It’s Groundhog Day on Teesside or there are lies, damned lies and the projected job creation figures of regeneration projects, including freeports, enterprise zones … and who’d be Ben Houchen, now, in the age of a Hard Brexit?

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How much is the remediation of the largest brownfield site in Western Europe going to cost; when does the work start and which businesses from outside of the immediate area say they will definitely move in (and not move existing businesses there)?

“On Teesside, there are hopes for as many as 18,000 new jobs, alongside benefits for the economy worth £3.2bn over the coming years.”

Low taxes and levelling up: the great freeport experiment comes to Teesside

“Freeports are a special kind of port where normal tax and customs rules do not apply. These can be airports as well as seaports. At a freeport, imports can enter with simplified customs documentation and without paying tariffs. Businesses operating inside designated areas in and around the port can manufacture goods using the imports and add value, before exporting again without ever paying the full tariff on the original goods they imported – although a tariff may be payable on the finished product when it reaches its final destination, including if that destination is in the same country outside the freeport.

Freeports are similar to free zones, or ‘enterprise zones’, which are designated areas subject to a broad array of special regulatory requirements, tax breaks and government support. The difference is that a freeport is designed to specifically encourage businesses that import, process and then re-export goods, rather than more general business support or regeneration objectives.”

Trade: freeports and free zones

“There is a strong case for arguing that economic regeneration has not benefited the least well off and has overshadowed the necessary social regeneration that should have accompanied it. In short, (past) investment in Stockton on Tees may have created vacancies, but not necessarily for the residents of places like Kingston Road, because they were not given the support to make it possible to apply, let alone secure, the new jobs being created.”

Digging Behind the Façade of Benefits Street 2 (13th September, 2014)

It became common practice around twenty years ago when appraising bids for funding to discount construction jobs amongst the figures like the 18,000 above for Teesside, if they are integral to the delivery of the project.

One may not make the largest brownfield site in western Europe, Ben Houchen’s proud boast not mine, ready for investment without serious remediation of the ground.

Jobs created by such groundwork are measured in weeks, because by their nature they are not permanent employment.

The only jobs one might estimate being generated by the project are those directly created by future tenants and any jobs they might indirectly create in the vicinity.

The employment by the site developer of sales, security and administration staff for the project would also be discounted, because they, too, are integral to its delivery.

The discounting, to make crystal clear, extends to the use of labour for the erection of buildings, laying of roads, pipework and so forth.

One might contend that if people and businesses are not employed in this essential building work then they might be lying idle and not making money.

However, Markit monthly industry surveys as far back as mid 2017, even with migrants in the mix (cue groan at niche pun) show the demand for labour in UK construction was exceeding its supply, forcing employers to raise pay, terms and conditions as they competed for scarce labour and skills.

Far from resources in the UK building trade lying idle, their scarcity in recent years will have slowed the rate of build of construction projects, deferred the start of others and potentially postponed some projects indefinitely, if not led to their cancellation.

Rising labour costs hit the bottom line of a company when they may not be passed on to the customer.

And how often is a building project delivered on time; to cost and specification?

One might be on firmer ground in making a case for training locals to undertake construction work in the hope they might benefit from those construction weeks.

One might hope …

Alas, that is one contention that has been well and truly tested to destruction over the last few decades.

Apart from anything else, one should not allow anyone to undertake that training, if they are not willing to routinely travel out of their immediate local area for work on its completion.

One should also be wary of would be trainees who are more interested in developing Do It Yourself skills (and who may be on benefit).

Birmingham City Council ran an excellent block paving training course at Amington Road, Alum Rock, in the 1990s as the city centre was block paved to death.

Hard landscaping was so in vogue that by the time the blocks had ceased being laid, the centre of Birmingham was a lot less green than when the effort to make it more aesthetically pleasing and pedestrian friendly had started.

Any way, as the training got into full swing, chaps offering block paving began to compete with the chaps, who just happened to have a bit of tarmac left over from a resurfacing job on the M6, going door to door for a contract to tidy up your drive or turn your front garden into a car park.

One has to admire their entrepreneurial spirit, if nothing else.

There is an element of a Field of Dreams approach to what amounts, in part, to training on spec.

That in chucking relatively large sums of public money at hard skills training (of the long term unemployed), the jobs will come and just at the point where a lot of folk are finishing courses and proving suitable, in other words employable, to take them up.

A complete nonsense, of course, and very demoralising for those doing the courses and those helping the folk on them.

It is on a par with spaffing muck up a wall and hoping some of it will stick.

I well remember a meeting from a few decades ago about the Peddimore development, a greenfield site, hard by Sutton Coldfield, Birmingham.

Council Representative: “It will be a new, state of the art semi-conductor plant.”

Jobcentre: “Silent scepticism, bordering on cynicism.”

Careers: What sort of jobs are we talking?

CR: “You know …”

C: “Ok, we’ll come back to that. Timescale?”

CR: “Well we haven’t got a company interested.”

C: “So you want folk to look at training up in occupations new to the region on the off chance that at some unspecified, future date there may be jobs in that line for which they might apply, but with no guarantee (understandably) of securing one???”

J: “Thinks, thank God for the Careers Service. The diplomatic faux pas is theirs, but those questions needed asking outright. I may now file my report. No action required. Watching brief only. In no circumstance be drawn into any discussions about the outline planning application.”

I am reminded at this point of the torturous process involved in bringing forth a fully fledged, all singing, all dancing, all gambling Super Casino. Definitely a story for another day.

Incidentally, property developers tend to think in terms of a few years, if not decades.

The unemployed prefer to be out of work for as little a time as possible.

A brand spanking new gigaplant, the semi-conductor factory of our day, is currently being discussed for Coventry (or not) on a brownfield site.

The approach to training for filling jobs in potential new developments that I have outlined above, if adopted understandably breeds cynicism amongst trainees and a view that people have only really participated in a box ticking exercise.

And to some extent, they might well be right.

Is Teesside going to claim an increase in the quantity and level of vocational qualifications as a result of the freeport?

Politicians and journalist do like numbers, but an increase in NVQs in a particular locale does not imply an improvement in the employability and/or the job prospects of those gaining them.

It is one thing to train people up successfully, it is another to actually persuade, say, a builder to take them on, instead of a tried and tested crew.

You will hear of Local Employer Compacts and Pacts, of Local Jobs for Local People and similar eyewash. One cannot legally force an employer to recruit from a particular area or make him or her contract with a local company.

The former runs slap bang into the Equality Act 2010 and the latter I gather might constitute some form of restraint of trade and also fall foul of equality legislation.

One may persuade a business to voluntarily focus their efforts in recruiting workers and contracting with businesses from a particular location, but not to the complete exclusion of all other areas and/or ethnic groups.

That voluntary approach may come with a price as the developer may contend that honouring such an agreement would cost more than following their usual practices (and there is no guarantee that any availble jobs and contracts that result from the project will not leak out of the area of the project).

Ultimately, it is employers and organisations, whether in the private, public or voluntary and community sectors who decide whom they will employ and with whom they will contract.

And herein lies the rub for Oop North, there are a lot fewer building companies, especially in the business of land remediation, up there than there are Dahn Sarf:

And a lot fewer building workers, too:

An established building company will have existing relationships with sub contractors and they with others and so on. Therefore, the potential for locals to gain work and business will be low, unless they are already in the building trade.

If you think that 18,000 is becoming to seem ever more like a mirage or mist on the Tees then you would be right.

It is best not to bother with spending all that time and effort on spec for little or no likely return.

I would argue that encouraging people to set up in business to, in the first instance, bid for a contract with an upcoming development is particularly wasteful all round.

And, seriously, think about it, new businesses do not suddenly materialise, miraculously appear, when a new factory, shop, office block or warehouse is completed or existing premises are refurbished or renovated.

To argue that would be silly, would it not?

Better to train up the locals for the jobs to maintain a finished development, like a trading estate and fill the jobs of business tenants as they arise. There is also a benefit in assisting local firms to contract for work related to the development on completion, like cleaning and maintenance.

In short, the public sector should put most of its time and resources into jobsearch provision; soft and basic skills eduction and training, including literacy, numeracy, communication and statistics …

… customised training; job preparation courses and Work Trials for the locals as job opportunities arise, and support for local companies to pitch for business.

The acquisition of soft, highly transferable skills and certificates for First Aid and manual handling makes those undergoing the training more employable, whatever else it does for them.

And you must not under-estimate the value of a brace of certificates, the moral boost to someone who got little out of their formal education and may even believe themselves to be a failure, thereby.

My senior colleagues, including Jobcentre Plus District Managers for Birmingham and Solihull used to attend the awards ceremonies of providers to hand out the certificates to students.

Some of them had never passed a test or examination in their lives and now a suited and booted civil servant was shaking their hand and congratulating them as they received their certificate in front of an audience of their peers.

If the boss was not available then they might end up getting me, but the commitment once made was striven to be honoured, because two of my bosses, amongst the best for whom I ever worked, women both, had come up through the ranks and knew the importance of such events to their participants (and our reputation).

Me?

I was the first member of my family to leave Sixth Form, none of my family has been to university, and step straight into a management job in the Civil Service.

None of what I describe above is really deliverable without significant input from at least the lead contractor and support from the private sector and the voluntary and community sector. The voluntary and community sector has a particular role to play in bringing those furthest from the labour market and/or the disadvantaged well within the orbit of the support being made available to jobseekers.

Heretic that I am, I think it is down to employers in all three sectors of our economy, the voluntary and community sector, the private and public sectors, to own the hard skills training of their new recruits and existing staff and fund much of it directly, too.

And it would be lovely, if employers committed to the continuous development of their staff.

One can, but dream.

My advice is bound to be ignored, because the above is hard work, in particular requiring the forging and maintaining of partnerships.

It is so much easier for a Boris Johnson, a Rishi Sunak or the ubiquitous Liz Truss to pose for the camera, sign a ‘contract’ to recruit and contract locally and move on to the next photo opportunity, leaving a Houchen to carry the can, sorry, look after matters, on a day to day basis.

Incidentally, Houchen’s proud boast, effectively talking down Teesside, is what secures you the public money to kickstart a regeneration project like his, but in order to lever in serious private investment, he now needs to start talking up Teesside and not continue repeating, ad nauseum, that Teesside is Europe’s largest brownfield site which is not exactly an attractive prospect as the UK economy slides into recession.

The remediation of the largest brownfield site in Western Europe is bound to be expensive, given it is highly polluted.

Given the immediate future state of our economy, I do predict land assembly and land banking in marginal areas, wherein folk only seriously invest in the best of times.

It is not unusual in such areas to have a patchwork of pieces of land owned by different parties, but which are not worth developing individually so a property developer (or better still the public sector) buys up the individual plots and assembles them into a good sized parcel and sits on that land for a few years, land banking, waiting for property values to rise.

Houchen has to hope developers will buy land on Teesside and adopt a Magrathean policy in the hope of a future upswing in the economy that will increase its market value, making it worth the cost of remediation at some future date.

“Brookfield Asset Management has canceled (sic) the sale of a UK port company that is locked in a legal battle with one of Boris Johnson’s closest allies, Conservative Tees Valley Mayor Ben Houchen.”

“PD Ports is a large company that has done very well under Brookfield ownership and continues to have exceptional long-term growth prospects,” a Brookfield spokesman said. “The recent lawsuit has strengthened our belief in the business, and we have made the decision to invest in PD Ports instead of selling the assets.”

The South Tees Development Corporation, chaired by Houchen, “has sued PD Ports separately in an attempt to prevent it from using two of the three access routes in Teesport, even though the main one is not affected.”

Brookfield abandons the sale of the UK port group wanted by Boris Johnson’s ally

The wider the uses for which you want to develop the land, invariably the greater the cost of the remediation, especially if you want to build housing upon it.

What Houchen has to worry about in the immediate future are fire sales of land and property in more attractive locations than Teesside.

In a contracting economy such fire sales draw inward investment away from very marginal areas, like Teesside, which only tend to become attractive as the economy expands and competition increases for the top locales, making those without deep pockets look outside of those places for land and property.

Of course, Brexit has made the UK a rather unattractive place for both domestic and foreign investors.

And if you are in the market to invest in the UK then why do so on Teesside when there may soon be (fire) sales of better prospects elsewhere in the UK, like London and the South East?

I digress, seriously, who ever goes back a few years after the announcement of 18,000 new(ish) jobs and checks out thoroughly whether that number has not been met, has been met or even exceeded?

The worthies will pop back to lay the corner stone then the capping stone and, finally, pose for the ceremonial opening with a large pair of fake scissors to ‘cut’ the ribbon at the entrance of the completed project.

Turning now to freeports, we are advised to see them as part of our Brexit sunlit uplands by a chap called Rishi Sunak, partly based on the opinions of another chap, also called Rishi Sunak.

I wonder if they are, by any chance, related?

Self made man, “Dishy” Rishi “I loved my boss and his company so much I married his daugher” Sunak, a financial paper shuffler with a head for creative accountancy, has a Garden Bridge to sell to the voters:

“One report, written by Rishi Sunak for the Centre for Policy Studies while he was still a backbench MP, suggested that freeports in the UK could create 86,000 jobs. A further report by the consultancy Mace indicated even larger benefits, with freeports boosting trade by £12 billion a year, UK GDP by £9 billion and 150,000 new jobs.

Other economic commentators such as the UK Trade Policy Observatory (UKTPO) have suggested, however, that these studies were based on questionable assumptions. The figure for new jobs in the Sunak report, for example, was produced by taking the number of people employed in the US’s Free Trade Zones (FTZs) and reducing it in line with the size of the UK’s total workforce. This assumes, however, that every job in an FTZ is a new job that would not exist in the absence of the FTZ – an assumption that one US Congress report suggests is implausible.”

Trade: freeports and free zones

Garden Bridges are very much in the Johnson Government’s main product line, their stock in trade.

There are less crude ways of estimating the number of jobs that a business may bring to a planned structure.

For example, the Department for Trade and Industry once produced a hard copy guide containing figures for the square footage that a range of occupations might, on average, occupy.

One took, for example, the square footage of a floor expected to be suitable for a call centre operation, consulted the guide for the space that an individual call centre desk took up and worked from there to come up with an estimate of the likely number of employees that would occupy the floor.

Freeports were trialled in the Thatcher era and the experiment ended in 2012.

In their 1983 General Election Manifesto, “The Challenge of Our Times”, the Conservative Party outlined plans to establish “experimental” freeports as a part of its regional policies to modernise the British economy following the early 1980s recession.

After winning a second term at the 1983 General Election, Margaret Thatcher’s government assigned freeport status to six areas, namely Belfast, Birmingham, Cardiff, Liverpool, Glasgow Prestwick Airport and Southampton.

These freeports experienced limited success during their lifetime and David Cameron decided not to renew the free port licences in 2012.

“Economic studies have found the main advantage of freeports is that they encourage imports by lowering duty and paperwork costs. Manufacturing businesses that are inside the freeport can benefit from cheaper imported inputs in comparison to those outside the area.”

Trade: freeports and free zones

One would have thought that a resurgent UK Labour Party whose current key policy pitch for the next General Election is to buy, make and sell more in Britain would have come out against freeports.

One would have thought …

Andy McDonald, the Labour MP for Middlesbrough does not strike me as being in 2021, if he genuinely thinks there is much value in worker directors which are so 1970s.

I was forgetting McDonald is a Corbynista.

“But I want them to be good, well-paid, secure and unionised jobs, where people have got a say about their own future.”

Andy, lad, a union representative on a board is not individual workers having a real say in how they do their daily job.

“… the UK’s own experience with freeports and enterprise zones suggests that there is a severe risk of merely diverting business from other parts of the UK, rather than creating genuinely new economic activity – and doing this at a considerable cost in incentives paid and taxes foregone (see Nissan in Sunderland in 2021).”

Trade: freeports and free zones

In the 1980s, Thatcher used the incentive of capital allowances to persuade Nissan to set up their first car plant in the UK. Nissan had first to invest its money in the UK to create the profits to offset against the proffered tax allowances.

In 2021, Boris Johnson bribed Nissan, a successful, profitable company, to make an essential investment in a battery plant in Sunderland that it owned and in which the company had already sold off an 80% stake to Envision, a company ultimately owned by the Chinese Communist Party.

I do not mind folk seeing Johnson coming, but I do mind that invariably its our money he ends up spaffing up the wall.

One Teesside Tory MP, Simon Clarke blamed the failed experiment on “an uncharacteristic lack of ambition by the Thatcher Government” and “the regulatory constraints placed on them by the EU”.

“There are currently 72 free zones in 20 member states of the European Union.”

Trade: freeports and free zones

The bright, shiny new freeports will provide “reliefs on business rates and stamp duty”.

The Thatcher era Enterprise Zones that included the suspension of business rates were tried; tested; evaluated professionally, externally of government; found wanting and subsequently terminated.

One of those Enterprise Zones, established in legislation in 1980, was Middlesbrough and Stockton-on-Tees.

Merry Hill and Canary Wharf were considered the most successful.

The exemption of businesses within the EZs from business rates prompted landlords to raise the rents on properties within them. They knew their tenants had got more money for rent, given they were not paying business rates. That was bad enough, but rising rents in EZs drove up rents in the surrounding areas where businesses were still paying business rates.

Moreover, there was a serious suspicion that some landlords were a bit vague about the exact boundaries of the EZs and so unclear as to which of their tenants were no longer paying business rates, causing some of them to increase rents outside of the EZs.

The successes of Merry Hill and, especially Canary Wharf were built on the lavish expenditure of public monies.

In the case of Merry Hill, the Child Support Agency became a major tenant of the development.

Canary Wharf got a publicly funded light railway.

Arguably, neither would have been successful, if they had not benefited from the sort of concentration of public money that EZs were not really meant to have received when first envisaged.

The aim being to lever in significant amounts of private sector money with the relatively inexpensive incentives created specifically for the EZs.

“Concerns that freeports will do little for the UK economy appear to be borne out by historical and international evidence. In a potential sign of their limited scope, Treasury estimates suggest the exchequer will lose just £50m a year as a result of companies taking up freeport tax breaks.

The Office for Budget Responsibility, the government’s tax and spending watchdog, reckons there will be few meaningful benefits. The most likely outcome, it says, is that economic activity that would have taken place anyway is dragged from one area to another – with an added cost to taxpayers.”

Low taxes and levelling up:

Not unsurprisingly, perhaps, KPMG, in anticipation of future public sector contracts, disagree with the foregoing.

“Lewis Atter of the infrastructure advisory group at KPMG, who advised on the creation of the Humber freeport, thinks the benefits will be bigger than the Treasury’s internal estimates. He believes hundreds of millions of pounds could be saved by companies, with a genuine levelling-up boost in the process.

“We’re definitely seeing internationally mobile investors – not yet signed on the dotted line but close – linked to tax sites,” he said. “And people have only become interested in these since the announcement [on freeports]. It’s quite clear we are seeing genuinely additional investment.” “

Low taxes and levelling up:

Meanwhile …

“In April 2019, the European Parliament called for freeports to be scrapped across the EU as a result of a report on tax evasion and money laundering. The report argues that freeports provide operators “with a safe and widely disregarded storage space, where trade can be conducted untaxed and ownership can be concealed.” The lack of scrutiny on imports means that high-value items like art, for example, can be bought and easily stored in freeports without the kind of checks and controls they would normally face. The likelihood of this will become clearer when the freeports are operational.”

Trade: freeports and free zones

There is a strong contention that a freeport could create a safe haven, a safe deposit, in which criminals might salt away their ill gotten gains, a place to rest say the physical product of money laundering.

Therefore, let us test out that theory by setting up freeports that by their very nature of lax checks creates a safe place for the storing of stolen goods?

It is not as though the UK is not already a giant freeport, a smuggler’s paradise for those importing goods from the EU.

Oh, it is and Lord Frost is keen to keep the import checks down to a minimum.

His light touch approach, Lord Frost contends, is a Brexit benefit and one he thinks the EU might come to replicate.

A Government currently mired in accusations of double dealing, dubious commercial practices and questionable business methods should surely be wary of the risks of freeing up regulatory constraints when some of its members already regard rules as guidelines for other people?

Ben Houchen was unavailable for comment.

16 thoughts on “It’s Groundhog Day on Teesside or there are lies, damned lies and the projected job creation figures of regeneration projects, including freeports, enterprise zones … and who’d be Ben Houchen, now, in the age of a Hard Brexit?

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