Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Supplementary Memorandum by the Department of Maritime Studies and International Transport of Cardiff University (FUS 16A)

THE FUTURE OF THE UK SHIPPING INDUSTRY

ANSWERS TO SUPPLEMENTARY QUESTIONS

Question: Might higher salaries in shore-based jobs actually encourage people to become cadets, since they can perceive a better-paid, more structured career?

  Answer: The short answer is probably "yes". However, the UK is not in danger of losing its maritime skills base because there has been a shortage of 16 to 17-year-olds willing to go to sea, but because an insufficient number of training berths for cadets have been provided by the British shipping industry over the past 18 years. In 1981 intake numbers fell below the required number to preserve the skills base for the first time, namely 1,050, and since then the cumulative shortfall in recruitment has grown to about 12,000. British shipowners should not be blamed, though, for the present predicament. The industry operates in an highly competitive international environment and in order to reduce their manning costs so as to stay in business many British companies have found it necessary either to reduce their commitment to cadet training or give up training altogether and employ entirely foreign seafarers from low wage cost countries at junior officer level. I entirely agree, therefore, with Mr Gray that the industry has had to cut its coat to fit the cloth. However, the consequence has been that the pool of partially and fully qualified seagoing officers below the age of 45 has now shrunk to the level where the shore based maritime sector's annual demand for fully qualified ships' officers cannot be met by natural wastage from the sea-going pool. Hence, the actual wastage rate will begin to rise and unless decisive action is taken by the Government to correct market failure there is no mechanism which will prevent it reaching the level where it will no longer be worthwhile for those shipowners who currently do train cadets and employ junior British officers to do so.

  The problem, of course, is that firms in the shore-based maritime related sector do not regard foreign ships' officers, naval officers or non-seafarers they might train as perfect substitutes for British ships' officers, so they will pay a premium price to secure the services of the latter. Moreover, most of these firms are in the private sector and thus cannot be expected to behave in an altruistic manner. So, for as long as they can recruit from the sea-going pool to fill vacancies where they have traditionally employed British ships' officers, they will continue to do so, particularly as by doing so they avoid any of the initial training costs involved which are borne by their former employers, namely British shipping companies.

  If the government fails to intervene to correct market failure then inevitably the skills base will be lost. The consequence of this is likely to be that firms which are footloose, such as much of Maritime London, will move their maritime related business offshore to other maritime centres where the required seafaring expertise can be found with a consequential loss in employment far greater than the number of ships' officers currently employed. Other firms, such as those in the port industry which are not footloose will have no alternative but to recruit foreign seafarers, naval officers or train non-seafarers. Whether the effects of this will be detrimental to the UK economy is uncertain. It will depend partially on whether employees displaced as a result of the upheaval are in employment or not and whether their value added in such employment is greater or less than it would have been if still employed in the maritime related sector. It will also depend on whether the net profits that firms earn on the maritime related operations which they have relocated abroad are eventually remitted to the UK and whether such earnings are greater or less than they would have been if such operations had remained in the UK. However, if I were chairman of UK plc, I would not risk the consequences of losing the skills base for the sake of a subsidy of about £70 million per annum, which in terms of total government expenditure is a trivial amount.

Question: What is your opinion of "fast track" Merchant Navy recruitment?

  Answer: It is one of the key measures, in a package of measures, that has to be adopted if the skills base is to be saved as such a training programme for graduates would halve the minimum lead time necessary to obtain a Class 1 certificate. However, if it is to be effective, it needs to be implemented during the current calendar year and at least 800 graduates recruited. This will not be achieved without significant Government financial support beyond that envisaged in the DETR strategy paper, British Shipping: Charting a new course, since such a scheme, I estimate, would cost about £32 million per annum when fully implemented and £7.2 million in the initial year. It is unlikely that sums of this order would be forthcoming from firms in the shore based sector on a voluntary basis, although as a taxpayer I am in favour of them making a fair contribution.

Question: Would it be possible for shore-based companies to employ officers with certificates other than Class 1?

  Answer: Yes, it would and they do, but research has shown that such people are usually employed in jobs where seafaring experience and skills are considered to be an advantage rather than essential.

Question: Of the four scenarios mentioned in your memorandum, which is most likely to counter the current problems of insufficient trained seafarers?

  Answer: Clearly, neither the first nor the second as they merely demonstrate the futility of trying to save the skills base at this eleventh hour without an appropriate package of measures, given the finding of the London Guildhall study which showed that the present situation is much worse than previously feared. This is because less than 50 per cent of seagoing ships' officers in the 25 to 45 age range hold Class 1 certificates and the majority of these are over 30 years old, which means that the number of fully qualified sea going officers in this critical age range is far fewer than previously thought.

  Of the other two, the fourth is, of course, most likely to save the skills base but whether it depicts the state of the real world depends very much upon whether the lower limit demand projection represents better the state of actual demand in the shore based sector than the central projection. The range of uncertainty surrounding the demand conditions is much greater than that surrounding the supply conditions and the fourth scenario presents a very optimistic picture. Even so, the prospects of saving the skills base are not good unless our proposed rescue package is implemented and that requires the Government assuming responsibility directly for its funding and making provision for it in the next budget. This means not only funding the "fast track" graduate training programme but also providing an inducement for non footloose firms in the shore based sector, such as those in the port industry, to behave in an altruistic manner and thus implement training schemes for non seafarers so as to reduce the shore based sector's demand for ships' officers.

Bernard Gardner

Cardiff University

1 February 1999


 
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