James McGrory: The economic benefits of a free port scheme after Brexit are an illusion

By James McGrory, Open Britain Co-Executive Director

Leave campaigners in the referendum liked to talk about Britain’s being a “seafaring nation"

It is in this vein that the anti-EU Centre for Policy Studies has released a report today advocating a new “free ports” policy for a post-Brexit Britain. If carried out by the Government, their proposal will succeed only in sinking our economy.

A free port is a zone within a country which is treated, for customs purposes, as an independent jurisdiction. This means goods can be manufactured, imported and exported in the zone without incurring normal barriers to trade like tariffs and customs duties. The CPS advocates turning several UK ports into free zones.

While this is not a bad idea in principle, there is a huge amount wrong with it in reality.

It would badly damage our economy by cutting Britain off from our biggest and most important trading partner – Europe.

Free ports are incompatible with being part of the European Customs Union, as the CPS themselves admit. The Customs Union means that our companies do not have to go through expensive, time-consuming procedures when selling their products in Europe – meaning free and easy trade with our biggest market.

The process also works in reverse, so importing goods from Europe is cheaper, keeping the cost of living down for British workers. Leaked Government papers have shown that the cost to our economy of leaving the Customs Union could be a staggering 4.5 per cent of GDP.

Free zones are also hard to square with membership of the European Single Market. Again, the consequences of leaving the Single Market would be deadly serious. Every piece of research has shown that millions of jobs depend on our trade with it. The lack of internal trade barriers means selling a British car in Berlin is as simple as selling it in Birmingham. Moody’s says that leaving it would cause a downgrade in our national credit rating.

The economic benefits free ports could bring are likely illusory. The CPS claims they could create 86,000 new jobs – a fraction of the number that could be lost if we leave the Customs Union and Single Market.

This number is deeply suspect. They arrived at it by taking the 425,000 people employed in free zones in the US, and simply scaled it down to a British level, despite our very different economies. You wouldn’t get away with that kind of working in GCSE maths.

Abandoning the close trading relationship we have with Europe for the mirage of free ports would be madness. Leave campaigners need to understand that, no matter how many wheezes they come up with, the best option for jobs and economic stability is continued membership of the Single Market and the customs union.