As Freeport East and Liverpool get go-ahead, what is a freeport and who will benefit?

Two new freeports have been given final approval by the government and will receive up to £25m each in seed funding to get started.

Freeport East - encompassing the existing ports at Felixstowe and Harwich - and Liverpool City Region Freeport will be subject to new customs arrangements.

Supporters claim Freeport East alone will create up to 13,500 new jobs and will boost the economy by £5.5bn.

In total, eight freeports will be created around the UK - but what are they and why should anyone care?

What is a freeport?

Freeports are parts of the UK which will be given their own set of economic regulations.

They can be airports as well as seaports and exist within the geographical boundary of the UK but outside of its customs system.

These "limbo" areas are exempt from customs duties and tariffs and duty is only paid once a finished product passes through that imaginary border and enters the UK market officially.

Businesses operating within those areas will be subject to special tax arrangements, planning policies, and customs policies. They will be able to re-export goods that have not entered the UK market without paying duties and will benefit from tax incentives such as relief from stamp duty and lower national insurance contributions.

How will it create jobs?

The government's claim that freeports will create thousands of jobs are based on the assumption that the financial benefits will attract new companies and bring about economic growth for businesses, allowing them to expand and create jobs themselves.

They also aim to encourage regeneration in their local communities, bringing about economic growth and potential jobs in coastal towns.

Freeport East said it had already been contacted by a wide range of overseas companies interested in opening sites in Suffolk and Essex because of the perceived advantages on offer.

How will businesses benefit?

Businesses operating within a freeport will be able to import goods and use them to manufacture other products - and add value - without paying customs tariffs. Only goods taken over the freeport "border" and into the UK would be subject to tariffs while those exported again would remain exempt.

Other benefits will include business rate relief, reduced administration, and faster planning procedures including an expansion of permitted development rights.

How will wider communities benefit?

The government says freeport areas have specifically been chosen with a view to regenerating some of the country's most disadvantaged coastal communities.

The hope is that international businesses looking for growth opportunities will be won over by the financial benefits of a freeport and choose to set up new sites in those areas, bringing high-skilled jobs with them.

The Department for Levelling Up says: "Local economies will grow as tax measures drive private investment, carefully considered planning reforms facilitate construction and infrastructure is upgraded in freeports."

Local councils will retain the business rates paid by companies operating from those areas and all freeports will have access to a regeneration and infrastructure fund worth up to £175m.

Won't the government miss out on tax revenue?

Yes. But the government is banking on the benefits of operating in a freeport stimulating enough growth that businesses will, ultimately, end up paying more off the back of greater profits.

Where will the eight freeports be?

Given final approval December 2022

• Solent including the ports of Southampton, Portsmouth and Portsmouth International Port

• Teesside including Teesside International Airport, the Port of Middlesbrough and the Port of Hartlepool

• Plymouth & South Devon including the Port of Plymouth

Given final approval January 2023:

• Liverpool City Region including the Port of Liverpool

• Felixstowe & Harwich including the Port of Felixstowe and Harwich International Port

Awaiting final approval:

• East Midlands Airport

• Humber including parts of Port of Immingham

• Thames including the ports at London Gateway and Tilbury

The government said it aimed to create one freeport in each of Scotland, Wales and Northern Ireland as soon as possible.

Are freeports new?

No. Seven freeports existed in the UK between 1984 and 2012 at sites including Liverpool, Southampton and Glasgow before the laws governing them were allowed to expire. Freeports already exist around the world including around 80 "free zones" in the EU and more than 290 "free trade zones" in the USA.