Since the EU referendum, there has been a growing interest in the reintroduction of free zones in the United Kingdom. Those advocating free zones believe that they will help to boost British trade after Brexit and promote economic growth. This briefing paper presents a history of free zones in the UK and US and then looks at the EU context. Although there are potential benefits and savings that businesses can accrue from simplified customs procedures and relief on customs duties and tariff inversion, the authors explain that such benefits will be very limited in the UK context. This is due to state aid rules which limit the scale of assistance possible. The UK would still be affected by these in some way post-Brexit. Thus, while there is a scope for free zones shaping an export-oriented place-based regional development programme, policymakers should devise measures that counteract possible diversion of economic activity from elsewhere, and offer a wider set of incentives than just free zones, while keeping within our WTO and any ‘level playing field’ obligations that arise from our trade agreements.

Read Briefing Paper 28 – What is the extra mileage in the reintroduction of ‘free zones’ in the UK?