Agenda item

To receive an update on progress with the Solent Freeport.

The Panel received an update on the Solent Freeport. The Strategic Regeneration Advisor gave a presentation on the key updates, which were as follows:

Members were reminded of the Freeport guidance which sets out that Freeports are special areas within the UK’s borders where different economic regulations apply. By delivering investment on specific sites benefitting from tax and customs incentives, Freeports are expected to create thousands of high-quality jobs in some of the country’s most disadvantaged communities. The guidance sets out that sites have been carefully selected for their suitability for development by local authorities and key private partners and sit within the outer boundary. 

The main national objectives of the Freeport programme are to create hubs for global trade and investment, to create hotbeds for innovation and to promote regeneration and sustainable economic growth.

The key tools available to achieve these objectives are:

Tax sites, where eligible businesses have access to tax reliefs including Business Rates, Stamp Duty, Employer National Insurance Contributions and Building Allowance and Enhanced Capital Allowances.

Council areas in which tax sites are located will retain 100% of business rates growth above an agreed baseline for 25 years, allowing Freeports to invest in regeneration and other priorities.

Each Freeport has been granted up to £25m in seed capital funding, primarily to be used to address infrastructure gaps in tax and/or custom sites that are holding back investment. 

Businesses operating within Freeport customs sites will have access to simplified customs arrangements. 

There are eight Freeports created across England. The Panel were advised that Freeports have outer boundaries which reflect the wider economic geography of the area and clarity was provided that   the only places where there is legislation change, and therefore the Freeport’s only regulatory role, is in relation specifically to tax sites. The expectation is that the reinvestment of business rates, and subsequently the benefits, will be in the wider economic area.

The Panel heard that four of the parcels of land make up the Southampton Water tax site which falls predominantly within the District. A full business case was put to the Government in 2022 and the vision for Southampton Water included port centric manufacturing, green energy, logistics and automotive industries with ready access to national and global markets.

It was explained that investment in the New Forest tax sites would increase port capacity at Southampton by up to 40%. This means the unlocking of additional capacity for three key port offers - the cruise terminal, the container port and the automotive sector. 

The Freeport Full Business Case forecasts that the Solent Freeport will see the creation of up to 16,000 jobs, 7000 of which are expected to be in the New Forest. The retained business rates could reach £511m, with 57% (£290m) of this figure being realised from the New Forest tax sites. Of 430 hectares of developable land within the Solent Freeport, 303 hectares is within the New Forest. The tax site benefits that were originally set until 2027 have been extended to 2032 and the timeframe for the business rate investment is still set at 25 years.

The Solent Gateway tax site (which comes under the remit of ABP) had planning permission in place and has moved forward with the first 21 acres of hard standing. £4.4million of their seed capital had been allocated and a further 50 acres of development is expected by April 2025.

The ABP land reserve is less progressed than Solent Gateway in its development process. The next stages of this process are expected to involve an options study, master plan and concept design prior to a Development Consent Order which it is expected will take two years with a final decision taking a further 18 months and therefore expected around 2028-2029. 

The Fawley Complex (Exxon) had been announced in November 2023 with a major investment on site of low sulphur diesel facility and the development of a hydrogen plant with £1billion investment in the site. The new plant would be in use around the first Quarter of 2025.

The owners of the Fawley Waterside tax site have withdrawn their previous planning application. Therefore, NFDC and the Freeport are continuing to have discussions, however seed capital was a concern due to the unobtained planning permission.

 There is some concern regarding underspend of the Solent Freeport’s seed capital allocation as these funds must be spent by March 2026. There has been a recent call for projects which would represent capital expenditure, such as the creation, acquisition, or enhancement of an asset, and this must deliver Freeport outputs such as jobs or skills innovation.

Retained business rates will be pooled across the region and the use of funding determined by the Solent Freeport Retained Rates Investment Committee. Through the full business case, the Freeport has set out the indicative funding share into themes such as skills, net zero, hotbeds of innovation, regeneration and enabling activity and local investment priorities. The current first five-year forecast would see around £11million in the next five years, with these figures increasing rapidly in the following years. This means that there is time in which the Freeport can be influenced in how and where reinvestment should be targeted.

Cabinet agreed to develop a New Forest Freeport Delivery Plan at their meeting in April 2024. The four priorities identified were:

Transport and wider infrastructure.

Employment and skills.

Prosperous communities.

Environmental sustainability.

In relation to governance of the Freeport, NFDC has representation on the main board as well as the finance and resourcing sub-committee and the retained rates committee.  Additionally, sub-groups are being established to develop programmes around-trade and investment, innovation, net zero and skills.

Following a member question on business rates, the Strategic Regeneration Advisor informed the Panel that the business rates forecasting model sets out the expected to be achieved against forecasts within the original   full business case. It was expected that these receipts would be reinvested across the entire geographic area. The Panel were reassured that legacy benefits could roll out across entire area and that work would continue to take place on developing a detailed plan for reinvestment going forward.

Some members voiced their concerns over the achievability of several of the anticipated benefits of the Freeport’s tax sites. The Panel were reminded that the Freeport did not have any powers outside of offering tax related incentives and that projected levels of investment into the District, via the tax sites, would be a benefit to the area. It was not considered a disadvantage for the Council or the District to be part of the Freeport, however it was acknowledged that NFDC must ensure that the drive for reinvestment and the expenditure of business rate receipts would meet the Council’s priorities. The Council had contributed three lots of £50,000 towards the delivery of the Freeport alongside officer and member time on the various bodies.

Members heard that the Freeport’s designation in offering incentives would not impact on other matters such as planning applications within the wider economic area. 

On skills, the Council were looking at challenges within the New Forest that may prevent residents from obtaining skills and jobs. It is hoped that this will be a key area where funding from business rate receipts could be used to invest and drive improvement.

The Leader of the Council reassured the Panel that, following meetings with the new national government, that assurances had been given that the Freeport programme would still be continued.