Corporate report

UK Freeports Programme Annual Report 2022

Published 16 December 2022

Ministerial foreword

I am thrilled to be publishing the first annual report on UK Freeports at such an exciting time for the programme. We have recently announced the first group of English Freeports to receive final government approval, and all eight English Freeports are already open for business with generous tax reliefs on offer to investors. The competition has just closed for a Freeport in Wales, and we expect to announce the winner of that, as well as two Green Freeports in Scotland, in the coming months.

At their heart, Freeports are all about levelling up. The communities they serve have been overlooked too often in the past. But Freeports give them the tools they need to transform their local economies, getting them ready for the future and creating opportunities for generations to come. It is a testament to the strong local partnerships across both private and public sectors, who are striving to make the programme a success for local communities, that we have reached this stage so soon.

This report shows how the UK government and devolved governments have come together with local partnerships to set up the UK Freeports programme with the shared aim of increasing investment into the UK to ensure we can continue to grow into a more dynamic economy.

Freeport status has brought in millions of private investments in areas such as the Humber, where the first rare earth processing hub at Saltend has been established. Further north, in Teesside, construction is underway at SeAH Wind Ltd’s multi-million pound offshore wind manufacturing facility at Teesworks highlighting the role Freeports will play in attracting green investment.

And when it comes to innovation, Freeports are already leading the way. Plymouth and South Devon Freeport, for example, has already taken advantage of the Freeport incentives to improve the testing of Marine Autonomous Vehicles in UK waters, making it easier for smaller businesses in the market.

And they are not the only Freeport maximising their innovative capabilities. The Thames Freeport has plans to develop an automated vehicle route from Thames Wholesale Markets to Central London and to establish river freight routes, supporting the decongestion of the region and decarbonisation of logistics. Freeport East, which covers Harwich and Felixstowe, is developing an innovation and skills centre to support their Gateway 14 tax site. And, in the East Midlands, plans have been developed for a Hydrogen Skills Academy, which will be the UK’s first practical, industry-based training centre in its field.

It’s fantastic to see Freeports driving growth and pioneering innovation, and watching how this translates into prospects for local people in the community. In the north west of England the Liverpool City Region Freeport’s Freeport Skills Academy will help unemployed people and care-leavers secure jobs within the Freeport. And in the south east of England, the Solent Freeport Green Growth Institute will play a big role in developing high-tech talent and skills for people in Portsmouth and Southampton.

To get to this stage, locations in England have set up governing boards to operate the Freeports which have been working extensively with local partners such as universities and trade bodies, as well as across government, to build comprehensive business cases which set out the strategic vision for their Freeport. A considerable amount of work has gone into making sure Freeports are set up for success and to ensure that we in government are confident that public money will be used effectively to maximise the benefits of being in or around a Freeport.

2023 is the start of an exciting new chapter for the programme. We will see Freeports continue to go from strength to strength by spreading their benefits across the whole of the United Kingdom. There will be two Green Freeports in Scotland focused on decarbonisation and at least one in Wales designed to create jobs in innovative industries. We will also continue to hold discussions with stakeholders in Northern Ireland about how we can expand the benefits which come with having a Freeport there, to ensure the whole of the UK is set up for success and has a bright sustainable future.

Freeports in England are now ready to move full steam ahead. Over the coming year, we will see them bring their plans to life with big private investments, upgrades to local infrastructure, and bold regeneration initiatives in those areas that need a boost, creating real impacts for local people. A true example of levelling up.

Dehenna Davison MP, Parliamentary Under Secretary of State (Levelling Up)

Background

This is the first annual report on the United Kingdom (UK) Freeports programme. This report includes information about Freeport delivery progress and results as well as an overview of how Freeports will play a crucial role in Levelling Up communities and driving sustainable economic growth across all four corners of the UK.

The UK government has committed to publishing an annual update on the development and delivery of UK Freeports, informed by evidence collected through the Monitoring and Evaluation requirements, for the first 5 years of the programme.

In August 2019, the International Trade Secretary announced the creation of a number of new Freeports across the UK, designed to boost international trade and economic growth in areas which need it most. Subsequently, the government has worked in partnership with local authorities, ports, businesses, and wider stakeholders to develop a highly ambitious, world leading Freeports model for the UK, including through a public consultation.

Freeports catalyse investment through a combination of generous tax reliefs on new economic activity, a special streamlined customs procedure, an ambitious programme of public investment, and wide-ranging support from the UK government to help businesses trade, invest, and innovate. This will bring sustainable jobs and opportunities to unleash the potential of every nation and region in the UK and regenerate historically overlooked communities.

Freeports in England

At its core, the Freeport model in England has 3 objectives:

a) establish Freeports as national hubs for global trade and investment

b) create hotbeds for innovation

c) promote regeneration through the creation of high-skilled jobs in communities that need it most.

English Freeport locations were selected through an open competitive process, which ran from November 2020 to February 2021.

In March 2021, the Chancellor announced 8 locations as winners of the English Freeports competition:

Summaries of each Freeport can be found in Appendix A.

Green Freeports in Scotland

The UK government is investing up to £52 million to bring 2 Green Freeports to Scotland. Green Freeports will have access to multiple reserved and devolved tax levers, a customs package and bespoke trade and investment support, all of which will underpin the Levelling Up agenda and the drive to a net zero economy in Scotland, whilst additionally bringing hundreds of jobs to the successful areas.

The Green Freeport model closely aligns to the offer set out in England. Green Freeports are based upon 4 main objectives:

• promote regeneration and high-quality job creation
• promote decarbonisation and a just transition to a net zero economy
• establish hubs for global trade and investment
• foster an innovative environment

The competition to establish 2 Green Freeports received 5 bids from ports right across Scotland. In partnership with the Scottish Government, the UK government have assessed the bid submissions and an announcement on the successful Green Freeport locations will be made soon.

Freeport in Wales

A Welsh Freeport will be backed by up to £26 million in UK government funding and have access to multiple reserved and devolved tax levers, a customs package and bespoke trade and investment support, aiding delivery of plans to Level Up the whole of the UK. The Freeport will support the regeneration of communities in Wales by attracting new businesses, jobs, and investment, as well as growing the Welsh economy.

The Welsh Freeport model closely aligns to the offer set out in England. The Freeport Programme in Wales is based upon 3 main objectives:

• promote regeneration and high-quality job creation
• establish hubs for global trade and investment
• foster an innovative environment

Applications for a Welsh Freeport closed 24 November and 3 bids were received from ports across the country. They will now be jointly assessed by officials from the UK and Welsh governments, and it is expected that the successful site will be announced in early 2023 before becoming operational later in the year.

Freeport in Northern Ireland

The UK government remains committed to exploring how we deliver the benefits of the Freeports programme in Northern Ireland. Engagement with stakeholders from across Northern Ireland is taking place to discuss future opportunities.

Operationalising Freeports

Following the announcement of the 8 successful Freeport locations in England, the UK government and local partners have been working to ensure that Freeports are set up to deliver success. Since the competition phase, successful bidders have transitioned into fully functioning Freeport bodies. At the beginning of the setup phase, with no formal governance or operations in place, Freeport operations were largely carried out by employees from local partners balancing the demands of the Freeport with other priorities. With government support, they have now developed comprehensive structures that have allowed them to produce ambitious plans to utilise the policy levers, confirm tax and customs reliefs in law, and consolidate strong local coalitions.

Setting up Freeport teams

Freeports have been setting up operational teams to help them deliver the Freeport objectives. Partnerships that were originally made to respond to the competition, provided the resource to cover operations, with local authorities and other partners providing personnel to dedicate time to developing Freeports. In recognition of the complex and wide-ranging specialist skills required to deliver Freeports successfully, expert external consultancy support was also sought to bring expertise and build capability in Freeport teams.

To support Freeports to become functional, the Department for Levelling Up, Housing and Communities (DLUHC) has provided a combined total of £8 million in revenue support funding across Freeports to build capacity. This funding, alongside contributions from local partners, has been utilised to recruit core Freeport teams to ensure the staff delivering the policy can devote their full capacity to it.

With recruitment now well underway, Freeports have ensured they have the capacity in place to deliver on the plans they have produced, start projects, and bring investment into their sites. Several high-profile chairs of Freeport governing bodies have been appointed, alongside the permanent leadership teams to oversee the day-to-day running of the Freeport. The funding provided by DLUHC has granted Freeports greater financial certainty and strengthened their organisational positions.

Local partnerships and governance

Effective management and governance structures have been put in place to provide oversight and strategic direction to the Freeport teams. These structures have formalised wide-ranging local partnerships that Freeports have developed. These partnerships have brought together important stakeholders including local government, the private sector, and educational institutions alongside central government backing to deliver for local communities and businesses.

In line with best practice, DLUHC provided Freeports with guidance for transforming the coalitions that took them through the initial competition phase into formal governing bodies. The governing body aims to bring together the best of the private and public partners, alongside voices from across the Freeport geography, to solve shared problems and provide for the region. Each Freeport is required to have a lead local authority member to provide democratic accountability for Freeport activity and the use of public money. Using the guidance as a starting point, Freeports put together processes and bodies to oversee the management of the Freeport.

Governing bodies were convened involving all the relevant local partners, including the port operator, the lead local authority and major landowners within each Freeport location. Each board was also required to appoint a chair with the necessary skills and seniority. These structures ensured that the required range of expertise and local interest was represented at the highest level of decision making. Each board was responsible for inputting and approving decisions as Freeport teams developed their business cases, therefore providing strategic direction that incorporated the breadth of the Freeport coalition.

Freeport partnerships have already started to operationalise their organisations, with many opting to create a company limited by guarantee (for example, Freeport East, Plymouth and South Devon, Solent, and Thames), or a public and private partnership (for example, East Midlands, Humber, Liverpool City Region and Teesside). These bodies are required to adhere to the Nolan principles to ensure transparency and accountability throughout the delivery of a public policy.

Tax sites

In parallel, Freeports have worked closely with the government to designate their tax sites in law so that businesses located on those specific sites, located within a Freeport outer boundary, can access a suite of generous tax reliefs. These reliefs are designed to drive investment into areas which have previously been overlooked. The strategic focus of the Freeport, alongside these incentives will help to build local clusters of business activity which will in turn create jobs and support regeneration in and around the surrounding area.

In addition, 100% of the business rates growth on tax sites above an agreed baseline will be retained locally to be utilised for delivering coherent, place-based Freeport growth. This will be guaranteed for twenty-five years, giving councils the certainty they need to borrow and invest in regeneration and infrastructure to support further growth.

Tax sites sit within an ‘outer boundary’ which sets the limit for how far apart they can be and broadly indicates the area that is expected to benefit most directly from the Freeport’s economic impacts. The area itself does not hold any special planning or regulatory status and Local Authorities within it retain all their statutory powers and responsibilities, including responsibility for providing planning permission.

Following a thorough assessment of the plans by HM Treasury and HM Revenue and Customs (HMRC), 23 tax sites have been designated in law and are open for business. Local Freeport partners are united around a clear vision for each tax site and its role in realising the Freeport’s objectives, formalising this in local site agreements or gateway policies designed to maximise the benefits tax sites deliver for local areas. Controls have also been put in place across sites to prevent displacement of economic activity from elsewhere, ensuring that tax site status will bring about additionality and growth. Summaries of all Freeport tax sites can be found in Annex B.

Customs sites

To ensure Freeports are attractive places to import and export, they have also been working closely with HMRC to secure operators for Freeport customs sites. A Freeport customs site is a secure area in which authorised businesses can make the most of a range of customs benefits including simplified declarations and duty deferment on imported goods. The Customs Site Operator (CSO), who must be authorised by HMRC to Authorised Economic Operator status (AEO(S)) standard, or equivalent, provides physical and Information Technology (IT) infrastructure to control goods entering and leaving their customs site.

A CSO can be either an owner/occupier of the site or they can offer their services to attract new businesses to utilise their infrastructure and access customs benefits. Freeports have been working to attract prospective CSOs to set up in their locality, with support provided by the UK government where appropriate. HMRC have undertaken rigorous assessments of applicants for this status, evaluating the suitability of the businesses as well as the proposed sites themselves. This has ensured that customs sites will be secure. By mid-December 2022, 6 customs sites have been designated, operating in logistics, aerospace, manufacturing, and port activities. Business is already taking place at customs sites, with the first shipment arriving at a Teesside Freeport customs site in September 2022.

Business cases

Alongside the tax and customs site designations, Freeports have developed detailed business cases. This process was designed to ensure Freeports are set up to deliver positive economic and social outcomes.

Going through the business case process enabled Freeports to build on the ambitions set out in their initial bids with comprehensive strategies for meeting each of the policy objectives. Considerable work was needed to put in place clear and specific plans, and to confirm commitments and requirements of local stakeholders to ensure benefits were delivered.

Strategies and plans were put in place to ensure that Freeports’ would create additional economic value rather than displacing it from elsewhere. Business cases outlined how they will utilise the policy levers to attract genuinely new trade and investment, support innovative businesses, and promote levelling up. The government ensured that Freeports focused on sectors and land where there are viability gaps and market failures deterring investment. Focusing the intervention on addressing these blockers to regeneration further builds in the requirement that Freeports will attract additional activity. Tax site management plans were produced with the protection of additionality at the core.

Freeports also undertook extensive economic modelling that demonstrated the anticipated benefits and costs of delivering the intervention. This supplied evidence that Freeports have fully considered the expected impacts of the programme and provided government with confidence that the overall economic benefits of Freeport status can be expected to outweigh the initial costs.

Tax sites and supporting infrastructure will need to be delivered at pace to maximise the appeal of tax reliefs to prospective occupiers. Business cases were therefore used as an opportunity for Freeports to produce thorough project plans that set out how they will deliver sites within the necessary timescales.

To provide the government with confidence in the plans set out by Freeports, DLUHC officials led a thorough appraisal, drawing on The Green Book best practice and including input from specialists across government. All Freeports now have approved outline business cases and have submitted full business cases. The first approved full business cases were announced on 7 December 2022 for Plymouth and South Devon, Solent, and Teesside Freeports. The remaining 5 English Freeports are expected to join these 3 in receiving final approvals shortly, and government remains committed to ensuring all four corners of the UK can reap the benefits of the Freeports programme.

Seed capital funding

Undertaking the business case process also enabled Freeports to determine how best to allocate up to £25 million of seed capital funding. This funding, provided by the UK government, will be used to realise Freeport objectives by facilitating or enhancing the value of the policy levers, for instance by increasing the viability or value proposition of a tax or customs site. Funding will therefore primarily be spent on projects relating to land assembly, site remediation and transport infrastructure. In some cases, funding has also been granted to accentuate innovation or skills programmes, to support local capacity to deliver on these objectives.

Projects funded by seed capital were developed by Freeports to address market failures that meant investment would not materialise otherwise. They will also be deliverable at pace, to ensure they can fully contribute to unlocking the policy levers within the five-year window that tax reliefs can be claimed.

Through the business case process, the government and Freeports worked together to ensure that projects granted seed funding are deliverable, aligned to the requirements of the programme, and managed by comprehensive governance structures that will secure value for money. Producing strong plans for effectively utilising seed funding has ensured Freeports will be set to deliver projects that will maximise the impact of the intervention.

The thorough planning that has gone into seed funded projects, as well as the assurance gained through the business case process, means government is confident that they will contribute to the policy objectives. It is expected the first seed capital payments will be ready for release from February 2023.

Progress on policy objectives

With effective operational teams and comprehensive strategic plans in place, Freeports have been set up to meet the policy objectives. Early impacts have already been made through Freeport activities that will play a part towards levelling up, increasing trade and investment, and creating hotbeds of innovation across the UK.

Establishing national hubs for global trade and investment

Significant progress has been made towards establishing Freeports as national hubs for global trade and investment. Freeports have contributed to the objective of levelling up by encouraging economic activity in areas which have been historically overlooked.

How Freeports contribute to global trade and investment

As part of the business case planning process, Freeports produced trade and investment strategies which outlined the target sectors most appropriate to their local context for attracting innovative companies to invest and creating highly skilled job opportunities for the region. Freeports will build on regional strengths to attract business involved in sectors including advanced logistics, advanced manufacturing, maritime, and the food and drinks market.

Freeports are also committed to supporting the government’s ambitions for the UK to become a global science superpower and the plan to achieve net zero by 2050. To help achieve this Freeports are seeking to attract businesses in sectors such as offshore wind, hydrogen, and renewable energy, where there has been a strong demand for creating decarbonisation within existing industrial clusters.

There is already positive evidence of new investment in Freeports. For example:

Freeport status in Humber has enabled Pensana to secure a multi-million-pound investment to establish Europe’s first rare earth processing hub at Saltend, which is expected to represent 5% of the world market by 2025.

Teesside Freeport is already driving millions of pounds of investment into the area. In July 2022, construction officially began on SeAH Wind Ltd’s multi-million pound offshore wind manufacturing facility at Teesworks. The project expects to create 750 jobs when operational, with a further 1,500 in the supply chain during construction.

Tax site status was an important catalyst for the proposed multi-million-pound investment for the expansion of the existing Maritime Rail Freight Terminal (SRFT) at the EMAGIC Tax Site in the East Midlands Freeport. Additional rail freight capacity as a result of this investment will attract businesses seeking to invest in the region by providing supply chain diversity and resilience via access to maritime ports (including other UK Freeports), as well as adjacent access to East Midlands Airport. Rail freight expansion reduces reliance on HGVs for transport to other parts of the UK and generates significant carbon savings by moving the transport of goods from road to rail.

During the business case process, Freeports also mapped out key investors and put together strategies for engaging with them. There is a strong focus to draw on the existing strengths of their respective region to fill supply chain gaps.

Freeports are already proactively seeking investment from their target sectors, including presenting at industry events, and creating networking opportunities to attract investors. As an example, representatives of the Liverpool City Region Freeport attended the World Free Zones Organisation’s annual conference in June 2022 to showcase the opportunities on offer.

The UK government has placed Freeports at the forefront of the international stage by showcasing them at high-profile international and domestic investor events, including UK’s Real Estate Investment and Infrastructure Forum (UKREIIF) and the Green Trade and Investment Expo (GTIE), which were attended by all Freeports. At GTIE, senior representatives from Plymouth and South Devon and East Midlands Freeports presented a panel session alongside 2 key private investors, providing a great example of how the private and public sector partners are working hand in hand to create better opportunities for local economies.

To further develop investment promotion, a dedicated Freeport page has been integrated into the Department for International Trade’s (now Department for Business and Trade) Great.gov.uk website which will showcase opportunities from across Freeports to international investors. This site gives investors the opportunity to explore the Freeports’ target sectors and strengths to establish the most suitable proposition for them. The ‘enquire now’ tab within the page can also be the first step of some customers’ journey, allowing Department for Business and Trade officials to identify and provide appropriate support to investors throughout the process of investing within a Freeport. All Freeports will have investment enquiry management processes in place and establish resources to guide prospective investors through their proposition.

How Freeports and the Department for Business and Trade work together

The UK government has provided a support package that raises awareness of UK Freeports with investors and highlights opportunities for investment into the Freeports. This offer has focused on supporting Freeports in the development of their trade and investment strategies, as well as providing them with tools to support them in independently pursuing their own lead generation activity and driving regeneration.

The Department for Business and Trade (DBT) is providing Freeports with access to its existing investment and export support services, including hosting workshops with individual Freeports to establish their unique high-potential opportunities which can be promoted both internationally and in the UK. This will form the basis of further promotional activity and marketing collateral which, once completed, will be shared with commercial officers across DBT’s international network to market Freeport opportunities to overseas investors. DBT will continue to support Freeports in targeting and tailoring promotion activities to suit local ambitions and target sectors.

As Freeport mobilisation progresses, DBT will seek to raise the profile of UK Freeports further by continuing to identify and facilitate promotional and networking opportunities, with potential investors and businesses, at a national and international level.

DBT has shared its expertise and experience during the business case process to help shape the Freeports’ trade and investment strategies, in part by drawing out their sectoral focuses and unique value propositions.

While DBT and DLUHC will be on hand to support Freeports with trade and investment promotion throughout the programme, the ultimate goal is to ensure Freeports are set up to attract investment and grow international trade independently. The work undertaken to date has set Freeports up to lead on delivering against these ambitions as they move into the next phase of delivery and as teams are mobilised within each Freeport to deliver their individual trade and investment strategies.

Creating hotbeds of innovation

Freeports will also create hotbeds of innovation by focusing public and private investment into research and development and helping businesses to collaborate, innovate, and develop the technologies and supply chains that will underpin the journey to net zero.

How Freeports are delivering on innovation and net zero

Freeports have developed ambitious plans to innovate and drive the government’s target to reach net zero by 2050. Through the initial stages of delivery of these strategies, Freeports have already begun to deliver on their potential to become drivers of innovation and net zero.

For example, Teesside Freeport has taken the initiative on innovation in digital trade by joining up with the International Chambers of Commerce, the Institute of Export, Teesside University, and a number of other partners to fund the establishment in Teesside of the Centre for Digital Trade and Innovation. While it is in Teesside, this is a national resource and its work should include and be shared with the whole trading and logistics community in the UK, in other Freeports and indeed across the UK economy. Basing its work on real life practical pilot work, it is intended to create the pre-competitive environment that does not currently exist in which traders, government, academics, and tech suppliers can get together to test how new technology, data models and systems that interoperate with those in other jurisdictions can not only provide commercial benefits to the trading community but deliver on government priorities on net zero, UK competitiveness and growth. The Centre has ambitious plans to develop its understanding and deployment of new technology such as Distributed Ledger Technology (DLT), Internet of Things (IoT), Artificial Intelligence (AI) and smart contracts and provide the thought digital and practical leadership that can enable the UK to play a global leadership role in digital trade.

In addition, East Midlands Freeport, building on its public and private sector partnership, and using part of its £25 million of seed capital funding, has developed plans for a Hydrogen Skills Academy. The Hydrogen Skills Academy, backed by Loughborough, Nottingham, and Derby universities, is expected to open in November 2023. It complements a series of innovative hydrogen projects being taken forward by the region’s Hydrogen Task Force and will be the UK’s first practical, industry-based training centre associated with the production, handling, storage, and use of hydrogen, helping put the East Midlands at the forefront of the UK’s net zero transition.

Liverpool City Region Freeport has embraced the government’s Future of Freight and Smart Borders programmes which will deliver the framework for net zero innovation in key Freeport sectors and forms part of the Freeport’s Skills Academy.

Another example is the Solent Freeport which will be using part of its seed capital funding to deliver the Solent Maritime Innovation Hub to promote and champion the excellence of the Solent maritime sector and provide collaborative space for industry, academia, and research organisation. As it stands, the Solent Maritime sector currently has no focal point in which to bring the sector together to share best practice, collaborate, host international investors, network and innovate, and to showcase the region’s global maritime excellence. Equivalent facilities exist within many of the other leading maritime clusters internationally, and so the Solent is currently at a disadvantage in this respect. The seed funding will be complemented by further Solent Local Enterprise Partnership (LEP) funding (which is approved and secured by the LEP Board) and the delivery lead will be its subsidiary Maritime UK Solent. This project is programmed to commence by Spring 2023, with initial occupation estimated from Summer 2023.

Solent Freeport is also a founding member of Solent Cluster, which aims to embrace future fuel technologies as a reliable alternative in a wide variety of industries and sectors. In becoming a leading centre for low carbon investment, it can grow the regional economy, protect skilled jobs, and create new employment opportunities in the technologies and industries of tomorrow, while significantly reducing carbon emissions.

Other examples of the work being undertaken include:

• the development of an innovation and skills centre by Freeport East at their Gateway 14 tax site
• the development of the Solent Freeport Maritime Innovation Hub which will operate in the expanded Solent Growth Hub and draw upon the range of existing support and incubators across the region within universities, research assets
• the Humber Freeport Innovation Hub which is an umbrella project that will be able to flex and support development of innovation connected to the Freeport business base, and local authorities
• the development of a Green Mobility Project at Thames Freeport, working on establishing a renewable multi-fuel, multi-modal and multi-user hub as well as new river freight routes on the Thames.

Freeports Innovation Network (FIN)

The FIN is a collaboration vehicle for Freeports to shape and orchestrate their innovation activity as a collective. Established by Connected Places Catapult and Innovate UK Knowledge Transfer Network (KTN), FIN is intended to accelerate practical action on priority innovation themes, reduce the risk of duplication of spend / effort and market distortion, and empower Freeport leaders to engage effectively with the UK innovation ecosystem.

The FIN is taking a ‘bottom up’ development approach, shaping a work programme in dialogue with the Freeports.

The key purpose of the FIN is to:

• identify and organise around the innovation needs required to deliver on operational objectives and ambitions of the Freeports – covering operational, built asset development and product/business services and products innovation growth activities
• build engagement, momentum, and collaboration across key stakeholders to address identified challenges
• connect national and regional activity to encourage the distribution of knowledge, resources and economic activity and encourage and support collaboration between Freeports, sharing resources, knowledge and physical space as required
• actively pursue public and private investment in innovation activities, by sharing best practice and leveraging individual Freeport initiatives to maximise investment and impact potential
• providing opportunities to leverage collective bargaining power, including seeking policy and investment opportunities through the UKs multi-modal ports, connected logistics, maritime and air, including supporting spending reviews in government
• undertake horizon scanning, mapping and intelligence gathering to identify future innovation opportunities and challenges
• support wider stakeholder engagement activities
• provide feedback on and support to wider government innovation offer to Freeports to optimise the impact of investments and programmes

Government support

The UK government is supporting Freeports to achieve their innovation and net zero potential through a support package that has been developed by DLUHC and Department for Business Energy and Industrial Strategy (BEIS). This support package has been tailored to provide for each Freeport’s specific ambitions and local context. The government will continue to proactively engage with Freeports as they iterate their innovation strategies over the course of the programme, and as they implement the activities contained within them.

The support package includes the Freeport Regulation Engagement Network (FREN) which helps Freeports overcome regulatory barriers to innovation.

Freeport Regulatory Engagement Network

The FREN is a network of Freeports and regulators, facilitated by BEIS. It helps businesses in Freeports to overcome the regulatory challenges of developing, testing, and applying new ideas and technologies. It exists to promote opportunities for innovation and to reduce the burden of regulation.

The FREN benefits Freeports by:

• enabling direct and early engagement between businesses, Freeports and regulators to discuss challenges and areas of opportunity
• sharing best practices and lessons learned on enabling innovation through regulation across Freeports
• providing support on regulatory issues, by sharing guidance and existing best practices, therefore, reducing bureaucracy and uncertainty
• where appropriate, helping regulators to establish new regulatory flexibilities to promote the development of new technologies

In addition, the FREN benefits regulators by:

• enabling direct engagement with Freeports and businesses to gather industry expertise on existing and potential regulatory issues inhibiting innovation
• facilitating discussion to identify opportunities for refining existing processes and exploring regulatory flexibilities when considered a benefit to drive innovation
• helping to streamline information and provide clarity on the existing regulatory landscape and practices relevant to businesses operating within Freeports
• sharing best practices and lessons learned on enabling innovation through regulation across regulators

Plymouth Autonomous Maritime Vessels Regulatory Challenge

DBT has identified the Plymouth and South Devon Freeport area as a High Potential Opportunity (HPO) area for Marine Autonomy. With the additional regulatory push of net zero by 2050 and the requirement innovation in clean propulsion.

The FREN ran a pilot project in the Plymouth and South Devon Freeport. The Freeport identified a regulatory barrier for innovation in Maritime Autonomy and hydrogen fuel cells. This project, with the Freeport and regulator driving the actions, focused on regulatory approaches to maritime autonomy innovations and testing more broadly. The FREN’s engagement with businesses found that innovators couldn’t test their vessels and therefore was not able to provide the relevant data required by the regulator to prove the vessels were safe. This meant that innovators were unable to test their products in UK waters and were forced to go overseas.

The FREN engaged with the Freeport and regulator to better understand the issue and to find out what was already being done to help innovative businesses in this area and to encourage a pragmatic approach. Engaging with businesses to understand the specific regulatory barriers they’re facing the FREN took a series of steps in order to address the challenges identified. Further to setting up a workshop on maritime autonomy in Plymouth to discuss the challenges identified, the FREN facilitated post-workshop discussions between the Freeport and the Marine Coastguard Authority (MCA) proposing a series of solutions that can be brought forward.

Enabling direct and early engagement to discuss challenges and areas of opportunity, bringing in insights and perspectives from across the network, the Freeport and the MCA took into consideration potential options to start addressing the identified barriers and bring this project forward. This resulted in Plymouth and South Devon Freeport and the Marine and Coastguard Agency to partner with Plymouth City Council, the University of Plymouth, the University of Exeter, and Plymouth Marine Laboratory to apply and successfully secure nearly £850,000 award from the Regulators’ Pioneer Fund. The funds will be used to develop an evidence base and a framework for testing autonomous and prototype vessels for research & development (R&D). This will allow UK innovators and businesses to take a leadership role in testing new and emerging technologies.

The Centre for Future Clean Mobility in the University of Exeter is also driving innovation in regulatory support towards net zero by 2050 and in clean maritime propulsion. Partner at the Regulators’ Pioneer Fund project, it focuses on regulatory approaches to clean propulsions.

FREN next steps

The FREN has taken a top-down and bottom-up approach in its pilot phase, including hosting broad topic thematic workshops and carrying out test-case projects focusing on specifics regulatory barriers to innovation. This has and is contributing to the iterative and dynamic development of the FREN offer. This pilot phase allowed the FREN to test approaches and resource through engaging with Freeports, regulators and businesses. The lessons learnt from the pilot phase have informed the FREN offer which will be launched in 2023.

Promoting regeneration and Levelling Up

Freeport sites have been identified as having the potential for business growth that require further investment in their physical regeneration to make them attractive for businesses to invest in. In addition to the up to £25 million of seed capital the government has allocated, Freeports will also be able to retain business rate growth for twenty-five years, worth an estimated £3 billion, which will be used to support projects. Some examples of existing or planned infrastructure which are planned to be supported by the retained business rates include:

• transport infrastructure at Ratcliffe South that upgrades the existing access site from both east (West Leake Lane) and west (Parkway Junction A453) via localised road widening and roundabout enhancements.
• the clearance and preparation of land at the former SSI Steel Works on Teesside
• land acquisition and developing infrastructure at Langage, as part of the Plymouth and South Devon Freeport
• an automated vehicle route from Thames Wholesale Markets to Central London and plans to establish river freight routes, supporting the decongestion of the region and decarbonisation of logistics
• supporting the development of a Strategic Rail Freight Interchange at the Parkside East site in the Liverpool City Region

Skills

Successful regeneration of an area is dependent on ensuring local people have the skills to access suitably paid work. If an area does not have access to a workforce which has the skills required by a business, it is less likely to invest. If the business does locate there, it will have to recruit outside of the region, which will reduce the economic opportunities for the area. Therefore, to bring long-term prosperity to Freeport regions, local people must be provided with the tools they need to make the most of the opportunities around them and secure sustainable jobs.

Freeports have developed skills and workforce strategies as part of their full business cases Freeports will be regularly reviewing the strategies to ensure they are delivering as intended and updating them as needed to ensure they remain relevant for the challenges they face. The Freeports have set out a selection of plans to aid levelling up and regeneration in their regions. These plans include developing talent pipelines related to green schemes, promoting apprenticeships, and supporting training across SME growth skills. Some examples include:

• Freeport East will be ensuring inclusive and equal access to Freeport jobs by positively enabling recruitment of ex-offenders, long-term unemployed people, and care-leavers, supporting Freeport employers to become Disability Confident as well as working through existing and new skills centres and institutes to facilitate a future workforce is available to support industries of the future.
• East Midlands Freeport aim to increase the volume of highly skilled jobs and training in the region and help reduce the skills gap to provide lasting employment and productivity in the area. This includes the development of their Hydrogen Skills Academy, which will upskill local people with practical, industry-based skills.
• Humber Freeport will utilise part of their Freeport retained business rates to create a dedicated Freeport Skills Fund which can be used to bring forward dedicated Freeport skills projects within the Humber
• Liverpool City Region Freeport, through the establishment of their Freeport Skills Academy, will assist Not in Employment, Education or Training (NEET) individuals into clearly defined career pathways and or education. It will also look to work with third sector organisations to secure roles for other disadvantaged persons within local communities, including exploring opportunities to levy fiscal support from adult education budget/skills bootcamp funding and other existing streams
• Plymouth and South Devon Freeport will implement an escalator model to ensure entry-level access to Freeport jobs, as well as higher-level entry points, with clearly defined opportunities for upskilling and career progression
• Solent Freeport, through the creation of the Solent Freeport Green Growth Institute, will pioneer green growth skills and innovation, playing a major role in developing a pipeline of high-tech talent and skills
• Teesside Freeport will increase the number of Tees Valley residents attaining Level 3 skills in the areas of digital and technology, advanced manufacturing, and green jobs through further developing work on the Lifetime Skills Guarantee programme
• Thames Freeport is implementing a targeted programme of work in disadvantaged communities to boost skills where inequality has previously held back opportunities for jobs and access to work, working with local schools and the voluntary sector. Key initiatives also include the establishment of a multi-million pound Skills Fund and a Skills Accelerator to develop and upskill the local workforce

The regeneration and levelling up potential of Freeports will create widespread opportunities for employment of local people in deprived areas. According to Freeport estimates (some of which were made in early 2022), they will contribute to creating the following number of direct and indirect jobs:

• Freeport East – 11,350 direct
• East Midlands – 28,900 direct
• Humber – 7,500 direct
• Liverpool City Region – 10,628 direct
• Plymouth and South Devon – 3,584 gross direct
• Solent – 15,062 direct
• Teesside – 41,780 direct
• Thames – 12,478 direct
• Estimated 82,597 indirect across all 8 Freeports

These forecasts will be monitored through government’s on-going monitoring of Freeports and reported against in future reports. A baselining exercise is due to take place in early 2023, in which the Freeports’ own estimates may be revised to ensure consistency of methodology for the monitoring and evaluation (M&E) programme.

Regeneration

Freeports have worked alongside the government to maximise the potential of enabling infrastructure work that will unlock access to key Freeport sites. The government has offered its expertise and support to enable Freeports to be ready to deliver plans to unlock underdeveloped sites. Wider regions beyond the Freeports programme will benefit from these plans, for example, where Freeport levers are concentrated on transport improvements that will improve local connectivity and help level up entire communities by making travel to work easier, which will in turn widen the range of job opportunities available.

Business Rates

Business Rates Relief and Business Rates Retention are considered a major source of funding to both businesses (through the relief) and the Freeports and their local authorities. Retention is estimated to be worth about £3 billion over twenty-five years, which provides businesses and local authorities with the certainty needed to plan both long-term and short-term projects. Retained funds go further than just regeneration and can be invested in a range of both infrastructure and local programmes aligned with Freeport objectives within the Freeport geography and wider Travel to Work Area.

Freeport plans for retained business rates are encompassed by the 3 key objectives of the Freeport model. Establishing Freeports as national hubs for global trade and investment, creating hotbeds for innovation and promoting regeneration. Proposed plans for retained business rates include:

Teesside Freeport plans to use retained rates to be a national hub for global trade and investment in 3 key sectors: Clean Energy including Offshore Wind; Chemicals and Materials Processing; Bio Life Sciences. It will create hotbeds for innovation by focusing on private and public sector investment in research and development to create a Net Zero Cluster. As well as the creation of high-skilled jobs in ports linked to the areas around them, funding can be used for regeneration in the local economy, providing improvements to places and supporting people with skills required to access new jobs.

East Midlands Freeport has plans to focus their retained business rates spend on transport and connectivity challenges to unlock connectivity in the region. Turbocharging and stimulating innovation across the region to accelerate new and existing interventions, working with regional partners to design a series of funds, interventions, and accelerator programmes. Retained rates will be utilised to generate high-value specialist jobs and workforce transition through the delivery of skills interventions that would enable the regional labour market to grow and evolve into the next generation of products, services, and technology.

Plymouth and South Devon Freeport has plans to focus their retained business rates spend on 3 key workstreams, skills, innovation and net zero projects. Working with businesses to set-up sector specific bootcamps to upskill the workforce in the region. Plans to use retained rates to deliver an innovation strategy with a focus on developing a Smart Port, unlocking Offshore Wind and Supply Chain development opportunities. Developing and delivering a range of low carbon solutions to decrease carbon emissions in accordance with the net zero strategy.

Freeport East plans to use their retained business rates to incentivise business activity aligned with Freeport objectives and build strong, collaborative partnerships that position Freeport East as a partner of choice for innovation in service delivery and business investment, in sectors such as green energy, digital technology and trade. Simultaneously they will apply retained rates to tackle inequalities in access to opportunity, for example strengthening skills support and connectivity to ensure Freeport East inspires local communities across the wider economic area to maximise the potential that Freeport status brings.

Liverpool City Region Freeport and its partner billing authorities (St Helens Council, Wirral Borough Council, and Halton Borough Council) will focus retained rates investment in a combination of initiatives that accelerate tax site delivery by addressing infrastructure needs, site abnormal costs (brownfield land development) and viability issues. Investment of retained rates will be managed by the billing authorities locally, working collaboratively with the Freeport Management Board.

As well as explaining how Freeports intend to use retained business rates within their business cases, each Freeport has agreed in a memorandum of understanding (MoU) with government that they will be used to serve Freeport policy objectives. The government has also requested that Freeports provide a detailed business rates investment strategy following full business case approval, the strategy will ensure the government has the strongest level of confidence that this high potential policy lever is utilised effectively to promote regeneration and levelling up.

Government delivery and support

While Freeports are accountable for the delivery, implementation, and on-going management of their Freeport, government is supporting them to maximise their potential as they implement their plans. As a highly novel and wide-ranging intervention, cross government expertise and co-ordination is crucial to provide Freeports with the necessary capacity and capability to deliver successfully.

DLUHC Freeports Delivery Team

As Freeports have been setting up their operations, government has supported them by providing expertise in developing strategic visions and making them a reality. The Freeports programme is led by the UK Freeports Delivery Team (Delivery Team) in the DLUHC. The Delivery Team is responsible for working with Freeport partners, the wider Department, and across government to ensure that Freeports can optimise the full range of government backing available to them to prosper and fulfil the policy objectives.

To date, the Delivery Team’s main role has been direct relationship management with Freeports, as well as working on allocation, assurance, and support. This includes the competitive process for selecting Freeport locations in England that DLUHC ran from November 2020 to March 2021 and the setup phase those locations have been working through since, developing their Outline and Full Business Cases and securing the necessary designations in law.

DLUHC relationship leads

Each Freeport has been assigned a DLUHC relationship lead (Freeport Lead). They act as the link between the Freeport and the government. The purpose of this role is to support each Freeport through delivery and maximise the benefits of the programme by developing a collaborative working approach between the UK government and Freeports.

Programme governance

The government has set up comprehensive governance and delivery structures to ensure the programme is carried out effectively and accountably. Governance structures and groups have been set up that incorporate the wide range of expertise necessary for successful implementation of the intervention.

For the setup phase, structures ensured cross-government responsibility for programme policy development, business case development support, appraisal, and approval. This was overseen by a working level Delivery Group, which reported to a senior led Strategy Board. Each government department retained autonomy over the aspects of Freeport delivery for which they were accountable for but were responsible for keeping the Strategy Board informed and updated on progress and risk.

Moving into the delivery phase, programme governance will be overseen by the UK Freeports Programme Board which provides strategic oversight and direction of the UK Freeports Programme, ensuring cross-departmental accountability and alignment on Programme delivery, including between Freeports and other relevant policy areas. The government has also set up a Freeports Security Forum (FSF) which acts as an advisory body to the programme, made up of members from across the UK government border security and law enforcement community.

The Infrastructure and Projects Authority (IPA) includes Freeports on its Major Projects Portfolio, meaning that the programme is subject to a higher level of scrutiny. The IPA provides expert project delivery advice, support and assurance to government departments and works with industry to ensure projects are delivered efficiently and effectively, and to improve performance over time. The programme will have ongoing IPA assurance reviews throughout its duration, with the next one planned for Spring 2023, ensuring that this high level of scrutiny will continue to be applied to government’s management of the programme.

Government support

The Delivery Team co-ordinates the cross-cutting government support offer to Freeports. Dedicated Freeport teams are in place across government departments. Specialist officials lead on both innovation and net zero in BEIS, on tax and customs in both HMRC and HM Treasury, and bespoke trade and investment advice and on promoting the Freeport opportunity in DIT. Having resource in place devoted to each of these policy levers ensures expert support for Freeports is always on hand across government.

Throughout the setup phase, government support has been primarily focused on development of strategic plans and increasing capacity in Freeports.

• DIT (now Department for Business and Trade) has provided expertise on international trade and export services, providing strategic advice in developing Freeports’ trade and investment promotion strategies.
• HMT Treasury assisted Freeports in setting out tax site boundaries and delivery plans.
• HMRC has a Stakeholder Engagement team which has direct relationship management with all Freeport operators. HMRC hold regular calls with potential customs site operators around designation to help them navigate the application process. It has also organised support for Freeports in attracting and landing new customs site operators and businesses by developing additional guidance and information packs, sharing best practices, and engaging with representative bodies
• BEIS has regularly engaged with Freeports to provide support and guidance in developing strategies for both innovation and net zero

As the delivery phase advances, government support will transition to an increased focus on understanding and demonstrating the impact Freeports are having and using this to further improve delivery of the policy. In parallel, government support will move from the focus of developing plans and governance structures to providing advice and assistance in the delivery of the interventions themselves. This will be built on a collaborative approach to working with Freeports, with the aim of maximising delivery and managing or mitigating risks or issues.

The rationale for shifting focus to these areas centre on achieving 3 key goals:

• holding Freeports and government to account for delivering on the ambitious commitments in FBCs and deliver Levelling Up
• supporting Freeports to deliver, with joined-up advice and investment from HMG on investment promotion, innovation, regeneration, and infrastructure.
• maximising the impact of Freeports, looking to evolve the offer and provide further investment and policy levers where there is a strong strategic case

To adapt to this new phase of the programme, the Delivery Team has restructured to include specialised workstreams for each of the policy objectives, as well as for programme management, M&E, and site delivery.

Senior engagement

The UK government and Freeports engage regularly at a high level. Senior officials from government provide a platform for a single conversation between Freeport management staff, industry, and government. This also includes co-ordination across Freeports to offer an opportunity to promote learning and sharing of best practice, identify common issues or barriers to delivery, and feed into ongoing development of the Freeport model.

Freeports in Scotland, Wales, and Northern Ireland

As English Freeports move into the delivery phase, the UK government continues to work in collaboration with the Scottish Government, Welsh Government and Northern Ireland Executive to support the bidding and setup phases of Freeports in each of the devolved governments. The UK government will work with their counterparts in Scotland, Wales, and Northern Ireland to support the successful bidders in developing their outline and full business cases to mobilise Freeports across the UK.

The Freeports Hub

To supplement the UK government’s offering to Freeports, DLUHC procured external support to provide additional technical assistance (‘The Freeports Hub’). This is a consortium led by PA Consulting, partnering with WSP and special economic zone experts Locus Economica. The Freeports Hub is a resource available to all Freeports and to the government to provide wide-ranging and highly specialist advice and expert support where necessary.

External support was brought in to support UK government and Freeports in recognition of the fact that additional expertise was needed to address the novel and complex nature of the policy. There is significant potential to learn lessons from international Special Economic Zone (SEZ) best practice that the Freeports’ Hub provides. In addition, the most effective support offer for the setup phase could only be provided at the necessary pace by taking advantage of the mature and innovative services offered by external providers.

The Freeports Hub provides technical advisory support, as needed, in many areas of specialism by increasing local capacity through the provision of strategic advice, shared learning/resources, and programme delivery support to Freeports.

Specific activities carried out by the Freeports Hub to date include:

• working hand in hand with various Freeports to accelerate the development and approval of Outline Business Cases and Full Business Cases
• customs specialists within the Hub worked with HMRC to react to feedback being received from Freeports to support the development of a guide to support more businesses to take advantage of the customs operator offer
• created a tax benefit modeller tool to support Freeports in calculating tax reliefs to support their business development promotion activities
• created detailed reports on specific subjects to enhance knowledge and market research for Freeports.
• helped Freeports develop strategies critical to achieving policy objectives.
• a small team from the Freeport Hub provided intensive troubleshooting support to a Freeport to enable them to submit their Outline Business Case to time
• each Freeport also has a dedicated relationship lead from the Freeports Hub, who supplements the technical expertise offered by the Freeport Lead.

The Freeports Hub will continue to adapt to meeting the changing demands and priorities of the programme to ensure local capacity is built in the most appropriate and necessary areas as Freeports move into the delivery phase. This will include greater focus on thematic areas such as skills, innovation, and net zero, as well sharing expertise in site delivery. In addition, they will expand their remit to include support to the devolved governments as they go through bidding and business case processes, and proactively managing customs support against potential demand.

Monitoring

To maximise ongoing learning during delivery of the programme, the government will monitor Freeports’ progress to understand how interventions are being implemented and to identify any barriers preventing successful delivery. This will ensure specialist and technical support can be provided where needed, with the aim of mitigating any risks or issues. The insights gained through monitoring will create learning that in turn will be used to inform the delivery of the programme and other public policy interventions.

Freeports are required to report quarterly on the progress of their sites and seed capital projects which includes providing data on the expenditure of public money, the status of sites and projects, risks, and delivery milestones. This will be complemented by regular site visits that will monitor on-site delivery first hand to provide government with confidence that plans are being implemented successfully.

On-going monitoring will be assisted by data collection to ensure accountability of public money and policy delivery, as well as feeding into programme level evaluations. Twice a year Freeports are also required to report on a core list of input and output M&E indicators which cover key themes such as business and job creation; regeneration and infrastructure; trade and investment; skills and education; innovation and collaboration and net zero. Freeports are only required to report on indicators that can only be collected at the Freeport level, with most of the data being collected from national statistics and other data sets.

Evaluation

Drawing on the ongoing monitoring, the UK government will also carry out a process, impact, and value for money evaluation to understand the impact of this new programme and maximise learning. As a novel policy, evaluation is key to understanding the impact to learn lessons that can feed into future initiatives. As a package of policy levers, it is important to know how they combine in different settings with different local actors, to help places level up.

A comprehensive evaluation will also provide insight into the risk of displacement. By rigorously examining the net benefits of the Freeport intervention and closely tracing the processes involved, government will understand how and if additionality has been brought about.

To ensure the evaluation draws on best practice from sectors where evaluation is more rigorous and institutionalised, the government procured specialist external M&E providers. The Freeports M&E provider is a consortium of 6 firms led by Arup, also including Technopolis, Cambridge Econometrics, Grant Thornton, Port Centric Logistics Partners, and the Institute for Fiscal Studies. The M&E provider has been working alongside government partners in designing a comprehensive M&E approach, as well as providing technical support for Freeports in undertaking requirements.

UK government published a high-level summary of the approach to Monitoring & Evaluation in April. This M&E strategy has been further developed into a full detailed M&E framework. This has been put together with input from across UK government and the M&E provider. It will remain live and iterative over the course of the programme, being updated to reflect progress. An executive summary of the framework is attached at Annex C.

The approach to M&E is underpinned by a Theory of Change that identifies the inputs, outputs, outcomes and impacts of the programme, and the causal links between them. These links will be tested through a mixed-method evaluation, combining theory-based and quasi-experimental models. This will fully capture the varied nature of the levers involved in the Freeports intervention and fully assess the additionality of the programme, in line with the recommendations in The Magenta Book.

Early outputs of M&E

As well as the development of the framework that will guide M&E over the course of the programme, work has begun on some of the early outputs. Baseline data was collected in October and November 2022, which is needed so that future M&E data can be compared to the commencement of Freeports to show their impact.

The initial stages of the first process evaluation have also taken place, with research undertaken relating to the application and set up phases of the programme. The aims of the process evaluation are to analyse aspects related to how the intervention works in practice. Through interviews with stakeholders from UK government, Freeports, local authorities and other relevant groups, findings have been gathered on the effectiveness of how the bidding and assessment for Freeport status took place, as well as the development of Business Cases. Interviews for these phases have now been completed, and following a thorough analysis of results, will be fed back into the delivery of the programme and wider policy development.

Due to the infancy of the programme, data collection has been light touch and focused on establishing the baseline. In future years, UK government will publish the findings from data collected through M&E through future editions of this annual report to provide a full picture of Freeports’ progress.

Assurance

To ensure accountability and transparency in the use of public money, DLUHC has developed a comprehensive assurance process for the programme. The approach to assurance seeks to secure the principles of managing public money, namely regularity, propriety, value, and feasibility.

The UK government’s functional standards for grants will be complied with in full. These standards state that assurance should use at least 3 different and defined defence levels, each responsible for safeguarding public funds. For the Freeports programme, these are as follows:

• lead local authority Chief Financial Officer – provides oversight of the proper administration of financial affairs at the Freeport
• DLUHC Assurance and Compliance Team – reviews Freeport activities, tests that first line assurance is operating effectively, and provides scrutiny of the technically complex areas of procurement, counter fraud, and subsidy control
• Government Internal Audit Agency – provides independent audit of the design and operation of controls within the assurance of Freeports

The UK government will carry out a range of activities to gain assurance that each Freeport is operating within the principles of managing public money, including that each Freeport can demonstrate transparent and effective governance arrangements and robust financial controls which protect public funds. These are detailed in the Freeports Framework (see below).

Annual reviews for each Freeport will provide a holistic understanding of delivery progress, to ensure lessons are learned and integrated in Freeports’ and government plans, as well as provide assurance to enable the future release of benefits. This ensures accountability for the taxpayer but will also benefit the Freeport by highlighting areas where further central government support can be provided to resolve problems. The annual process will be supplemented by additional risk-based assurance activities.

Security

To ensure necessary attention and planning has taken place around security of sites, Freeports have all committed to honouring the obligations set out in the OECD Code of Conduct for Clean Free Trade Zones and the UK’s Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

In addition, Freeports have engaged with local security stakeholders to produce security and illicit activity risk assessments. Security mechanisms have also been established for each Freeport, in which all relevant local security stakeholders meet regularly throughout delivery to review the risk assessment and maintain oversight of current measures in light of Freeport status. UK government national security stakeholders have formed the FSF. Members of the FSF thoroughly reviewed all risk assessments and the plans for subcommittees. FBC approval was conditional on the FSF being satisfied with their submissions.

Freeports are also required to carry out an annual audit of security which will build upon the commitments made in Freeports’ FBCs and will ensure the structures Freeports have put in place remain effective and responsive in managing existing, new, or emerging security risks. The audit will also allow Freeports to put forward recommendations to inform security policy at a national level. The FSF will review all Freeports’ security audits, to provide government with ongoing assurance that Freeports are actively managing potential security and illicit activity risks. The FSF can also provide recommendations to Freeports to strengthen their local security apparatuses.

Memorandum of Understanding and Freeports Framework

The collaborative approach to working between Freeports and UK government will be underpinned by an MoU signed by DLUHC, the Freeport governing body, the lead local authority, and the local authorities responsible for the collection of business rates in designated tax sites. It will articulate a mutual understanding of expectations including:

• accountability and governance
• financial arrangements
• Freeport delivery
• strategic delivery
• performance management, assurance, and evaluation
• ongoing management

Release of funding and other benefits will depend on performance against financial expectations and delivery milestones as agreed in the MoU, as well as completion of satisfactory assurance. By formalising a shared understanding between Freeports and government on how best to fulfil the policy objectives, the expectations agreed through the MoU reflect the government’s key aim of protecting additionality and ensuring the policy does not displace economic activity from elsewhere.

Alongside the MoUs, the government has produced a performance management, assurance, and security framework document known as the Freeports Framework. It sets out what is expected of local authorities and Freeport governing bodies in receipt of government funding and other support to provide UK government, stakeholders, and the public, with assurance that Freeports will be subject to vigorous stewardship and their benefits will be fully realised.

By agreeing to abide by these 2 documents, UK government and Freeports provide confidence in the accountability, transparency, and collaborative approach of the programme. The role of the MoU has been highly effective in managing Freeports objectives and cross government collaboration.

Acting on non-compliance and non-delivery

If any issues arise with the delivery of the programme, the first course of action will be to engage with Freeports to find out where additional support can be provided to resolve it. The government and Freeports will work together to produce an action plan setting out how performance can be improved within a set timeframe, drawing in wider support from across government or the Freeports Hub where appropriate.

However, the UK government reserves the right to intervene if a Freeport underperforms, becomes non-compliant with regulations, presents security risks, or cannot demonstrate robust stewardship of public money. The government reserves the right to withhold or remove access to Freeport policy benefits where there is continued non-compliance and non-delivery without an adequate reason. The principles behind this management of non-compliance and poor performance have been agreed through the MoU and Freeports Framework and will secure public accountability for the delivery of a public policy.

Appendix A – Overview of English Freeports

East Midlands Freeport

As the UK’s only inland Freeport is uniquely placed to capitalise and innovate on the region’s unrivalled commercial and industrial strengths. Its central location, combined with its proximity to the M1 and the Strategic Road Network, put 91% of the UK population within a four-hour drive, and its airport connectivity, with East Midlands airport as the UK’s largest express freight airport, provides rapid access to global markets for importers and exporters. Complementing this, direct rail connections to all coastal freeports make EMF an airport-connected axis, offering unique benefit to the wider freeports regime.

East Midlands Freeport has spearheaded the development of the Hydrogen Skills Academy, a public-private sector collaboration. They work with businesses and further and higher educational parties to provide the skills needed to support the hydrogen economy in the region.

Freeport East (Felixstowe and Harwich)

Freeport East is a world-leading centre for clean energy production, offering a unique set of opportunities and support for investors, traders, manufacturers and suppliers.

It encompasses Britain’s biggest container port and busiest railhead, 2 major ferry terminals, the UK’s leading telecommunications R&D facility and is part of the UK’s East Coast Green Energy cluster. The Freeport also benefits from strengths in areas such as renewable energy and green fuels, agri-tech, logistics and quality of life.

Humber Freeport

Humber Freeport builds on the region’s existing strengths in renewable energy, clean growth, and advanced manufacturing, offering excellent connectivity to the UK’s manufacturing supply chain. Home to the UK’s busiest port complex, the Humber Ports play a vital strategic role for the UK as a global trade gateway.

Liverpool City Region Freeport

The Liverpool City Region Freeport is a multi-modal Freeport driving growth in the UK’s advanced manufacturing, biomanufacturing, logistics, and low-carbon industries.

Liverpool, as the country’s leading transatlantic port, is a prime Freeport location. It handles 45% of the UK’s trade from the United States and is the UK’s biggest western-facing port. The Freeport tax sites which include several existing rail terminals and water accessible locations are the largest strategic employment sites in the city region and are capable of expanding the region’s logistics and manufacturing capability.

Plymouth and South Devon Freeport

Plymouth and South Devon Freeport provides the opportunity to harness the region’s unique national capabilities in marine, defence, and space, and join a globally impactful innovation cluster.

As Britain’s Ocean City, Plymouth has a natural harbour and direct deep-water access to the English Channel and the Atlantic Ocean. The city and the surrounding local area are also ideally located for accessing European and global markets.

Solent Freeport

The Solent’s geographical location makes it Global Britain’s most important gateway, offering unrivalled connectivity through direct highway and rail links to the key manufacturing areas in the Midlands and the Northern powerhouse and international connections through an airport and its 3 ports. The Solent Freeport will provide the investment incentives to unlock more than £1.35 billion in private sector investment directly within the Solent Freeport area and attract and grow businesses that build on the existing strengths of the Solent region and support regional and national strategies. It will also develop new markets and add significant additional capacity to one of the UK’s most important port clusters. The key sector propositions and target markets in the Freeport include port activities and logistics, marine manufacturing and technology, advanced manufacturing, and green energy and decarbonisation.

Teesside Freeport

Located in the north-east of England, Teesside Freeport is Britain’s best connected trade region, unlocking global markets, major trade hubs and offshore projects via air, sea, rail, and road. As well as being amongst Britain’s biggest chemical clusters, the area boasts existing specialisms including offshore energy, engineering and biomanufacturing; with the skills and workforce to match.

Thames Freeport

As a gateway to London, Thames Freeport’s ports represent vitally strategic connectors of global trade for container, bulk, and ro-ro cargoes. It is an efficient multi-modal logistics and manufacturing hub, ideally located next to major population centres in Europe’s biggest consumer market and resurgent industrial cluster.

Appendix B – English Freeport Tax Sites

Freeport tax sites maps

East Midlands

The Ratcliffe-on-Soar Power Station site redevelopment is creating a zero-carbon technology and energy hub for the East Midlands, helping to meet the region’s decarbonisation goals. The site is a 273-hectare redevelopment opportunity with the majority of this located within the Freeport tax site boundary. Focused on low-carbon energy and advanced manufacturing, this site offers significant long-term, bespoke investment opportunities.

EMAGIC is home to the East Midlands Airport, the UK’s largest freight airport handling 350,000 tonnes of cargo per year. EMAGIC includes plots on SEGRO Logistics Park East Midlands Gateway, including access to a 50-acre Strategic Rail Freight Interchange and freight terminal, operated by Maritime. This site is capable of handling up to 16 775m-freight trains per day. EMAGIC, with its unrivalled connectivity, is focussed on further developing the nation-leading advanced logistics market in the East Midlands.

EMIP, located adjacent to the nationally significant Toyota manufacturing plant, has the potential to become the next generation of rail connected business parks. The proposed investment will also enable a significant modal shift, from road to rail freight, reducing carbon emissions for businesses within the region and increasing connectivity. EMIP offers 5.2 million square feet of state-of-the-art manufacturing and distribution space and is capable of the production, storage, and use of hydrogen.

Freeport East

The 32-hectare tax site at Freeport East Felixstowe is strategically located on the UK’s East Coast with easy access to the major ports in north-west Europe and is directly connected to the world’s major shipping lanes. It sits at the point most closely located to the EU and UK markets.

Freeport East Harwich is a 122-hectare project which offers an ideal location for the development of an innovative green energy hub given its proximity to the offshore and floating wind farms of the North Sea. The existing infrastructure and expertise from the ports make Freeport East Harwich well-equipped to build the UK’s reputation as a leader in renewables.

Gateway 14 is poised to be the largest net zero exemplar logistics and business park in East Anglia at 156 acres. The landmark development is strategically located in a prime position along the main corridor to the UK’s midlands via the A14, perfectly situated for logistics and manufacturing. The site will also include an innovation and skills centre to support adults retrain and upskill.

Humber

AMEP is a fully consented project and a bespoke port facility for the renewable energy sector, particularly offshore wind. Able will invest circa £450 million to develop 1,340m of new deep-water quays, lay down lands and manufacturing facilities.

The Goole tax site represents a unique opportunity to co-locate with the new Siemens rail factory currently under construction creating the opportunity to be part of that facility’s supply chain. The tax site is a large undeveloped site with excellent transport links. The site is ideally situated to access Hull, Goole, Scunthorpe as well as East Yorkshire (Doncaster, Wakefield).

At the heart of the UK energy transition, Saltend is the country’s premier location for world-class industrial businesses to prosper. Owned and operated by PX Group, Saltend is strategically positioned on the banks of the Humber. The 370-acre site is home to some of the world’s leading blue-chip manufacturing, chemicals, and renewable energy businesses. Adjacent to Saltend is the Yorkshire Energy Park, a next generation energy and technology business park positioning the Humber at the forefront of the global transition to net zero.

Liverpool City Region

Parkside, St Helens is the largest strategic employment site in the city region at 161ha. It is located in St Helens close to the M6 and M62. The site includes the former Parkside Colliery. It will attract advanced manufacturing and logistics businesses.

3MG (53ha), Widnes, offers direct connections to the UK motorway network and rail access from the West Coast Main Line. 3MG is already involved in the hydrogen economy supporting capital investment in low carbon fuels and infrastructure.

Wirral Waters (100ha) is located around the Birkenhead Docks. It has port connectivity, direct access to the M53 motorway and is located within the Mersey Waters Enterprise Zone. It comprises significant areas of dockside land capable of attracting a range of port-centric businesses, advanced manufacturing, innovation and research and development activities.

Plymouth and South Devon

South Yard is a 35 hectares site (of which 31.9 hectares is designated for the Freeport) at the southern edge of Devonport Dockyard with direct deep-water access. It is currently home to Oceansgate, the UK’s first marine enterprise zone, a world class hub for marine industries, as well as facilities owned by large players in the area, including Princess Yachts and the Ministry of Defence.

Langage is a 48.5 hectares tax site located on greenfield land. It incorporates a customs zone to provide industrial and manufacturing space for high value manufacturing and engineering companies, focusing primarily, but not exclusively, on the marine, defence, and space sectors. £118 million in private investment will be used to build advanced manufacturing units and logistics facilities and a further £28 million to deliver a green hydrogen electrolyser plant. The site will also be home to a mobility hub to facilitate the delivery of critical sustainable and low carbon transport options.

Sherford employment zone is a logistics facility providing integrated warehousing, storage, and engineering space for a single marine/defence contractor. Located on the opposite side of the A38 Expressway to the Langage site, the Sherford Employment Zone forms part of the employment allocation of the Sherford new community.

Solent

The Southampton Water is a 333ha tax site comprising several areas, including:

• Marshwood Port
• Redbridge
• Strategic Land Reserve
• Fawley Complex
• Fawley Waterside

Each of these have unique offerings for investors to locate and thrive in. For example, Redbridge, ABP and Marshwood offer additional capability for both existing and potential new uses specifically in the areas of container handling capacity, Port Centric Logistics and Port Centric Manufacturing. Meanwhile Fawley Complex and Fawley Waterside have the potential to unlock green energy and net zero technologies.

Navigator Quarter is a c30 ha tax site with the potential to provide state-of-the-art research, manufacturing, and industrial facilities. The area has been identified as a potential location for a new science park, currently being explored in partnership with Southampton University. It also has interest from a leading General Aviation operator looking to relocate and set up a new business, primarily due to the Navigator Quarter being included within the Freeport.

Dunsbury Park is an award-winning business park next to the A3(M) on the London/Solent corridor. Owned by Portsmouth City Council, it is a £140 million+ project which offers 47 hectares for development for units from 20,000 to 200,000 square feet. The site also has planning permission for 665,000 square feet for manufacturing industrial, distribution and office space.

Teesside

Teesworks West and Teesworks East covers a combined total of almost 1,000 acres, with the wider development making it Europe’s largest brownfield site. Both are targeting clean energy, offshore wind, chemicals and materials, advanced manufacturing.

Wilton International is Britain’s biggest chemical complex, offering low-cost utilities and the UK’s largest private wire network. As one of Europe’s largest research and development facilities, the Wilton Centre is home to several leading global and regional businesses in the chemical, manufacturing, material, and life science industries.

Thames

The Port of Tilbury is the largest of 8 ports owned by Forth Ports. Sitting on the north bank of the Thames just 22 nautical miles east of central London, it is perfectly placed to handle cargo for London and the rest of the south-east. With an excess of 1,000 acres, it is home to 56 operational berths, 31 independent working terminals, 10.2km of quay and 5 million square-feet of warehousing. The Tilbury Tax site primarily concerns developable brownfield sites with large river frontage.

London Gateway’s highly productive deep-water berths are built to handle the world’s largest vessels. Its state-of-the-art technology means that it can do this in the safest, most reliable, and efficient way. Facilities include 3 berths – with a fourth berth under development - 1.25 km of quayside, substantial modern crane, rail and road infrastructure and adjacent logistic park.

The Dagenham tax site covers 44 acres, with direct river access via dock with Ro-Ro capability.

Appendix C - Monitoring and Evaluation Framework Executive Summary

Abbreviations

DiD - Difference-in-differences method

DLUHC - Department for Levelling Up, Housing and Communities

FDI - Foreign Direct Investments

FREN - Freeport Regulatory Engagement Network

GDP - Gross Domestic Product

HMG - His Majesty’s (HM) Government

HMT - His Majesty’s (HM) Treasury

LEPs - Local Enterprise Partnerships

M&E - Monitoring & Evaluation

OGD - Other Government Departments

ONS - Office for National Statistics

R&D - Research & Development

ToC - Theory of Change

Introduction

The Freeports Programme was announced by the UK government in January 2020. Freeports are a flagship government programme that is expected to play an important part in the UK’s post coronavirus (COVID-19) economic recovery and contribute to realising the levelling up agenda, bringing jobs, investment, and prosperity to some of the UK’s most deprived communities across the whole of the UK with targeted and effective support1

The Monitoring and Evaluation (M&E) Programme under the Freeports Programme is required to assess the effectiveness of this new policy and provide ongoing learning as the Programme is delivered.

This Framework report sets out the agreed approach to Freeports M&E. The rest of this Executive Summary includes a short background section on the Freeports M&E Programme. It then looks at different elements of the M&E framework in turn, covering the overall approach to Freeports M&E, the Theory of Change (ToC), data and geography, baselining, and ongoing monitoring as well as impact, process, and value for money evaluation. Finally, the report includes a short section looking at evaluation plans going forward.

Background

The Freeports Programme

Freeports are special areas within the UK’s borders where different economic regulations apply. Freeports in England are centred around one or more air, rail, or seaport, but can extend up to 45km beyond the port(s). The English Freeports model includes a comprehensive package of measures, comprising tax reliefs, customs, business rates retention, planning, regeneration, innovation, and trade and investment support. The first English Freeports became operational in Autumn 2021, and full roll-out has taken place over the course of 2022.

The Monitoring and Evaluation of the Freeports Programme

The purpose of the M&E of the Programme is to provide robust findings to assess the effectiveness and impacts of Freeports as a new policy. The M&E will provide accountability to Parliament, the International Trade Committee, and, ultimately, to taxpayers. Importantly, the M&E Programme will also enable learning and capacity building as the Programme is rolled out, providing early findings to improve the delivery of different initiatives. Initially envisaged to run for five-years, the M&E Programme will provide an initial assessment of the impacts of the Freeports Programme, which may be extended in the future to cover long-term impacts.

Overview of M&E Framework

Approach to Monitoring and Evaluation

M&E are key activities at the centre of understanding what works and why. Whilst monitoring can demonstrate progress on meeting certain goals and can guide necessary adjustments in response, evaluation establishes whether overall objectives have been met and the extent to which change has occurred as a direct response to an intervention.

The M&E of the Freeports initiative aims to be exemplary in identifying the impacts of the Freeports Programme as a whole, shedding light on how changes were achieved (that is, what interventions worked best and the factors contributing to this), as well as enabling ongoing learning and accountability. While the M&E approach focuses on assessing impacts at a programme level, it needs to consider how to deal with the unique characteristics of individual Freeports.

The M&E of the Freeports Programme will include monitoring, a process evaluation, an impact evaluation, and value for money evaluation, all at the programme level rather than at the individual Freeports level.

M&E definitions

• Ongoing monitoring – the main objective of ongoing monitoring is to check whether the implementation of the Freeports Programme is going to plan and to identify any barriers preventing the delivery of Freeports’ business cases as planned.
• Process evaluation – an analysis of how the Freeports Programme is being implemented and how is that contributing to the impacts of the Programme, what factors are helping Freeports to improve the delivery of business cases, whether the Programme design is working, and what is working more or less well and why.
• Impact evaluation – an objective test of what changes have occurred, the scale of those changes and an assessment of the extent to which they can be attributed to the Freeports Programme. This is usually investigated through theory-based, experimental, and/or quasi-experimental approaches
• Value for money evaluation – a comparison of the benefits and costs of the intervention.

Theory of Change (ToC)

The ToC is a key pillar of the M&E strategy. It sets out what the Freeports Programme is expected to deliver, including outputs, outcomes and impacts, as well as the causal links between them and the associated assumptions.

The Freeports Programme is aiming to address specific challenges and opportunities identified across 3 key areas: trade and investment (including Foreign Direct Investment), innovation and productivity and regeneration and levelling up in some of the most deprived UK communities.

To help respond to these challenges and opportunities, the UK government has designed a bespoke, “world-leading” UK Freeport model aiming to achieve 3 objectives:

• promote regeneration and job creation – government’s lead policy objective
• establish Freeports as national hubs for global trade and investment across the UK
• create hotbeds for innovation

The M&E of the Freeports Programme will seek to test to what extent the objectives set out above will be achieved and why. To this end, a ToC has been developed to understand how the key components of the Programme can lead to the desired objectives and the associated causal mechanisms.

An overarching logic model was developed to visually represent the ToC for the Freeports Programme. The development of the logic model has been led by DLUHC, with input from other government departments, the Freeports Hub, and the Freeports M&E provider. A full write-up of the ToC including a literature review has also been produced and is appended to this report. The model presents a more developed version of the initial logic model included in the Freeports Bidding Prospectus. The model will continue to be refined as the evaluation progresses.

Research questions

A set of high-level research questions have also been developed for each of the four key M&E activities. They were developed while preparing the ToC and refined with stakeholders with the purpose of defining the broad scope for M&E activities. These will be reviewed on an ongoing basis as the M&E progresses. Note that some questions will inform different types of activities simultaneously, for example informing both the monitoring and process evaluation activities. Impact evaluation questions overlap significantly with value for money questions as impacts need to be assessed and quantified to feed into a value for money assessment. The high-level research questions are the following:

1. How is the Freeports Programme being implemented and how is that impacting on the delivery of the Programme?

2. To what extent and in what ways is the Freeports Programme achieving its objectives?

3. What is driving the impacts of Freeports?

4. What are the lessons of the Freeports Programme for future policy, private and public sector stakeholders and local communities?

5. What is the value for money of the Freeports Programme?

These high-level research questions are then underpinned by a set of more detailed questions, which in turn relate to sets of causal contributions explaining what needs to happen for outcomes and impacts to be achieved and which will be tested during the M&E. These will seek to test specific causal links in the ToC, including how performance varies across different Freeports. The causal contributions are largely based on the assumptions underpinning the ToC, which explain what needs to happen for the outcomes and impacts to be achieved.

For example, the key research question “How much investment are Freeports attracting once set up and what is driving that?” can be broken down into more detailed questions and causal contributions as follows:

• trade and investment promotion activities ensure that Freeport benefits are understood by businesses
• Freeport incentives are significant enough for businesses to choose to locate/invest in Freeports
• lower costs and regulatory support encourage firms to move into the Freeport as anchor tenants
• the presence of an anchor tenant encourages suppliers and collaborators to locate to the Freeport in order to increase business with them, leading to clustering effects.

Overall, about 70 contribution claims were identified and will be assessed as part of the evaluation. At the end of each year of the M&E Programme, it is recommended that the ToC is reviewed to assess if causal contributions are still valid. Evidence gaps should also be identified and feed into a revised methodology focusing on addressing those gaps. The ToC will therefore evolve as the M&E progresses based on the findings produced each year. It is also envisaged that further work will take place early on in year 2 of the Programme on refining the evaluation questions, reflecting further development on the ToC at the level of individual Freeports and thematic areas (‘meso level’). Theory development and testing at this level (including through cross-case comparisons) will play a key role in understanding how Freeports are attempting to achieve the same outcomes and how context, implementation and choice of levers are affecting delivery.

Data and geography

The M&E for the Freeports Programme requires the gathering and analysis of a wide range of data sources including both quantitative and qualitative, across different geographies that will be used to support a wide range of research methods.

Based on the contribution claims identified in the ToC and the logic model, a data gap analysis was undertaken to identify a range of data sources which are needed for the monitoring and evaluation of the Freeports Programme. The 3 distinct phases of the project need different sets of data sources. These 3 phases have been characterised as baselining, monitoring, and evaluation:

• Baselining: The initial phase of the M&E is the baselining exercise. Baseline data collection is needed to answer all monitoring and evaluation questions as a comparison period. If possible, all baselines will be collected from at least 2018 onwards so that at least 2 years of pre-pandemic data is sourced to control for disruption to economic activity in this period. Official sources and the Freeport Data Collection will be utilised as well as macro-economic modelling outputs from Cambridge Econometrics.
• Monitoring: During the operation of the Freeports Programme, several data sources will be utilised to monitor ongoing changes in firms and the local economy. Monitoring data will use the same sources as the baselining to be able to compare all monitoring figures to their baseline.
• Evaluation: The evaluation phase of the project will use data for theory-based and quasi-experimental evaluation and for the value for money assessment. We expect that in some cases, the evaluation methodology will require more granular data than what was collected for monitoring, as sophisticated quasi-experimental methods require large amounts of data at a very granular spatial level.

Data sources were collated after prioritising a long-list on the basis of selection principles which included Reusability, Consistency, Granularity, Quality, Objectivity and Proportionality and Practicality. We are expecting to be using a selection of publicly available statistics, private sources, projections from consortium parent Cambridge Econometrics and monitoring data collected by Freeports.

Challenges with data collection are likely to be significant and several data challenges are already emerging:

• Time lags - Public data releases are often slow due to quality assurance and data gathering processes and lag the relevant time period by a year or more. This can be a challenge to the M&E programme where timely analysis is required.
• Lack of spatial granularity – Several high-quality data sources do not report to LSOA or finer geographies and have therefore been largely excluded from analysis.
• Data gaps – There are a few variables of interest which are not covered by public or private data sources including sub-national or firm-level imports and exports and site-specific emissions estimates.
• Lack of counterfactual – The selection process of the designated Freeports sites limits available counterfactual sites in the UK due to selection on observed and unobserved characteristics such as port size and development potential.

DLUHC and the M&E provider will work closely with the ONS, cross-government experts and the Freeports to mitigate these challenges. Bespoke data reported by the Freeports and qualitative sources such as surveys and interviews will be utilised in cases where data gaps cannot be filled with existing indicators and datasets. In addition, counterfactual problems are expected to be resolved partially through the use of Cambridge Econometrics modelling.

When gathering data related to the impacts of Freeports on the wider area in which they sit, the geography of the ports will need to be considered and study areas defined from which certain impacts of the Freeports Programme may be identified. Three study areas have been defined for the purpose of the M&E Programme:

• Freeport site area (FSA): Any site that’s officially part of the Freeport: tax sites, customs sites or other Freeport development sites (based on geographical shapefiles submitted by Freeports).
• Immediate port area (IPA): The immediate area encompassing the port where we expect that most of the inputs of the programme could be identified.
• Wider port area (WPA): The wider area surrounding the immediate port area, where we expect that most of the economic outcomes of the programme could be identified.

As part of the data gathering and analysis, we will also gather data for counterfactual areas (other seaports and airports) to be able to compare the performance of Freeports to similar non-Freeport areas.

The immediate and wider port areas will be defined in line with Lower Super Output Area (LSOA) boundaries (Geographically, LSOAs are available across England, Wales, and Northern Ireland. While Scotland uses ‘Data Zones’, these are comparable in size to LSOAs and can therefore be used interchangeably). This allows contextual data to be brought in and statistics dynamically calculated for each port. Moreover, this allows for a consistent and comparable analysis across all ports.

Both for the IPA and WPA areas it is expected that a disaggregate and aggregate level will be used; however, in both cases the plan is to use the aggregated level for the monitoring phase. We expect that some of the most sophisticated quasi-experimental methods will require granular data, and this is where the 2 disaggregated geography definitions are planned to be used. Freeport monitoring inputs are expected to be submitted on the Freeport’s site area level and at the wider port area level.

Baselining and ongoing monitoring

Baselining

Baselining is essential for any M&E programme as it constructs the reference period to which the programme’s impacts can be compared to.

Ideally, all indicators would use the same baseline period and base year. This makes it possible to compare the results across indicators and provides a straightforward methodological approach, which makes reporting clear-cut for both monitoring and evaluation phases. However, the Freeports Programme will use a broad range of data inputs and types, making it challenging to use only one baseline period and base year. Therefore, the M&E programme will use the simplest possible method that still fits data availability.

The base year will be 2021 for all indicators where this is possible as 2021 is the last full year before the Freeports Programme’s implementation. Indicators gathered at the half-yearly level will be aggregated to 2021. Some monitoring inputs are designed to monitor the Programme’s implementation; for these, we will use 2022 as the base year since this is the first year for which data collection is possible.

For official and private data sources the baseline period will include at least a ten-year period before the 2021-2022 announcement and implementation of the Freeports Programme. A long baseline period is important for 2 reasons. First, this ensures that the baseline is representative of the long-term socio-economic conditions of the Freeport areas, and not only an anomaly base year. This is necessary given the significant EU Exit and pandemic-related variation in economic conditions. Second, this can establish the pre-treatment trend for Freeports to understand the relative growth or decline in indicators before Programme implementation. This will also capture any effects on the area that occurred due to the Programme’s announcement but before the implementation of seed capital projects or tax reliefs or custom benefits.

Freeports will be required to provide data from 2018 onwards for quantitative indicators for their site area and wider port areas4, where feasible. This provides 2 pre-pandemic years (2018 and 2019), which could be used as an alternative baseline in case the pandemic significantly impacts 2020 and 2021 base years.

Baseline data will be collected for all areas of the UK at the lowest geographical level possible (ideally at the LSOA level). Freeport Data Collections will be gathered only for Freeport site areas and wider port areas.

Overview of baselining period and geography

• Official public datasets – will be collected yearly/half-yearly, with a base year of 2021, a baseline period of 2011-21, covering the whole of the UK
• Private data sources – will be collected yearly/half-yearly, with a base year of 2021, a baseline period of 2011-21, covering the whole of the UK
• Freeport Data Collection – will be collected yearly/half-yearly, with a base year of 2021, a baseline period of 2018-21, covering the Freeport Site Area/Wider Port Area

While it is acknowledged that more structural economic changes in the local area will not be apparent until the ex-post evaluation, ongoing monitoring against a baseline and counterfactual remains important to understand the initial changes in the area induced by the Freeports Programme. Therefore, the aim is to make sure that key monitoring indicators are regularly compared against one of the following options:

• Freeport’s performance against targets set in business cases.
• Freeport’s performance against a ‘no policy synthetic Freeport’, using a synthetic control group method for low-level output indicators.
• Freeport’s performance against ‘policy-off’ and ‘policy-on’ counterfactuals using the Cambridge Econometrics’ Local Economic Forecasting Model’s (LEFM) projections for key outcome indicators.

Ongoing monitoring

The monitoring of Freeports will focus on assessing to what extent the plans set out in the Freeports business cases are being delivered, for example whether seed funding is spent as planned. This will draw heavily on data gathered by the Freeports themselves, complemented by wider data sources presented in the Data and Geography section.

On-going monitoring will enable the observation of outputs and early outcomes from the Programme, as well as learning from how the Programme is being delivered. This will feed back to the Programme’s implementation, which is crucial given that some aspects of the Programme will continue to be shaped over the coming years.  The monitoring will feed into an Annual Review as part of the Freeports Performance Management and Assurance Process.

Monitoring and evaluation activities are strongly intertwined, and thus both activities will be linked throughout the entire duration of the M&E Programme. Some of the ways in which monitoring and evaluation activities will feed into each include:

• using monitoring data to inform the impact evaluation and measure progress against the Freeports Programme’s ToC
• driving insights from the FMI for the Programme’s process evaluation
• using data on the Programme’s implementation (for example, seed capital) for the value for money evaluation
• providing feedback on the intervention’s progress as evidence base for the Freeports’ on-going Learning Programme and allowing DLUHC to fine tune policy design and implementation along the way.

Impact evaluation

The impact evaluation of the Freeports Programme will focus on assessing a wide range of outputs, outcomes and impacts using a mixed-methods approach, combining a theory-based approach with quasi-experimental methods.

Theory-based approaches

Theory-based impact evaluations aim at drawing conclusions about the contribution an intervention has made towards intended impacts alongside external influencing factors. They can also explain why an intervention worked, or not, by examining how differences in context and among programme participants affect the achievement of outcomes. This helps to inform translation of findings to other populations, places or time periods.

Theory-based approaches provide rigorous testing of a ToC and whether the causal chains leading to the desired change are supported by sufficiently strong evidence. Methods can involve different types of techniques for data gathering and analysis, including qualitative interviews, quantitative surveys, reviews of programme data and secondary sources, case studies and may incorporate findings from econometric analysis. Therefore, proposed quasi-experimental methods set out in the next section will feed into the theory-based approach presented in this section, bringing econometric evidence with other sources of evidence together to answer the key research questions of the evaluation.

A summary of the theory-based evaluation approach is below. This includes four different types of analysis:

• Contribution analysis – this involves the identification and testing of a long list of contribution claims based on the ToC to assess the impacts of the Freeports Programme, which will enable us to test not only the ‘what’ (what impacts result from the programme) but also the ‘how’ and ‘why’ (underlying mechanisms, role of contextual factors). About 70 contribution claims have been identified directly related to the key research questions, classified by ToC level (input, output, outcome or impact) and topic (for example, trade, employment). For each claim, data sources and analysis methods have also been identified (Appendix E).
• Process tracing – this involves the use of Van Evera tests for a selection of high priority contribution claims. The tests provide a robust and systematic way of testing high priority contribution claims. These will incorporate evidence from quasi-experimental approaches where possible, as well as other data sources.
• Comparison of Freeport level case studies – the cross-case comparison framework will set out key data and evidence for individual Freeports, and will allocate different scores across different programme level contribution claims based on the evidence gathered. These will help show which types of Freeport, the entire programme, and indeed specific high priority contribution claims, have greatest explanatory power – for each Freeport, we will be able to determine the total proportion of contribution claims with a certain score and draw comparisons across Freeports.
• Comparative case studies – in addition to testing contribution claims at a programme level across the Freeports, the explanatory power of specific policy levers on different Freeports, and different tax sites, will be assessed. While Freeports are a key unit of analysis with specific governance arrangements and initiatives in place, tax sites also represent a useful case as they are likely to vary within the same Freeport in terms of sectoral focus, location, types of businesses and infrastructure investments, among other factors. This method of analysis will provide insight on where some policy levers may be more effective in some cases than others, and the contextual factors which explain this.

Van Evera tests for process tracing

• Straw in the wind: evidence that lends more support to the contribution claim if seen but which is not sufficient in itself to confirm it, nor sufficient to reject it if not seen. An example could be primary research with Freeport businesses who say they would not have located to the area were it not for the Freeport designation. This evidence alone can be considered weak given the potential for conformation bias in terms of businesses wishing to portray an overly picture to influence policy continuation, or because they may not be aware of other external factors that might have influenced the decision to locate at the Freeport.
• Hoop test: evidence that weakens or disproves the contribution claim if not found, but which in itself is not sufficient to confirm the contribution claim. These are pieces of evidence that would expect to be seen if the given contribution claim is true. An example of this would be secondary or monitoring data showing new firms locating to the Freeports area. Hoop tests do not provide strong evidence to prove a contribution claim (in this example, secondary data would not show causality linked to the Freeports) but can be an important early step because if evidence does not pass the hoop test, then it suggests the intended outcome has not happened and that the contribution claim can be rejected without running further tests.
• Smoking gun: evidence that further strengthens the contribution claim if observed (although may not definitively prove it) and which also helps to weaken hypothesis on alternative explanations on why outcomes have arisen. For example, interview evidence where findings triangulate across multiple stakeholder groups to point to the same conclusion, including businesses in Freeport areas and wider sector stakeholders who are not direct beneficiaries of the Programme.
• Double decisive: evidence that helps to confirm the contribution claim if observed and which also helps to rule out alternative explanations. These are pieces of evidence that we would ideally like to see if the given contribution claim is true but may in practice be difficult to uncover. Potential examples might include a business locating to a Freeport area sharing internal business case documentation demonstrating that the fiscal incentives available through Freeport designation were a core part of their decision for moving to the Freeport area, over and above other locations considered.

Quasi-experimental approaches

Through the ToC and the data gap analysis, a set of contribution claims have been identified that will need to be analysed in undertaking the Freeports Programme evaluation. While qualitative evidence will be key in undertaking the theory-based evaluation of the Programme. Many of the contribution claims will be answered using quantitative evaluation with hypothesis testing. More than one hypothesis may be matched with each contribution claim as separate hypotheses are expected to be formed for each indicator and for each subclaim within a contribution claim.

A quantitative method has been matched to all those hypotheses for which it is possible to gather quantitative data. To classify the various analytical approaches, we used the Maryland Scientific Methods Scale developed by What Works Centre for Local Economic Growth.

The first question asked was whether the contribution claim was a priority research question. Sophisticated quasi-experimental approaches require specialised data skills, high quality data and considerable amount of time; therefore, it is proportionate to use them only in case the hypothesis is one of the most crucial questions to be answered by the evaluation.

For all non-priority hypotheses, it was recommended to use rather simple before-after comparisons (compared to the baseline) or cross-sectional analysis (comparing the performance of Freeport areas with counterfactual areas or with synthetic Freeports). These methods are the same as the ones that monitoring reports would use and could be found in the monitoring dashboard as well. They would reach level 2 on the Maryland Scale in terms of robustness.

Priority hypotheses are predominantly higher in the ToC’s logic map and are at high-level output or outcome levels. In case the hypothesis relies on an outcome indicator which can be modelled by the Local Economic Forecasting Model (LEFM) of Cambridge Econometrics, a hybrid method combining both the quasi-experimental Panel Difference-in-Difference (DiD) approach and the LEFM has been suggested; thereby ensuring that the evaluation mitigates many of the main causal and analytical concerns of the methodology around displacement, spillovers, deadweight and lack of appropriate control areas.

For any other hypothesis using a quasi-experimental Panel DiD approach has been suggested, which on its own is able to mitigate many of the potential confounding factors. Overall, priority hypotheses would be assessed with methods that reach level 3/4 on the Maryland Scale. A summary of the 2 core methodological approaches (Panel DiD and Panel DiD with LEFM modelling) is provided below.

It is important to point out that the proposed approach assumes that 1) key data sources will not be lagged significantly so timely data is available and that 2) only the short-run impacts of the programme can be evaluated, since many effects would only realise after several years and decades.

Quantitative Approach Methods

A Difference-in-Difference (DiD) model will be utilised as an econometric technique to measure the causal effect of the Freeports Programme as a non-random intervention. This model is often described as a quasi-experiment as, although not fully randomised, economic models can exploit the fact that the programme is implemented for some areas and not others. The DiD model seeks to understand the counterfactual question of ‘what would have happened to the outcome if the intervention did not occur’. This is by looking at the difference in outcomes between the treated group (Freeports) and control group that share similar characteristics with the treated group.

Whereas the DiD method provides the most rigorous estimation of the size of the impact, it is not able to identify particular causal relationships or composition effects within that overall scale of impact, nor the likely secondary impacts on areas outside of the treatment area. In order to complement the Panel DiD approach, a supplementary assessment framework that is a combination of qualitative data inputs, static modelling and off-model analysis to explore the way in which direct local effects are propagated across the wider economy has been proposed.

Originally called the Local Economy Forecasting Model (LEFM) is one of a suite of models maintained and operated by Cambridge Econometrics. LEFM is designed to undertake scenario analysis of local economies or groups of local economic geographies in order to provide ex-ante projection for a range of economic variables, including GVA, productivity, and employment by both sector and occupation. This would be provided for the eight individual Freeport study areas individually, both with and without the policy interventions incorporated into the model as inputs.

The ex-ante ‘policy on’ scenario will form a modelled estimate in LEFM of what the intended impacts of the Freeport policies will be, against which actual estimated impacts can be compared over time. LEFM translates initial direct impacts (for example increases in employment in a particular sector) in wider economic impacts by accounting for innovation and knowledge spillovers; agglomeration and clustering and other spatial dynamics as well as input output relationships. These estimates could be updated periodically based on measured direct impacts.

The results of the Panel DiD approach could be connected with the results of the LEFM’s ‘policy-on’ modelling to provide an estimate for both local and national impacts of the Freeport policy. This off-model analysis would make use of both qualitative and quantitative monitoring results to model the spatial and sectoral distribution of potential displacement and spillover of economic activity. This would provide an opportunity to adjust the results of the Panel DiD method (which is suitable for the estimation of local impacts) with the results of the ‘policy-on’ LEFM modelling (which is suitable for the estimation of regional and national impacts).

Value for Money Evaluation

Overview of value for money evaluation

The purpose of the value for money assessment as part of the Freeports Programme M&E will be to assess the value for money to the taxpayer of the public costs associated with delivering the Freeports Programme. The assessment will therefore be undertaken at a programme level based on the evaluation of programme-level impacts.

It is worth noting that the HM Green Book is better suited to the assessment of spending programmes such as infrastructure investments than tax incentives. Therefore, there is a degree of novelty on how the value for money assessment of the Freeports Programme is undertaken and presented. Work is ongoing to develop an approach to the value for money assessment. This approach is likely to evolve as the impacts of the Programme are analysed over time.

Process evaluation

The process evaluation will focus on how Freeports are being delivered, complementing the impact evaluation, focusing on what is working well (or not) and why. While the approaches to the impact and process evaluations are presented separately, these are aligned, and their results will be analysed together to provide the information and context required to undertake the theory-based evaluation of the Freeports Programme. The data gathering process for both the impact and process evaluation will also be co-ordinated.

The aims of the Freeports Programme process evaluation are to analyse aspects related to how the intervention works in practice following the approach set out by Moore et al. (Moore et al. (2015), Process evaluation of complex interventions: Medical Research Council guidance, BMJ 2015; 350), looking at programme implementation, mechanisms of impacts and context.

The process evaluation will focus on how Freeports are being delivered across different phases to understand how the Programme’s implementation, interacting with stakeholders and context, have contributed to effective delivery and wider programme objectives. These phases include application for Freeport status, set-up phase, implementation and operational phases.

The process evaluation will also focus on on-going learning and how to improve the delivery of Freeports to achieve the objectives set out in each business case, for example, lessons around governance and partnerships, which vary significantly across the eight Freeports. Learning will be focused on those aspects related to current structures, resources and process for delivery. To assess this, the process evaluation is likely to draw heavily on interviews with different stakeholders across the Freeports, complemented by quantitative data. The timing of the process evaluation will be key to enable learning related to the implementation of the Programme.

The approach to the process evaluation has followed similar steps to the impact and value for money evaluations. These include:

• Understanding the Freeports Programme implementation process – a theory of how the intervention is intended to be implemented has been identified. This will facilitate an evaluation of the intervention’s fidelity (whether it was implemented as expected), the extent to which it was implemented, any adaptations made to fit specific contexts and the implementation’s reach
• Developing a process map – a process map has been developed to enable us to visually represent the key steps that Freeports will follow in setting up and operating the Freeports. This enables us to identify the key steps in the process to research during the process evaluation.
• Confirming process evaluation questions – these questions were developed with cross government input.
• Developing the process evaluation framework – a framework has been developed setting out key topics and specific research questions based on the key research questions (step one) and the main steps and activities that Freeports are expected to get involved with as set out in the process map (step 2). The framework identifies what data should be collected and how to answer each of these questions over time.

In Year One of the M&E, a process evaluation of the initial phases of the Freeports Programme up to the set-up phase (business case phase) has been undertaken. This will rely on interviews with key stakeholders including the core delivery team from DLUHC and other government departments, the Freeports Hub and the Freeports’ Senior Responsible Officers.

Future M&E Plans

The indicative timetable for the M&E Programme going forward is set out below, including which elements of the ToC we will be able to report on in each year:

• Year one (to end 2022): develop ToC and M&E framework, gather baseline information. By the end of year one, a start will have been made in assessing how Freeports are being delivered (Inputs and activities of the ToC).
• Years 2-4 (2023-6): updates on performance and outputs, preliminary impact assessments, and annual reviews to identify lessons learnt. By the end of year four, it is expected that the M&E will look at and assess level 2 of the ToC.
• Year 5 and beyond (2027): final evaluation of this M&E Programme. By the end of year five of the current M&E Programme, it will be approximately expected to look at and assess level 3 of the ToC. It is worth noting that a longer-term evaluation will be needed to fully assess long-term impacts expected from the Freeports Programme.

This ongoing process will feed into Learning and Engagement Programme and enable ‘near-live’ enhancements to policy implementation and evaluation approaches. These will be reported in the Annual Report on the UK Freeports Programme, which will provide an update on the delivery of the Freeports progress as a whole.