23008_Nearshoring Report

Another factor which may support demand for warehousing and manufacturing facilities in the UK but with an eye to the export of goods to the EU is the implementation of freeports , areas designated with tariff-free status until goods leave the specific zones. Following changes to the rules of movement of goods between the UK and the EU, many businesses face the challenge of restrictions or double import tariffs being applied to goods travelling from farther away locations, entering either the UK or the EU and then moving onto destinations on the other side of the UK-EU border. In response to this, some UK businesses have sought to establish operations on the continent to maintain business in the face of new costs and restrictions. However, this is costly, time- and attention-consuming and capital sapping, especially where there is replication of stock holdings or service provision.

The UK Government has sought to create freeport customs zones in locations across the country: businesses located within these sites will be able to import goods for processing or use in manufacturing or for onward movement. However, goods will only attract UK duties when they are transported beyond the zones into the UK. This means that goods can be moved onward to Europe without attracting import duties in the UK, thus avoiding ‘double dutying’ of import taxation. Whether these locations will attract businesses to create new manufacturing or processing facilities to serve both the UK and Europe will remain to be seen but early indications are that occupiers are showing interest in the schemes and how it could be applied to their businesses.

On the more challenging side, however, the UK will face challenges in convincing businesses considering setting up new operations to serve Europe including the EU in the post-Brexit environment. The new challenges to moving goods across the new UK-EU border attract complexity, limitations and cost and this is translating into lost opportunities for the UK. In addition, the incentives being offered a country and EU level on the continent, under the banners of national and EU related investment-encouraging policies, make the EU attractive for those considering investment, particularly in key high technology and green technology sectors. Chinese electric and hybrid carmaker BYD announced in March 2023 that it will not consider building its first European car factory in the UK because of the impact of Brexit. BYD, which is targeting sales of around 800,000 cars a year in Europe by 2030, has shortlisted locations in Germany, France, Spain, Poland and Hungary but said that the UK had not even made a top 10 list of possible locations due to post-Brexit challenges. BYD

To what extent businesses will invest in the UK – either to feed the UK itself or the wider European market – will depend on how supportive they feel the UK is as a home for business, and crucial to this will be government policy and initiatives. Key target areas for the UK Government are focused on high value-add sectors such as science and technology (including life sciences and semiconductors policies) and renewable energy albeit progress in setting some specific goals and strategies has been hampered by UK-specific factors, such as the political instability at the very top of government. As a result of this and other factors, business investment in the UK has remain somewhat restrained. The UK Government’s ability to set and enact business-engaging policies for long-term opportunities in the country will help to shape businesses’ strategic investment in the UK – and the country’s economic prospects.



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