Freeports in Wales Are a Catalyst, Not a Solution

Freeports are often presented as a new tool of economic policy. In reality, they are a familiar idea being adapted to a modern challenge.

Variants of freeports can be traced back to trading hubs such as Livorno in late 16th century Italy, where goods could move in and out with minimal customs friction.

The UK has experimented with freeports before, most notably between the 1980s and early 2010s. Their reintroduction reflects a shift in how they are now being used. Traditionally focused on facilitating trade through customs and tax advantages, freeports are now increasingly positioned as instruments of regional economic development, intended to attract investment, support industrial activity, and stimulate local growth.

The recent announcement of £25 million to support seven projects linked to the Anglesey Freeport illustrates this shift in practice. Centred on Holyhead and the wider Anglesey area, the funding is designed to accelerate development linked to energy, logistics, and advanced manufacturing.

While the announcement is locally significant, it points to a broader challenge facing parts of Wales. GVA per head remains at around 72% of the UK average, highlighting the scale of the productivity gap these policies are attempting to address and its implications for wages and living standards.

Many parts of the country have experienced sustained deindustrialisation over several decades. On Anglesey, this includes the closure of the aluminium plant in 2009 and the end of electricity generation at Wylfa in 2015. More recently, job losses at the 2Sisters food processing site have reinforced concerns about the resilience of the local economy.

These patterns are not unique to Anglesey. Across Wales, similar trends can be observed, including an ageing population, the outmigration of younger workers, and a shift towards lower-value or more seasonal employment in some sectors. This is reflected in earnings data, with median weekly pay in Wales around £60 lower than the UK average, consistent with a sectoral mix weighted towards lower-value activity.

In Anglesey, the strategy is built around a set of existing and potential strengths. The Morlais tidal energy project, the future development potential of the Wylfa site, including proposals linked to small modular reactors, and grid infrastructure originally developed for heavy industry all point towards a possible role in the emerging low-carbon energy system. Institutions such as M-SParc, Grŵp Llandrillo Menai, and Bangor University contribute to a growing base of skills and innovation.

In this context, the £25 million funding package should be seen as a catalyst rather than a solution. Its primary function is to unlock further investment, particularly from the private sector.

A similar approach is being taken in South Wales through the Celtic Freeport, centred on Port Talbot and Milford Haven. There, the focus is on floating offshore wind, hydrogen, and the decarbonisation of heavy industry, building on existing industrial and energy assets.

However, an important economic question remains. To what extent do freeports generate genuinely new activity, as opposed to relocating existing investment?

Early evidence from the current UK freeport programme suggests progress, but on a relatively modest scale. Government figures indicate that freeports have attracted several billion pounds of investment and created thousands of jobs. While this is positive, it remains below some of the longer-term projections associated with the policy. Independent analysis has also highlighted the risk that some activity may reflect displacement rather than net new growth.

For Wales, this matters because relocating activity within the UK would do little to strengthen the underlying economy.

The long-term success of freeports will ultimately be determined by a small number of practical factors, which together shape whether investment translates into lasting economic change.

At the centre of this is investor confidence. Firms will only commit capital where there is clarity on long-term policy, planning timelines, and infrastructure delivery. Where uncertainty persists, investment is often delayed or redirected, regardless of the incentives on offer.

That in turn depends heavily on infrastructure readiness. Energy projects, advanced manufacturing, and logistics all require reliable grid capacity, transport connectivity, and sites that are ready for development. In areas such as North Wales, grid constraints and the timing of upgrades are likely to play a decisive role in determining what can be delivered and when.

Even where these conditions are in place, outcomes will depend on the availability of skills. The sectors targeted by both Welsh freeports require specialised capabilities, including engineering, construction, and project delivery. Without a workforce able to meet these needs, there is a risk that projects are delayed or that benefits are captured by workers from outside the region.

The broader economic impact will be shaped by the extent to which supply chains develop locally. Anchor investments are important, but the longer-term effect depends on whether local firms can participate, expand, and embed themselves within these emerging sectors.

These factors are interconnected, and constraints in any one of them can limit overall impact.

Scale is another factor. Public funding announcements are important signals, but they represent only a small proportion of the total investment required. Sustained private sector engagement will be necessary to deliver meaningful change.

There is understandable caution about new programmes and ambitious projections, particularly where past initiatives have struggled to deliver lasting impact.

Freeports provide a framework through which investment can be coordinated and barriers reduced. They create the conditions for growth, but they do not guarantee it. The key test will be whether they deliver durable economic change across Wales, reflected in sustained job creation, business growth, and supply chains that are embedded locally.

That is the test of whether they deliver lasting economic change, rather than short-term activity.