The Financial Case
Demonstrating that the intervention is affordable
Having established in the Economic Case that Option A (£25 million seed capital funding) was the preferred scenario, the Financial Case set out the capital and operating costs of the Freeport over a 25-year period, showing how they would be met. Headline figures were that income from retained business rates growth of £71.9m, along with £14.9m of rental income from the existing Oceansgate Enterprise Zone, would provide total income of £86.8m over the 25-year lifetime of the Freeport. This income is expected to be used to fund debt charges associated with public match borrowing; lifecycle costs covering all capital projects (excluding those to be met by private funding); and, Freeport operating costs. After meeting these costs, the FBC forecast that the Freeport would have residual income of £32.3m, which clearly demonstrated its affordability.
The Freeport’s operating costs were modelled within the FBC to be funded from DLUHC revenue support grant and landowner contributions for the first two years of operation (2022/23 and 2023/24). From 2024/25 onwards the Freeport’s operating costs were expected to be fully self-funded, without grant funding from DLUHC.
Retained business rates were modelled as a core part of the Freeport operating model. Once debt charges associated with public match borrowing, operating costs and lifecycle costs are covered, the residual income will be used to promote the Freeport’s objectives within the Freeport geography and wider Travel to Work Area, with the early priorities being innovation and skills funding and offsetting the impact of any displacement of economic activity from the surrounding area.
In order to make a compelling case for Freeport designation, the business case that was submitted to Government followed a prescribed template that was by necessity very detailed and also contained a range of commercially sensitive information. These summaries provide a more digestible overview of the business case with commercially sensitive information removed. It should also be noted that the material presented, including all cost assumptions, was accurate at the time of submission (April 2022). The summaries have not been updated since then. We have moved forward on a number of core activities through our mobilisation phase which are not reflected in the summaries, with the Freeport Company and associated board structures having now been established. This has enabled us to start building on the hard work that went into securing Freeport designation, working with our partners to leverage exciting new opportunities for the area.