicians on the North Sea coast in order to make themselves more appealing.
If freeports in Wales are to be a success, they need transparency and good governance to inspire the confidence of companies that are investing.
Campaigners claim that mass die-offs of sea life in the area are linked to the redevelopment of historically polluted land in the freeport area, although a Government panel concluded a new disease to be the most probable cause. There are also accusations of cronyism and a lack of transparency. Political goodwill from voters who turned blue for the first time in their lives is also increasingly hard to find – only a fraction of the 20,000 promised new green jobs have materialised, and locals’ patience is running low.
If freeports in Wales are to be a success, they need transparency and good governance to inspire the confidence of companies that are investing. It should be noted that if freeports in Wales were funded via the Barnett formula they would have received only £8m of UK Government funding to set up. However, Mark Drakeford has managed to negotiate direct funding of the freeports from the UK Government, which means that instead of being subject to the Barnett formula, each Welsh freeport will receive the same £26m grant that English freeports have received.
Having a steady government with large popular support, headed by shrewd politicians, could well be the USP that Wales has in making freeports a success as part of its wider green plans.
This article was commissioned and edited by Kaja Brown thanks to the Books Council of Wales’ New Audiences Fund.