Select Committee on Environment, Transport and Regional Affairs Twelfth Report


Why do we need a UK shipping industry?

4. Most of our witnesses told us about financial and other measures that they believed the Government should take to protect and support the United Kingdom's shipping industry. In doing so they stressed what British Shipping: Charting a new course describes as the industry's "importance for the UK which differentiates it from other industries".[7] The first aim of our inquiry was to analyse the importance of shipping to this country, and therefore the merits of the arguments advanced in favour of supporting the industry.


5. The UK-owned merchant fleet is made up of all trading ships owned by British companies or individuals. The UK-registered fleet is generally defined as those vessels owned by British companies which are registered in the United Kingdom. The Red Ensign group, sometimes referred to as the British fleet, is made up of trading ships registered in Crown Dependencies, such as the Isle of Man, and in a number of Dependent Territories, such as the Cayman Islands, Bermuda and Gibraltar.[8] Registration of vessels in the United Kingdom is carried out by the Register of Shipping and Seamen at the Maritime and Coastguard Agency (MCA), and by equivalent organisations in the Crown Dependencies and Dependent Territories.

6. There are a number of requirements that must be met by an owner to register a vessel in the UK. The owner must either be a British citizen, a European Union citizen established in the United Kingdom, a citizen of a British Dependent Territory, a British Overseas Citizen, or a person who qualifies as a subject under the British Nationality Act 1981. In the case of a company, it must be incorporated in the UK, a state of the European Union or a British Dependent Territory.[9] The owner must ensure that the vessel is seaworthy, and otherwise safe, and must also pay a fee.

7. The crew of UK-registered vessels must also meet certain criteria. The Master, Chief Mate and Navigational Watch-keeping Officer, as well as the Chief Engineer, Second Engineer and the Engineering Watch-keeping Officer must all hold a UK Certificate of Competency, or a UK Certificate of Equivalent Competency—a certificate from a country whose standards are recognised as being as high as those of the UK.[10] On certain strategic vessels, namely every ship of 500 gross tonnes or more which is a cruise ship certified to carry more than 200 passengers, a product tanker, or a 'roll-on, roll-off' ship, the Merchant Shipping (Officer Nationality) Regulations 1995[11] require that the Master be a Commonwealth citizen, an European Economic Area national, or a national of a North Atlantic Treaty Organisation (NATO) member State.[12]

8. Not all UK-owned vessels are also registered here. In 1997, for example, the total size of the UK-owned trading fleet of vessels over 500 gross tonnes was 10.8 million dead weight tonnes (dwt),[13] but only about 20 per cent of the UK-owned fleet was registered in this country. A further 54 per cent was registered in the wider Red Ensign registry: particularly the Cayman Islands, Bermuda, and the Isle of Man. The remaining 26 per cent was registered in other foreign registers, such as Liberia.[14]


9. The United Kingdom is a nation of islands. Consequently the dependence of our economy on shipping is marked. 95 per cent of our external trade by tonnage, and 77 per cent by value, is conducted by ship. 7 per cent of domestic freight tonnage moves by water.[15] Ferry services also provide passenger transport domestically and to Europe, with 32 million passengers carried from the UK to Europe during 1997, 4.2 million to Ireland, and a further 16.7 million on domestic routes.[16] Thus shipping is pivotal to the success of the British economy.

10. The UK shipping industry as a whole also makes a significant contribution directly to the UK economy in terms both of the balance of payments and employment. The Chamber of Shipping has estimated that the turnover of the industry is approximately £9 billion each year.[17] We were told that half of the industry's earnings are made in cross-trading away from the UK, which meant that it was "a major earner of invisible earnings".[18] Indeed, British Shipping: Charting a new course makes clear that the UK shipping industry is the "fourth or fifth biggest service-sector exporter for the UK--larger than telecommunications, films and television, or computer services".[19] It is also a major employer. Research by London Guildhall University found that in 1997 there were approximately 28,000 active British seafarers, comprising about 17,600 officers, 45 per cent of whom are employed on foreign vessels, and almost 11,000 ratings.[20]

11. Further contributions are made by the host of industries which exist to support the shipping industry. The Chamber of Shipping told us that the "total commercial maritime presence in the UK, defined as 'all trading activity at sea undertaken by UK companies and all other land-based, supporting activities', [includes] shipping, shipbuilding and repair, marine equipment manufacture, the ports, education and the financial and other maritime services (particularly in the City)".[21] We were told that this wider maritime industry, together with the shipping industry itself, generates profits of £7.5 billion, or 1.1 per cent of Gross Domestic Product (GDP), from a total annual turnover of £20 billion. It employs over 112,000 people in 1,200 companies.[22]

12. The economic contribution of the shore-based maritime industries was stressed by many of our witnesses. Particular emphasis was put on the activities of Maritime London, those businesses in the City of London which provide financial and other services in support of the shipping industry. The Baltic Exchange told us that ship-broking alone contributes 5 per cent of the City's overseas earnings from services.[23] Other industries are also significant: 30 per cent of all marine insurance, for example, is placed in the London market.[24] We were told that London is the principal centre for maritime law, and the world's leading centre for maritime-related arbitration, with 70 per cent of all arbitrations conducted here.[25] London also takes a leading role in ship surveying, and is home to the largest of the classification societies, Lloyd's register, which accounts for 21 per cent of the world fleet.[26] Finally, as well as offering several other maritime-related services, and a ready source of capital for shipping companies, the City also operates the only freight futures market in the world, the Baltic International Freight Futures Exchange (BIFFEX).

13. The Baltic Exchange told us, however, that "the time has long gone when the success of these services [provided by Maritime London] is intimately bound up with the size and success of the British-owned merchant fleet".[27] Although the UK fleet has declined, the expertise and experience accumulated by Maritime London has for the time being allowed it to remain pre-eminent. Much of its work is carried out in respect of foreign-owned or foreign-registered vessels. However, it is to an extent dependent on a supply of experienced British seafarers from which to recruit its staff. Although some businesses, such as those associated with the Baltic Exchange, do not generally require the expertise of former seafarers, others, such as Lloyd's Register "would say clearly and loudly [that] we need people from the sea to maintain the staff we have".[28] It was estimated that Lloyd's Register alone employed 1,200 people with maritime experience.[29] The London Maritime Arbitrators Association told us that several of its 37 members were former master mariners or marine engineers.[30]

14. Several witnesses therefore argued that any further decline in the British shipping industry would have serious consequences for Maritime London. Lloyd's Register said that "if UK shipping is allowed to decline ... our universities may well be forced to cut back on the relevant courses in naval architecture and engineering".[31] Thus Lloyd's Register agreed with the Baltic Exchange, which told us that "any strengthening of the UK fleet would generate more business for shipbrokers and for Maritime London generally, and the Baltic Exchange welcomes and encourages all efforts in that direction",[32] but went further, emphasising the essential role fulfilled by the UK merchant fleet in providing training and experience to seafarers who, when they come ashore, might be employed by Maritime London. "The leading position of Lloyd's Register depends on the continued existence of a strong UK shipping industry, not only for the direct work it creates but the infrastructure it provides for our operation".[33] Without that infrastructure, the whole of Maritime London might be undermined. The London Maritime Arbitrators Association told us that there are several "services essential to the conduct of maritime arbitration: specialist lawyers, cargo and ship surveyors, consultants, and experts in other relevant fields ... there is a serious possibility that, with the contraction of the UK fleet, the skilled personnel that previously supplied a number of these services may not be available to the same extent. The effect of this may well be, in the long run, seriously to damage the support services underpinning London's role as the centre of the maritime arbitration world".[34]

15. Lloyd's Register said that continued decline of the British shipping industry might mean that it was forced to "move the core of our marine operation ... out of the UK to where the shipping industry was of the size and strength to meet our requirements for educated and trained staff and a supporting infrastructure".[35] Since "the centre of gravity of world shipping is now in the Far East",[36] it is conceivable that some of the industries of Maritime London, which are relatively 'footloose', would move to areas such as the Far East where the shipping industry is stronger if the British industry could not supply their needs.

16. The geographical position of the UK means that ports, ship-repairers, ship-builders and other industries outside Maritime London have also become significant industries. For example, we were told that the British ports industry handled 558 million tonnes of cargo in 1997, making it "by some way the largest port industry in Europe".[37] Despite dramatic reductions in shipbuilding in the UK during the past thirty years, shipbuilding and particularly ship-repairing remain substantial industries, employing approximately 26,000 people.[38] Turnover on merchant vessel work in shipyards is around £500 million each year.[39]

17. Many of these shore-based industries are also dependent on a supply of experienced ex-seafarers. The British Ports Association told us that about one in six employees in its sector, such as pilots, harbour masters and vessel mooring staff, out of a total of 25,000, required marine skills.[40] Although it admitted that some of these posts could be filled by those with little or no seafaring experience, "there will always be a need for a hard core of personnel with specialised marine skills who understand the language of ships and are familiar with their requirements; this will always be a vital part of the safety network provided by a port".[41] The Shipbuilders and Ship-repairers Association emphasised the symbiotic relationship between seafarers and its industry: shipyards "were suppliers of engineering skills to the merchant navy, and in their turn also drew on the skills of merchant navy engineer officers and ratings".[42]

18. In all, the University of Wales has calculated that there are 16,825 shore-based jobs which employers would prefer to fill with those with seafaring skills. For 11,778 of these posts such skills are considered essential.[43] Thus each year it is estimated that it is essential to recruit 497 ex-seafarers, and employers would prefer to employ a total of 810.[44] Of those, employers would like to recruit 528 merchant seafarers each year, and 421 such personnel were considered essential.[45] We asked whether the Royal Navy could meet some of the demand for ex-seafarers, but we were told that the number of suitably-qualified ex-naval seafarers was insufficient.[46] Therefore, 77 shore-based posts, and only 20 of the 'essential' category, are likely to be filled each year by former Royal Navy seafarers.[47] In short, the Merchant Navy is the only assured source "of a continued supply of people of seafaring skills and experience not merely to man our ships but to fill a wide range of jobs in the shore-based maritime-related sectors of the economy".[48] Suitable training may in some cases be offered by shore-based companies, but "Merchant Navy service still provides the most cost-effective training for these jobs ... reliance on non-seafarers, where that is possible, would lead to quality loss".[49]


19. Merchant shipping provides considerable support to the military. It is estimated that in the event of a conflict overseas, 90 per cent of the necessary equipment, supplies and personnel arrive in the theatre of conflict by sea.[50] Civilian ships are also used in peacetime to move equipment and personnel for exercises and training, and also for towage, movement of fuel, surveying, cable laying, equipment trials and the recovery of lost aircraft.[51] There are two means for the Ministry of Defence to meet its shipping needs: chartering and requisition. The Ministry told us that whilst it would "plan in the first instance to charter shipping on the international market, using existing crews from the ships chartered, [we] recognise that there may be situations in which it would be necessary to use some British ships and/or seafarers to undertake particular operational tasks".[52]

20. The Ministry of Defence told us that shipping chartered on the international market provided "the greatest range of ships at a competitive price, thus ensuring best value for money for the taxpayer".[53] Therefore, in peacetime, and even during some conflicts, such as the Gulf War, the Ministry of Defence has relied on chartered vessels to meet its needs. During the Gulf War, for example, 165 ships were chartered without any significant delay.[54] Even in more peaceful times considerable use is made of the charter market: the Ministry placed 74 charters on the open market during 1997.[55]

21. At other times, requisition may be the only way to obtain either the type or quantity of vessels required, because shipowners are either unwilling or unable to accept charters. For example, during the Gulf War there was an "absence of a credible enemy threat from air or sea ... the Government could not expect such co-operation from foreign ship owners or crews in support of a UK operation where a significant threat to supply ships existed".[56] There may also be political reasons why ship-owners are unwilling to take up charters to assist in an operation.

22. As the Ministry of Defence told us, "a unilateral scenario at the moment in defence planning terms is probably very, very low, but nevertheless it must remain part of defence planning".[57] The Crown Prerogative may be used to requisition vessels registered in the UK, and in the Dependent Territories and the Crown Dependencies,[58] but only for defence of the realm. Ten of the 45 merchant vessels used to support the Falklands conflict, for example, were requisitioned,[59] but requisition would not have been possible, for example, at the time of the Gulf War. It is also not entirely clear what the reaction of ship-owners would be to any attempt to use the Crown Prerogative. It has been suggested that one response to requisition might be for an owner to 'flag out' by placing the vessel on a foreign register.[60] Furthermore, the Ministry of Defence has admitted that the response of vessels registered in the Dependent Territories in particular is unpredictable: for example, the Cayman Islands "have a certain number of vessels sailing without UK officers, and those [vessels] we cannot be as certain [as other vessels] of getting back".[61]

23. Although difficulties with using the Crown Prerogative might be overcome by putting in place emergency legislation to requisition all UK-owned vessels, even if they are foreign-registered,[62] it is apparent that the response of UK-registered ships, and those registered in the Crown Dependencies, is likely to be most favourable to requisition. Since the Ministry of Defence must plan to meet all eventualities, it is clearly essential that the UK register is able to meet defence and strategic requirements. It is also important that the vessels are of the right type: roll-on/roll-off vessels, container ships, break-bulk cargo vessels, and specialist break-bulk cargo ships capable of carrying ammunition.[63]

24. British seafarers also have a role to play in military matters. The Ministry of Defence has in the past resisted attempts to alter the requirement[64] that the officers of certain strategic ships registered in the UK should be British, to avoid "security difficulties in a conflict".[65] Furthermore, it is possible that foreign seafarers may simply refuse altogether to assist during a conflict involving Britain: the Chamber of Shipping told the Defence Committee in 1995 that whilst "foreign crews may be prepared to take a ship into a war zone in support of British military operations provided that they were paid enough and provided that the hazards were not too great ... some may not".[66] It alleged that at one stage Japanese crews had refused to enter the Gulf during the conflict there, and that the Indian Government had ordered its nationals not to serve on ships taken up for the Falklands campaign.[67] NUMAST told us that "experience in the Falklands and in the Gulf has shown that foreign seafarers may often be unwilling to serve on ships involved in third party conflicts".[68] The Ministry of Defence appeared to deny the charge,[69] but Major General Ewer admitted that "at the end of the day there are very severe circumstances ... where a resource of that kind [trained UK seafarers], which takes time to generate—you do not produce trained seamen at the drop of a hat—would be needed".[70]

25. The competence and age of seafarers must also be taken into account when deciding whether there are enough of them to meet this country's defence requirements. For example, the Chamber of Shipping told the Defence Committee in 1995 that over half of British ratings were then engaged as stewards and caterers,[71] and, whilst the Ministry of Defence pointed out that there would be demand for such staff during a conflict, it admitted that they could not be used for deck or engine room operations in an emergency.[72] Furthermore, the RMT told the Defence Committee in 1994 that "to be fully competent to serve in a military campaign ... [seafarers] have to be physically fit".[73] Simply counting the total number of British seafarers may give a misleading picture: "the actual numbers of people, deck and engine room ratings, young enough and fit enough with the competence [to meet defence needs] may not even exceed 3,000 people"[74] in 1994.

26. Although most of the Ministry of Defence's requirements for merchant shipping can be met through chartering vessels and crews on the open market, there are situations where that will not prove possible. Thus the need to maintain a large UK-registered merchant fleet, which includes particular vessels able to meet our defence and strategic needs, as well as sufficient trained British seafarers to man the fleet, remains. In the last resort, as the Employment Committee has said, a shortage of "ships or trained sailors at the disposal of HM Government may have a marked effect and detrimental effect on the UK's ability to defend itself".[75] It would also have the same effect on the country's ability to supply itself during a conflict.


27. The Transport White Paper describes shipping as "an efficient and environmentally friendly means of carrying our trade".[76] The evidence we received supported that claim. The Royal Society for the Protection of Birds, for example, told us that "it produces lower emissions of atmospheric pollutants per tonne of goods moved than any other major mode of transport".[77] There is also little constraint on traffic. Thus the UK "has a natural interest in exploiting the potential of shipping on coastal and short-sea routes to relieve pollution and congestion on the roads".[78]

28. British Shipping: Charting a new course points out that the UK is, as an island nation, particularly exposed to the consequences of maritime accidents: "in the interests both of the users of our waters and of those whose interests may be damaged by maritime pollution, we need to ensure the safety of all shipping around our coasts".[79] The UK can only exercise direct control over the standards of ships around its coast if they are UK-registered. There are, therefore, powerful environmental and safety arguments for encouraging the UK shipping industry, and particularly registration in this country.


29. Standards of safety and environmental protection are, however, less easy for the UK to enforce or even influence on the majority of the vessels which travel through the waters around the United Kingdom which are not UK-registered. The only control that the UK can operate is through Port State Control, which applies only to those vessels which dock here. The only means by which the standards of foreign-registered ships can be affected by this country is through the Government's influence in relevant international fora, such as the International Maritime Organisation (IMO).[80] Several of our witnesses argued that the strength of the UK shipping industry, and particularly the size of the UK register, would decide the weight given to the UK in such fora.[81] The Baltic Exchange pointed out that the IMO is based in London, and is "the only United Nations body located in the UK".[82]

30. Although we recognise the points made, it is difficult to assess what impact the size of the UK shipping industry, or the strength of our register, would have on our influence in international fora. However, it is self-evident that it would be difficult for the United Kingdom to carry weight in discussions about the standards which other countries' registers should adopt if it had a very small, or non-existent, register itself. As the Minister for Shipping told us, it is "very important to maintain the primacy of what is regarded internationally as a quality flag, and that this country should have a voice that is listened to".[83]


31. The evidence we received indicates that a vibrant shipping industry would bring benefits to the United Kingdom's economy, both in terms of the balance of payments and employment. There are of course many other industries which could make the same claim, and to justify the kind of financial and other support that most of our witnesses called for, reasons why the industry is specially deserving must be identified. Reasons must also be sought to justify specifically boosting the UK register and the number and training of British seafarers.

32. The shipping industry is unusual because of the number of industries it supports, not only directly, but by providing a pool of suitably qualified ex-seafarers. Without a significant British shipping industry the on-shore industries, including Maritime London, would face extreme difficulties. Britain's defence and strategic requirements mean that sufficient numbers and quality of ships and seafarers must be available to it at relatively short notice. Shipping is also a relatively environmentally-friendly mode of transport, and the UK has a vested interest in the standards of ships around its coasts, and so in increasing the size of its own register, and in ensuring that it is a voice that is listened to in international maritime fora. For all these reasons, we believe that the case for ensuring that the United Kingdom has a strong shipping industry, and particularly a successful register and a large number of seafarers, is overwhelming.

7   British Shipping: Charting a new course, para.8. Back

8   Also known as Category 1 of the Red Ensign Group. Back

9   Information provided by the Registry of Shipping. Back

10   Certificates of Equivalent Competency are issued, subject to a test of English language skills, to holders of certificates from European Union states, and members of the Commonwealth such as Australia, New Zealand, India, Pakistan, South Africa and Canada. Countries whose certificates are not recognised include Panama, Liberia and Cyprus, as well as Bangladesh and Sri Lanka. Back

11   SI 1995/1427. Back

12   Information provided by the Maritime and Coastguard Agency. Back

13   British Shipping: Charting a new course, para.25. Back

14   British Shipping, Charting a new course, paras.26 and 27, and Chart 2. Back

15   Figures taken from British Shipping: Charting a new course, December 1998, the Department of the Environment, Transport and the Regions, para.9. Back

16   Figures taken from Passenger Ferry Facts, at Back

17   See FUS 21, p.9. Back

18   Q.150. Back

19   British Shipping: Charting a new course, para.1. Back

20   UK Seafarers - An Analysis, by McConville et al, the London Guildhall University, 1997. Back

21   FUS 21, p.9. Back

22   See FUS21, p.9. Back

23   FUS 13, p.1. Back

24   FUS 13, p.2. Back

25   FUS 9, p.1. Back

26   FUS 13, p.3. Back

27   FUS 13, p.1. Back

28   Q.215. Back

29   See Q.215. Back

30   FUS 9, p.1. Back

31   FUS 8, p.2. Back

32   FUS 13, p.1. Back

33   FUS 8, p.2. Back

34   FUS 9, p.2. Back

35   FUS 8, p.3. Back

36   FUS 13, p.1. Back

37   FUS 4, p.1. Back

38   FUS 5, p.1. Back

39   See FUS 5, p.1. Back

40   See FUS 4, para.3. Back

41   FUS 4, para.3. Back

42   FUS 5, p.1. Back

43   See FUS 16, Table 1, taken from UK's requirements for people with experience of working at sea, The University of Wales, 1996. Back

44   FUS 16, Tables 2 and 3. Back

45   FUS 16, Tables 2 and 3. Back

46   See Q.71. Back

47   FUS 16, p.3, Tables 2 and 3. Back

48   British Shipping: Charting a new course, para.12. Back

49   Britain's Maritime Skills: An Audit, Chamber of Shipping, p.8. Back

50   Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86), Q.1006. Back

51   See FUS 39, p.1. Back

52   British Shipping: Charting a new course, para.14. Back

53   FUS 39, p.1. Back

54   Q.390. Back

55   FUS 39, p.1. Back

56   Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, para.9. Back

57   Q.416. Back

58   In other words, the Cayman Islands, Bermuda and Gibraltar, and the Isle of Man and the Channel Islands. Back

59   See Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, para.11; see also QQ.390 and 391. Back

60   See Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, evidence, Q.967. Back

61   Decline in the UK-Registered Merchant Fleet, First Report of the Transport Committee, HC (1987-88) 303-III, evidence, Q.1393. Back

62   See FUS 39, p.1. Back

63   See Q.394. Back

64   Described above. Back

65   Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, evidence, Q.1003. Back

66   Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, evidence, p.58. Back

67   See Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, evidence, p.58. Back

68   FUS 1, p.6. Back

69   See QQ.427 to 432. Back

70   Q.415. Back

71   Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, evidence, p.58. Back

72   Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, evidence, Q.974. Back

73   Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, evidence, Q.265. Back

74  Defence Use of Civilian Transport Assets and Personnel, Sixth Report of the Defence Committee, HC (1994-95) 86, evidence, Q.266. Back

75   The Future of Maritime Skills and Employment in the UK, Third Report of the Employment Committee, HC (1992-93) 924, para.27. Back

76   A New Deal for Transport: Better for Everyone, July 1998, Department of the Environment, Transport and the Regions, Cmd.3950, para.3.181. Back

77   FUS 6, para.23. Back

78  British Shipping: Charting a new course, para.10. Back

79  British Shipping: Charting a new course, para.11. Back

80   See British Shipping: Charting a new course, para.11. Back

81   See, for example, FUS 21, p.4. Back

82   FUS 13, p.3. Back

83   Q.448. Back

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