Brexit fury as Sunak's freeport plan risks infuriating EU: 'They could block UK exports!'

The Chancellor unveiled a wide range of policies in today’s Budget announcement to try to spark economic recovery following the impact of the Covid pandemic. Mr Sunak’s announcement included details of the eight freeports in England. The English sites were confirmed as East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City, Plymouth, Solent, Thames and Teesside. The Chancellor said he is also in discussion with the other UK governments about locations in Scotland, Wales and Northern Ireland.

Freeports are special economic zones with “different rules to make it easier and cheaper to do business”, Mr Sunak told MPs today.

They can be found around the world, but the UK’s plans would not have been permitted had the country still been in the EU.

Encouraging investment and job creation are among the key objectives of the freeport policy.

Some argue that freeports’ favourable customs duties and tax breaks provide a key trading advantage.

However, economist and head of Tax Research UK, Richard Murphy, told that freeports will only make EU-UK trade harder post-Brexit, as Brussels will not be a fan of the proposal.

He said: “The difficulty with freeports is that you create lots of new internal borders within the UK, and that’s a lot of extra work.

“They are usually very poorly regulated because the whole purpose is to have ‘light touch regulation’ which normally results in no regulation.

“They really are not well run. And because the people we trade with will know that, the EU for example, I bet this will increase problems with trade between the UK and the EU.”

Mr Murphy even warned that the EU could block UK exports for fear of importing goods that have not undergone thorough checks.

He continued: “The EU will say ‘there is light-touch regulation in these places, therefore we can’t rely on whether the right things are being done therefore we won’t accept any imports from freeports.’

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“There could be a block on trade from freeports, which would be crazy.”

Mr Murphy also warned that freeports are often associated with “illicit activity”, and could result in more criminality in the UK.

He continued: “The second problem is freeports are associated with crime. Light touch regulation attracts those who want to undertake criminal activity because there are fewer checks, fewer barriers leading to more drug smuggling and counterfeit goods.

“There also tends to be tax abuses. Art works are regularly moved through freeports because they effectively become a mechanism for money laundering.

“This will be banned, but trading in precious metals, fine wine, high value cars – a lot of these are used for money laundering purposes.

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“The chance that criminal activity will go up in the UK as a result of us having freeports is very high I’m afraid.”

In the Commons today, Mr Sunak argued the case for freeports.

He said: “Our freeports will have simpler planning to allow businesses to build, infrastructure funding to improve transport links, cheaper customs with favourable tariffs, VAT or duties and lower taxes – with tax breaks to encourage construction, private investment and job creation.

“An unprecedented economic boost across the United Kingdom. Freeports will be a truly UK-wide policy – and we’ll work constructively with the Scottish, Welsh and Northern Irish administrations.”

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