Memorandum by NUMAST (FUS 1)
THE FUTURE OF THE UK SHIPPING INDUSTRY
1. EXECUTIVE SUMMARY
Britain's merchant navy has suffered
an unparalleled decline during the past 20 years.
The future supply of British maritime
expertise is seriously jeopardised.
The loss of British shipping and
seafaring skills has profoundly adverse consequences for an island
nation in which 95 per cent of trade goes by sea.
There are strong economic, employment,
environmental and strategic arguments to support action to end
British shipping has immense potential
to help achieve the objectives of the Transport White Paper.
Clear consensus and unity exists
within the industry on the measures required to end the decline.
Most other major maritime nations
have adopted packages to support their shipping industries, with
tangible national benefits accruing as a result.
International trends present important
and potentially vast opportunities for the development of the
British shipping industry and of UK maritime training.
NUMAST is the trade union and professional organisation
representing more than 18,500 ship masters, officers, cadets and
other professional staff in the shipping industry.
Over the past two decades, Britain has suffered
a devastating decline in its merchant fleet. For more than a century,
the British merchant navy was the world's largest and 50 years
ago British-registered tonnage represented more than 22 per cent
of the world total. Today, British owned and registered tonnage
accounts for less than 0.3 per cent of the world total and the
red ensign fleet has slumped to 30th place in the world league
Similarly, the past two decades have witnessed
a drastic decline in British seafarer numbers. Total employment
of British seafarers onboard British registered ships has fallen
from 87,000 in 1975 to less than 17,000 in 1995.
For an island nation, that still relies on shipping
to carry more than 94 per cent of its international trade, these
statistics should be of the utmost public and political concern.
NUMAST therefore welcomes the Transport Sub-committee's
decision to stage an inquiry into the future of the UK shipping
industry at this crucial stage in the industry's long and proud
3. WHAT ACTION
The decline of the British shipping industry
stands in stark contrast to the state of the international industry.
While the red ensign fleet has shrunk, in tonnage terms, by more
than 95 per cent since 1976 the international merchant fleet has
grown to a record level of more than 760 million dwt and over
the last year alone registers such as Panama (up 7.8 per cent),
Singapore (up 16 per cent), Bermuda (up 24 per cent) and Germany
(up 35 per cent) have continued to record significant growth.
Shipping, therefore, is by no means a sunset
industry. More than 95 per cent of world trade is moved by shipping
and the volume of international seaborne trade has grown year-on-year
by more than 22 per cent over the past decade. UNCTAD forecasts
an average annual growth of 3.9 per cent in the coming decade.
At the same time, the international shipping
industry is experiencing regulatory and commercial pressures to
place a new emphasis on quality operations, creating substantial
demand for well-run and efficient ships and highly trained and
experienced seafarers. Britainwith its long maritime history,
world-renowned maritime expertise and a small but specialist shipping
fleetcould reap substantial benefits from these developments.
To secure a share of this global market, British
ships and seafarers need to be able to compete on an equal footing
with foreign counterparts. British shipping is squeezed on two
sides: from other traditional maritime nations who provide varying
levels of support for their shipping interests and from flag of
convenience registers offering substantial savings through minimal
adherence to international regulations and the use of low-cost
labour from developing nations. Research conducted by the OECD
on the latter shows that the operating practices permitted under
such regimes can enable shipowners to more than halve their costs.
Over the past two decades, the vast majority
of developed nations have adopted packages to promote their shipping
industries and the employment of their seafarers. Measures adopted
include: the reservation of certain trades to domestic-flagged
ships; operating subsidies; investment incentives; preferential
tax regimes; "second" registers; tax and social cost
exemptions for seafarers; and training support for seafarers.
There are many examples to illustrate the success
of such strategies, but perhaps the most relevant to the UK situation
is the experience of the Netherlands. Until the early 1990s, the
Dutch-flagged fleet had suffered a fairly severe decline. However,
following research showing that the Dutch maritime sector generated
some £5.2 billion a year (equivalent to 2.7 per cent of the
country's GNP) and provided jobs for around 120,000 people, a
support package was introduced in 1996 that attracted more than
110 ships to the register within 18 months and led to 40 companies
either expanding or establishing their shipping activities in
Although the 1992 Joint Working Party report
"British Shipping: Challenges and Opportunities" described
the industry as "a vital national asset", Britainin
contrast to most other major maritime nationshas for much
of the past two decades adopted a largely "hands off"
approach to its shipping industry. Indeed, during the 1980s certain
support measures were actually removed. In an international industry,
it is imperative that Britainif it is to retain any significant
presenceresponds to the regimes adopted elsewhere and enables
its ships and seafarers to compete on a reasonable basis.
Specifically, the UK shipping industry requires
a fiscal regime that is at least comparable with major competitors.
Evidence shows that the fiscal system in Britain is the least
conducive to investment in shipping of nine other major European
maritime nations. This is of particular concern now that the average
age of the UK fleet is well above that of the world fleet and
also because the volume of tonnage on order for UK registration
now amounts to only 1.3 per cent of the world total, compared
with 4.5 per cent in 1979. If British owners are not given the
climate in which to invest in new, efficient and technologically
advanced tonnage, the competitive disadvantage of the UK merchant
fleet is likely to be further exacerbated and the decline will
All sides of the UK shipping industry are united
behind a request for the introduction of the tonnage tax scheme,
along the lines of those successfully operated in the Netherlands,
Norway, Greece and Germany. Together with an improved depreciation
regime for investment in new shipping, this would ensure a tax
system that not only matches foreign competition but also better
reflects the fiscal realities of the present-day shipping industry.
NUMAST considers it is very important that any
initiatives have a direct and transparent linkage with employment
and training. Proposals submitted to the government's shipping
working group demonstrate the unity between employers and the
maritime unions on this issue.
4. THE BENEFITS
UK SHIP REGISTRATION,
The benefits of encouraging UK ship registration
are profound. Research by the business information group Douglas
Westwood showed last year that UK marine industries have an annual
turnover of £46 billion, generate exports worth £12
billion, and sustain more than 782,000 jobs. Just over 4.7 per
cent of UK GDP comes from marine-related industries and services
and maritime-related employment represents 3.6 per cent of the
UK workforce. Marine industries and servicesincluding shippingmake
a bigger contribution to the national economy and employment than,
for example, the financial sector.
However, as the UK shipping industry declines,
so does the UK's international maritime status. Other countries
provide evidence of the way in which shore-based maritime industries
and services suffer as a result of a decline in national shipping
activity, underlining the fact that domestic maritime infrastructures
are inherently linked to the state of the national merchant fleet
and maritime expertise.
With the development of new maritime centres,
such as Hong Kong, Singapore, Cyprus and Vancouver, Britain's
traditional leading role in the provision of such services as
shipbroking, classification, insurance, management and equipment
supply is becoming increasingly jeopardised through a challenge
that must be fought off if we are to retain our international
While shipping continues to make one of the
largest sectoral contributions to the UK balance of payments,
that contribution has been halved in real terms since 1980 and
continued decline of the fleet at present trends (particularly
in the high revenue earning ferry sector) could reduce earnings
by around one-third, in real terms, over the next decade. The
loss of City-based maritime services would add significant additional
damage to the national economy.
The benefits of encouraging domestic shipping
were underlined by US research in 1997, which showed that the
cost of running the country's cargo preference scheme was more
than offset by the increased revenue arising through employment
and foreign exchange benefits. With less than 1.4 per cent of
the world fleet, British-owned shipping still manages to account
for around four per cent of global shipping earnings and even
a marginal increase in this share (particularly at a time of increasing
international seaborne trade) would have significant national
economic impact. At present, just a one per cent increase in the
UK's share of the world shipping market would add around £1
billion to gross invisible earnings.
However, with 78 per cent of British-owned shipping
now operating under non-UK flags it is important to stress the
value of maintaining an adequate domestic merchant fleet to offer
full choice to domestic shippers, for security of trade, and to
ensure a firm degree of domestic control over the shipping carrying
our trade and passengers and operating in our waters. It should
be of the utmost concern that the vast majority of British seaborne
trade is now carried on foreign flagged shippingwith disturbingly
high levels onboard flag of convenience tonnage, operated to minimal
levels of safety and operational standards. While the UK fleet,
despite its additional average age, continues to boast one of
the world's best safety records, many of the ships operating in
our waters sail under registers with tonnage-loss ratios as high
as 40 times in excess of flags such as the UK. In recent years,
around one in every 10 foreign ships checked in UK port state
control inspections have been found to have so many defects that
they have had to be detained. Disasters such as the Braer and
the Sea Empress have highlighted the immense environmental and
economic impact that may arise from maritime accidents and underline
the need to promote the highest standards of safety through maintaining
our own merchant fleet and a strong pool of domestic maritime
Furthermore, as British shipyards and marine
manufacturers rely on UK shipping for around 50 per cent of their
business, the interdependence of the various sectors of the UK
maritime economy must not be ignored.
The spectacular growth in recent years of the
Isle of Man register makes an interesting contrast to the drastic
decline of the UK mainland register. Indeed, in recent times it
has actually overtaken the mainland register in tonnage terms
as a result of concerted efforts to attract foreign shipowners.
However, although the register has provided a degree of employment
opportunities for British officers and ratings, the proportion
of British seafarers employed is markedly less than on mainland
registered ships and the UK training and employment links have
been steadily diluted as increasing numbers of foreign owners
have transferred tonnage to the register. It is, as the Chamber
of Shipping has pointed out, the ships that are owned and operated
in the UK that represent Britain's true shipping interest and
which make the full contribution to employment and the UK economy.
The closer those ships are to the UK, not least in terms of registration,
the more direct the national benefits appear to be.
Although the Isle of Man has been viewed as
a form of UK second register, there appears never to have been
a conscious political programme to develop it as such. The initial
development of the register came from British owners transferring
from the mainland register and its genuine connections with the
mainland are now often tenuouswith any accruing benefits
to the overall UK maritime infrastructure falling short of those
that would arise from mainland flag operation.
5. THE CONTRIBUTION
The role of shipping in delivering environmentally-sound
transport policies has been seriously neglected over the past
two decades. There has been a marked absence of policies to encourage
the use of waterborne freight, so that the proportion of domestic
trade being carried on water (just 7 per cent) lags well behind
the levels attained in many comparable countries.
There are strong arguments in support of encouraging
a transfer of freight from the roads to the seasomething
that is increasingly reflected in the policies being pursued by
the European Union and individual member states. Britain has an
extensive coastline, with no major towns and cities being further
than 75 miles from the sea and some 350 ports around its coastline.
Shipping offers the potential to ease road congestion, reduce
noise and atmospheric pollution, and curb the pressure for new
road building programmes. Unlike the road system, it requires
little in the way of infrastructure investment and maintenance
and has enormous potential additional capacity. In total terms,
UK commercial road transport consumes almost 10 times as much
energy as domestic shipping to carry about twice the volume of
freight. Overall, water transport is as much as twice as energy-efficient
as rail, four to 10 times more energy-efficient than road and
many times more energy-efficient than air transport. A single
voyage by a coastal cargoship can carry as much cargo as 80 or
more lorries, with one estimate showing that the 11 million tonnes
of freight carried by water in London in 1990 amounted to some
10 million fewer lorry journeys.
The catastrophic decline of the British fleet
has reduced the opportunities for domestic shipping to contribute
to "greener" transportation policies and to benefit
from EC initiatives in this area. The development of shipping
as an alternative to rail freight has also been hampered by comparatively
poor road and rail links to ports and, until recently, by the
inadequacy of the freight facilities grant system for encouraging
alternative transportation modes. In addition, there has been
little consideration of the way in which new shipping technologies
can be used to overcome old objections about the speed of shipping
compared with land transport.
6. WHETHER ENOUGH
UK REGISTERED SHIPPING
Concerns about the strategic impact of the loss
of UK registered ships and seafarers has been articulated not
only by NUMAST but by numerous Parliamentary defence committee
inquiries during the past 15 years. In 1988 the defence committee
stated: "The availability of merchant shipping for defence
purposes is governed by three key factors: the number of UK flagged
ships; their accessibility when they are needed; and the availability
of a pool of British seafarers to man them. There are grounds
for concern on all three counts." Since that warning was
made, the number of British owned and registered ships has fallen
by around two-thirds, from 685 to 231, which NUMAST believes makes
a mockery of repeated government assurances that there are still
sufficient ships to meet strategic needs.
The British merchant navy has long held a central
role in our nation's defences and has traditionally been accepted
as "the fourth arm" of the armed forces. In the present
unsettled and constantly changing geopolitical situation, that
role is perhaps more important than ever.
The Falklands War and the Gulf conflict are
two recent and striking examples of the crucial contribution that
merchant shipping and merchant seafarers can make at times of
national emergency. Admiral Sir John Fieldhouse said after the
Falklands conflict that "without the ships taken up from
trade, the operation could not have been undertaken". Yet
the UK fleet today is less than one-third the size it was at the
time of the Falklandswhen foreign ships had to be chartered
by the government to make good critical shortages in key sectors.
In the Gulf war only eight of the 143 ships chartered by the MoD
flew the red ensign and a subsequent National Audit Office inquiry
confirmed concerns that the UK had paid around £38 million
in excess of market rates for foreign ships it chartered.
During the Gulf conflict, concerns were also
raised by US forces that delays in shipping troops and equipment
to the region had setback the combat readiness of the forces.
At a time when the UK is making a significant contribution to
the Joint Rapid Reaction Force, the need for adequate numbers
of merchant ships and seafarers is of special significance. Whilst
NUMAST welcomes the decision of the Strategic Defence Review obtain
four new ro-ro containerships in addition to two new ro-ro vessels
on bareboat charter to the Royal Fleet Auxiliary, we believe this
falls far short of what is required to remedy the impact of the
past two decades of decline.
The strategic concerns about the merchant fleet's
decline are not a simple matter of numerical decline. Different
ship types have particular strategic valuero-ro ferries,
product carriers and tankers, and large containerships are of
particular importance. Reliance on foreign shipping is, as the
Gulf experience showed potentially economically unwise, presents
strategic sensitivities, and "potential legal and political
difficulties" (as stated by the 1985 Defence Committee inquiry).
The government has itself acknowledged these issues by deeming
that certain ships of strategic significance should be required
to have British nationals as their masters.
It is now more than a decade since the defence
committee voiced its concern at the number of British seafarers
available to serve on ships operating in support of the armed
forces or strategic operations. Yet, since that time the number
has continued to decline and, on present trends, is set to decline
even more dramatically over the next decade. Reliance on foreign
seafarers or even crews from NATO or other EU countries is strategically
unwise. Not only do many of these countries also suffer from serious
and growing shortfalls in maritime expertise, experience in the
Falklands and the Gulf has shown that foreign seafarers may often
be unwilling to serve on ships involved in third-party conflicts.
7. THE PRESENT
UK SEAFARERS, THE
UK SEAFARERS CAN
Just two decades ago, the British shipping industry
employed 82,626 seafarers. In 1995, the year for which the most
recent statistics are available, it employed just 31,392. Between
1978 and today, the total number of British seafarers has fallen
from more than 65,000 to less than 25,000. Most alarmingly, more
than 70 per cent of British officers and 53 per cent of British
ratings are aged over 40. On current trends, this means that existing
officer numbers are likely to decline by almost 30 per cent over
the next five years.
This decline has very serious implications.
It matters that Britain faces a growing shortage of skilled and
experienced ships' officers and that we may soon be in a position
where we will be reliant on international markets for meeting
British merchant navy officers are internationally
renowned for their expertise and are among the most sought after
by shipowners and crewing agencies on the international market,
with around half the NUMAST membership employed on foreign flagged
ships. With the pressure for safer shipping operations and the
introduction of stricter regulatory regimes for shippingincluding
the International Safety Management Code and the revised Standards
of Training, Certification and Watchkeeping Conventionthe
demand for such skills is intensifying.
However, not only is there a growing shortage
of British officers, there is a growing international deficit
of skilled officers that is certain to increase in the coming
yearswith worldwide cadet recruitment estimated to be barely
75 per cent of the level required to meet future needs and the
new STCW Convention likely to lead to further reductions in the
supply of officers. Research suggests that worldwide demand for
skilled officers is already exceeding supply by as much as 50,000
and that the shortfall is likely to rise to around 350,000 within
six years. Although the officer nationality requirements for British
ships have, misguidedly, been diluted in recent years, NUMAST
believes that efforts to promote the UK register could be constrained
by a domestic seafaring skills shortage at a time of intense international
In 1991, a University of Warwick study predicted
a shortfall of 12,600 in the international and national supply
and demand relationship for UK officers by the end of the decade.
A recent EC-commissioned report on European officer training suggested
that the UK is presently short of around 850 officers, that this
will rise to more than 3,100 by 2001 and could grow to more than
6,800 by 2006.
Such shortages present profound problems for
the shore-based maritime infrastructure. Many leading institutionsincluding
classification societies, marine insurers, the Baltic Exchange
and the Salvage Associationhave expressed their concern
at the loss of seafaring skills for essential posts, such as pilotage,
ship inspection and surveying, marine law and insurance, maritime
training, ship management and harbour administration.
The demise of UK maritime expertise presents
a serious threat to the future health of many maritime industries
and services that provide significant economic and employment
opportunities. The loss of merchant navy officers' skills also
presents a serious threat to the safe operation of shipping in
our waters, as well as to Britain's continued international pre-eminence
in many maritime fields. While shipping companies may have been
able to utilise low-cost foreign labour in many seagoing posts,
it is unlikely that such a process can be applied to shore-based
maritime services and industries. In the long-term, Britain's
ability to influence global maritime policies and events will
be jeopardised by the country's consequent marginalisation in
worldwide shipping business and affairs.
Furthermore, the growing shortage of British
officers is likely to result in a "feeding frenzy" among
non-training employers, inflating pay and accelerating the flow
of officers from the sea to shore-based employment.
The employment of British officers has, in the
past 25 years, become increasingly threatened by the drift of
British-owned tonnage to foreign registers, by the low level of
wages that can be paid to seafarers from low-cost labour supplying
countries, and by the progressive employment support measures
adopted in many high-cost labour supplying countriesincluding
special tax and social security regimes, the payment of training
costs and innovative recruitment campaignsthan can halve
the cost of employing national seafarers.
While the UK has in recent years attempted to
offset the impact of such competition by introducing limited income
tax concessions for seafarers and by increasing the size and scope
of support for maritime training, it is fair to say that the overall
regime falls far short of that enjoyed in many other countries
and has failed to promote any significant increase in employment
and training levels. Many measures have been introduced in a non-systematic
mannerwith the result that income tax and national insurance
concessions, for example, are applied in a confused or complex
process that may actually exacerbate problems by requiring employers
to transfer contracts offshore or to require employees to serve
on certain ship types or in certain trades. With the European
Commission having explicitly stated the policies that member states
may pursue to promote seafarer training and employment, it is
now more essential than ever before that the regime in the UK
matches that applied in comparable countries such as the Netherlands.
The annual intake of officer cadetsthough
now significantly up from the trough of less than 100 in 1986is
still barely one-third the level acknowledged as necessary for
ensuring that future needs are met. While evidence shows that
there is no shortage of well-qualified and committed young people
applying for seagoing training opportunities, it is clear that
the number of available cadetships is extremely limited.
Because the current international trends present
significant opportunities for skilled British officers and offer
young people potentially stimulating and high value career choices,
the shipping industry could offer the government a valuable source
of fulfilling its commitment to provide new and rewarding opportunities
for youth employment.
NUMAST believes there is significant scope for
further expansion of the SmarT training support scheme, to encourage
more employed to contribute to the training process. The Union
has for several years also argued strongly in favour of the creation
of a national training fund scheme to co-ordinate all actual and
potential sources of training funding, with the additional development
of an industry "levy" scheme to end the present divisive
and damaging structure in which many employers are content simply
to "poach" from those who make the often considerable
commitment of investment in recruitment and training. There are
now firm and tangible signs of support within the industry for
such a scheme and NUMAST believes the government must play a firm
role in fostering its development.
8. WHAT THE
UK CAN LEARN
Virtually all major maritime nations have adopted
some form of policy programme for supporting their merchant fleet
and merchant seafarers. The measures utilised are varied and their
impact has similarly varied, from slowing the rate of decline
to generating a market revival in fleet size and seafarer employment.
Britain's failure to match such policies in
a cohesive and planned strategy has undoubtedly resulted in its
comparatively marked maritime declineone of the most severe
experienced by any country.
The measures adopted in countries such as Norway,
Sweden, Denmark, Greece, Spain, Germany, the Netherlands and the
United States have followed an assessment of the national value
and importance of the country's maritime sector and have been
introduced in a planned, strategic manner. In contrast, the UK's
response to the decline of the merchant navy has until now failed
to produce a comprehensive and co-ordinated strategy for the future.
The European Union has becoming increasingly
aware of the decline of the Community's maritime industries and
increasingly responsive to their needs. The EU guidelines on state
aids for shipping adopted in July 1997 have signalled the endorsement
of the progressive measures adopted by countries such as the Netherlands
by accepting the fact that shipping presents a "special case"
for support. The research has been conducted and the political
arguments for measures to provide the environment for British
shipping and maritime skills to be rejuvenated have been proven.
Other countries have acted in response to these factorsBritain
can no longer afford the time to go through the processes followed
by these countries: in essence, there is no need to "reinvent
It is now essential that Britain adopts a structured
and strategic maritime policy in line with the EU guidelines and
the measures adopted elsewhere. Unless this is done, the UK fleet
and UK seafarers will become increasingly competitively disadvantaged.
9. THE ROLE
THE UK, SUCH
In the past few years, a number of studies (including
work undertaken by British Invisibles and the Maritime Panel of
the Technology Foresight Programme) have demonstrated the immense
national value of the UK maritime sector. Britain remains a global
market leader in many maritime servicesaccounting for around
25 per cent of the marine insurance market, as much as 50 per
cent of sections of the shipbroking market, classifying more than
one-fifth of the world fleet and also acting as a leading international
centre for maritime law, seafarer training, consultancy and publishing.
Underpinning NUMAST's evidence to this inquiry
is the concern that the continued decline of the UK fleet and
of UK seafarer numbers will jeopardise the future of such services
in Britain. There is already evidence to show that maritime-related
earnings in the City have declined by around one-third over the
past decade and by more than 50 per cent in real terms since 1975.
Shipping's unparalleled internationalism fosters the ready development
of new centres of expertise and servicedemonstrated by
countries such as Singapore, Cyprus and Hong Kongwhich
many other governments around the world are consciously responding
In 1992 the EU's Maritime Industries Forum warned
that "there is at all times the potential for outward movement
towards operating bases where conditions are more favourable or
where survival in this highly competitive global market is less
By failing to stem or reverse the loss of British
registered ships and of British seafarers, the UK will lose the
basic building blocks supporting the valuable ancillary maritime
services and industries. In turn, Britain will face the gradual
demise of its international maritime status and its ability to
participate and influence global maritime policy. For an island
nation, still highly dependent on the sea and shipping, that should
be a deeply disturbing prospect and one that should be avoided
at all costs.
The UK shipping industry has suffered a decline
of almost unparalleled severity.
This decline presents alarming consequences
for national security, employment, the environment and the economy.
A comprehensive package of measures must be
introduced urgently to ensure a future for British shipping, UK
seafarer employment and the wider UK maritime infrastructure.
Measures required include:
The introduction of an optional tonnage
The provision of an improved depreciation
regime to encourage greater investment in new tonnage.
Application of the measures permissible
under the EU state aid guidelines for supporting shipping and
Increases in the scope and value
of existing support for seafarer recruitment and training and
their application to all employers recruiting British cadets and
The extension of existing UK seafarer
income tax concessions to certificated UK officers and ratings
in all sectors of the industry, irrespective of ship type or trading
The abolition of employers' National
Insurance contributions for British seafarers, with no loss of
seafarers' individual entitlements.
Improved incentives to encourage
the transfer of freight to waterborne modes of transport.
Concerted and strict application
of international safety standards on foreign ships trading in
In 1986, a similar inquiry by the House of Commons
Transport Committee warned the government:
"It is a fact that in the real world there
are only two alternatives for maritime governmentseither
to promote their country's shipping industry, or to see
it obey market trends and ebb away to registers which have a competitive
advantage even though their advantage may sometimes be artificial.
There is no third option."
Twelve years on, NUMAST believes that stark
warning is as real as it ever wasif not more so. We cannot
wait a further 12 years. Today, more than ever before, we have
to take the first option.
23 November 1998