Freeport seed capital eligibility criteria
This page explains the eligibility criteria for public authorities who want to award a seed capital subsidy under the English Freeports Subsidy Scheme.
Applies to England
Introduction
The 8 Freeports in England have been granted access to an equal share of £200 million of seed capital. The purpose of the seed capital is to address infrastructure gaps in Freeport locations and create the right physical conditions to encourage private sector investment.
Seed capital is paid by the Department for Levelling Up, Housing and Communities to public authorities, who may then use it to award subsidies. This guidance explains the eligibility rules for public authorities who want to award a seed capital subsidy. These eligibility criteria may be amended from time to time as required.
Public authorities who satisfy themselves that a subsidy award complies with this guidance are not required to conduct their own assessment of the award against the subsidy control principles.
Definitions
Accountable Body – the local or combined authority identified as “Accountable Body” for the Freeport in the Memorandum of Understanding with DLUHC.
Change request – the formal process of approving changes to a Freeport’s agreed Full Business Case, administered by DLUHC.
DLUHC – Department for Levelling Up, Housing and Communities.
Eligible project – a project which is using seed capital to deliver the type of eligible activity identified in the eligibility rules at section 3 of this eligibility criteria and is being delivered in an eligible location.
Eligible location – the Freeport locations identified in the eligibility Rules.
Enterprise – the definition of “enterprise” in section 7 of the Subsidy Control Act 2022.
Full Business Case – the agreed Full Business Case submitted by the Freeport to government as a part of the Freeport approval process, and which is included in the Memorandum of Understanding with DLUHC.
Legal commitment - when the local authority enters into a grant funding agreement or other type of legal agreement with the recipient enterprise.
Outer boundary – the outer limit delineating the geography of the Freeport (maps of the Outer boundaries).
Public authority – the definition of “public authority” in section 6 of the Subsidy Control Act 2022.
Preparatory activity – project activities undertaken in advance of physical works commencing including, but not limited to, site investigations and studies, preparing cost estimates, developing design works, obtaining planning permission, and negotiating land and/or building acquisitions.
Related subsidies – the definition of “related subsidies” in section 5 of the Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022.
Scheme – the English Freeports Subsidy Scheme. The Scheme was made on 19 November 2021, prior to the Subsidy Control Act 2022 coming into full force and effect from 4 January 2023, and it is therefore a legacy scheme and the subsidy control requirements set out in the Act do not apply except for the requirements as to transparency in Chapter 3 of Part 2 of the Subsidy Control Act 2022.
Freeport seed capital – £200 million of capital funding allocated by DLUHC for capital works in Freeport locations.
Seed capital subsidy – a subsidy awarded by a local authority to deliver an eligible project.
Eligibility rules
The following eligibility rules apply to the award of a seed capital subsidy:
1. Eligible location
The award of seed capital subsidy under the Scheme is limited to eligible activity undertaken in the 8 Freeport locations in England:
- East Midlands Freeport
- Freeport East
- Humber Freeport
- Liverpool City Region Freeport
- Plymouth and South Devon Freeport
- Solent Freeport
- Teesside Freeport
- Thames Freeport
Seed capital subsidies can only be provided to an eligible project undertaken within the ‘outer boundary’ of any of the 8 English Freeports, or – where justified in an approval full Business Case – in an economically connected location.
2. Eligible activity
To be an eligible activity, seed capital subsidies must provide financial assistance to a project that has been set out and agreed in the relevant Freeport’s full Business Case, or subsequently approved by DLUHC through a formal Change Request.
A business case for the project must also have been approved by the Accountable Body, in accordance with local assurance processes, and by the Freeport Board. This ensures that the project requires a subsidy and has been designed to minimise public costs while maximising public benefits. In determining the level of seed capital subsidy to be awarded, this business case must consider the cumulative amount of related subsidies previously received by the Enterprise, whether given under the Scheme or otherwise.
Public authorities other than an Accountable Body may award a seed capital subsidy under this Scheme with the permission of the relevant Accountable Body, and with confirmation that the Accountable Body has approved a business case for the project in accordance with local assurance processes.
The public authority awarding a seed capital subsidy under this Scheme must also include in all legal agreements with the recipient(s) an appropriate mechanism to recover that subsidy should it become necessary to do so.
3. Eligible costs
A seed capital subsidy can support capital expenditure associated with delivering an eligible project including preparatory activity.
4. Ineligible costs
A seed capital subsidy cannot be used to provide financial assistance for ineligible costs. “Ineligible costs” are any costs that are not either (a) “eligible costs” as set out in Paragraph 3 or (b)” preparatory costs” which are only costs associated with preparatory activity.
Any costs that are not associated with preparatory activity and are undertaken prior to the seed capital subsidy being awarded under the Scheme will be ineligible.
5. Eligible recipients
Public authorities may award a seed capital subsidy to any Enterprise undertaking an eligible project within an eligible location.
6. Subsidy type
Public authorities may award a seed capital subsidy in form of a grant, a loan or otherwise as agreed with DLUHC in the Freeport’s full Business Case or a subsequent formal change request.
7. Subsidy value
The Scheme can cover a seed capital subsidy up to the value of £25 million to an eligible project, which can be a combination of Freeport seed capital and other subsidies used to deliver eligible activities, or solely Freeport seed capital, but never solely other subsidies. Where the combined value of related subsidies supporting an eligible project exceeds £25 million the project shall fall outside the scope of this Scheme.
Transparency
Public authorities must comply with the transparency requirements set out in Chapter 3 of Part 2 of the Subsidy Control Act 2022. Any seed capital subsidy awarded that exceeds the value of £100,000 must be uploaded on to the subsidy database within 3 months of a legal commitment being made by the local authority.