Christopher Walker is a former Treasury economist and the author of ‘Supercharged Freeports’, a new report published today by Mace, the construction consultancy.
If there is one thing distinctly lacking in the Brexit debate, it is something truly visionary about what post-Brexit Britain could look like. Margaret Thatcher, of course, was a true visionary. It was one of the qualities that set her apart. It took vision to transform our economy in the 1980s, reversing decades and decades of relative economic decline with the other developed economies.
The myopic leadership of the Labour Party is only able to see as far as remaining in the EU Customs Union, a field of vision stretching only marginally beyond its own political infighting. Equally, the Government has not exactly captured the imagination of the British people.
Surely our politicians can do better?
Whether you voted for Brexit or not, it is going to happen. We need some creative thinking to bring the Remainers and Brexiteers closer together.
Staying in the EU Customs Union, specifically, would deprive Britain of the one defining long-term economic benefit of Brexit – the ability to forge our own trade deals with some of the fastest-growing economies around the world.
Forging those trade deals – and the massive growth in trade they imply – is a key determinant of the Brexit benefit-cost equation. It was one that was overlooked in that HM Treasury paper just before the referendum. Without boosting the UK’s international trade beyond the EU, the economics of Brexit are unlikely to stack up nearly as well.
We must position post-Brexit Britain as an even more open trading economy than it is today. Historically, we are a trading nation. That is what we need to be in the future.
So how do we do it?
Realistically, free trade deals with those other countries won’t come quickly or easily. We might, optimistically, have such deals in place with the US, Canada, Australia and New Zealand at or soon after the end of the 2019-21 (1st) transition period, though with clear challenges in the case of the US.
One answer could be Free Ports. These exist all the around the world. There is thought to be around 3,500 of them, all told. The US has nearly 200. We don’t have any; alas, being in the EU Customs Union prevents us having them
Free Ports allow goods to be imported into the Free Port area without paying import duties. They don’t count as part of the domestic customs area. That means that factories operating in the Free Port area can import goods, use them to make products higher up the value-added chain, and then export those products back out again without paying domestic import duties. That boosts profitability and the ability to invest for the future.
What has all this got to do with the Northern Powerhouse?
Love or loath the politics of it, the Northern Powerhouse is actually a rather visionary concept by contemporary political standards.
There is a broad consensus across the political divide that we need to rebalance the UK economy. The Northern economy produced £330 billion of economic output in 2016, yet in a balanced economy it would have produced £400 billion, around £70 billion more. That’s £1,500 for every northern household.
Much of the Northern Powerhouse narrative has been about improving connectivity between our great northern cities to support ‘agglomeration’ effects to boost productivity.
But what if we could improve that connectivity with our great northern ports, too, and then make those ports ‘Free Ports’? That would increase the amount of trade coursing through the Northern powerhouse, driving up productivity and GDP per head there, and rebalancing the UK economy without a need to ‘tax the south’.
And what if we selected those ports on the basis of the economic clusters already existing and emerging around them, to nurture and support the rapid growth of their industries? This could include ports in the three key northern growth estuaries – the Hull and Humber (e.g. energy, including off shore wind), The Tees and The Mersey.
We could then ‘supercharge’ those Free Ports by layering on enterprise zones (Hull already has one). That would support investment by capital intensive industries and the creation of hundreds of thousands of high value-added jobs. That is what Margaret Thatcher did when her Government incentivised Nissan to invest in the Sunderland plant. Today it contributes to making the North East the only exporting region in the UK.
With better connected Supercharged Free Ports, we would have ‘agglomeration plus plus’. A report published today by the construction consultancy Mace, which I authored, shows that designating seven ‘Supercharged Free Ports’ throughout the Northern Powerhouse from 2021 could eventually boost international trade by £12 billion and add £9 billion a year to northern GDP, in today’s money. That would be enough to close the GDP gap between North and the rest of the UK by 10 to 15 per cent. It could create 150,000 permanent high value-added jobs in industries like advanced manufacturing and engineering.
Some may love the idea, others may hate it. But it’s visionary.
So my plea to the politicians on Brexit? Let’s have a bit more ambition, a bit more ‘oomph’, something a bit more visionary. Let’s start by putting forward policy ideas that capture the imagination of Remainers and Brexiteers alike, rather the politic that divides them. Then, let’s forge a positive and exciting vision for post-Brexit Britain.