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

Memorandum by the Chamber of Shipping (FUS 21)


  The Government's review of the shipping industry is both welcomed and urgent.

  It comes at a time of considerable opportunity for well-placed and efficient shipping fleets, with world seaborne trade projected almost to double by the year 2012.

  The Chamber and the two seafarers' unions (RMT and NUMAST) have taken a common line on all major issues throughout.

  Action is needed to:

    1.  establish a competitive tax environment for shipping in Britain and put British companies on the same footing as their competitors elsewhere; and

    2.  boost the training of British seafarers and create a cost-climate which will encourage their employment in the long-term.

  Such a policy will bring direct, practical benefits to the wider, shore-based maritime businesses, to Britain's defence policy, and to the environment.

  Many major European countries have already adopted measures such as those proposed, with successful results. That is encouraged by EU state aid guidelines.

  If Britain chooses not to follow their example, our shipping companies and UK Plc will lose out, particularly with the increasing trend towards cross-national mergers.

  As such, registration in the UK brings few practical benefits. It is more important to establish the right operating and employment climate in Britain. Nevertheless, the Chamber supports a revival in the UK register and stresses the importance therefore of its administration being both efficient and user-friendly.


  The Chamber represents 137 member and associated companies, which own or manage 680 merchant ships of 17 million dead-weight tonnes. We are grateful for the opportunity to present evidence to the Transport Sub-Committee on this important subject.

  Over the last year, the Chamber has been pleased to work closely with the Government and the trade unions in the context of the Shipping Working Group established by the Deputy Prime Minister. We would emphasise the common line that has been taken by the industry (the Chamber and two unions) in every major representation made to Government within the Working Group. The Chamber notes that the Government's "daughter" paper on shipping is scheduled to be published during the first half of December.

  We consider that the present initiative offers a clear opportunity for the Government—while setting its priorities across a wide range of issues—to ensure that Britain embarks on a positive industrial policy for shipping, for the first time in many years. That would also bring benefits to a wide range of shore-based, maritime-related businesses, to the economy as a whole (both earnings and skills), to our defence capability, and to our position in the world's international maritime bodies. If this window is missed, the message will be sent to our shipping industry, market analysts, the related industries, and the outside world that maritime matters are not high on the Government's agenda and all will react to that message in accordance with their assessment of the future. We believe that a negative message will have serious and possibly irreversible consequences for UK Plc.

What action and partnership is required of the industry and Government to develop a sustainable, internationally competitive shipping industry?

  The Chamber considers that the Shipping Working Group has correctly identified the challenges facing today's British shipping industry. We shall not know—until the publication of the "daughter" paper—what actions the Government is proposing. Nevertheless, the industry has jointly identified the following items as being of greatest priority and called for urgent Government action, echoing what is available in many other EU countries, on:

    (1)  Training. The aim is to increase the current level of about 450 new officer trainees (cadets) each year to a target of 1,200 and to employ more British ratings.

    (2)  Employment costs. The preservation of maritime skills in the UK—for the future needs of both shipping and the related shore-based businesses—depends not just on the expansion of training, but on establishing a cost-climate in Britain which will create opportunities for the employment of more British seafarers.

    (3)  Taxation and investment. This is perhaps the most crucial issue. If British companies are to remain active in international shipping, a more competitive tax environment is required for shipping in Britain, which will put them on the same footing as those from other countries in Europe.

    (4)  The UK ship register. However well focused the employment and fiscal arrangements which apply to a national fleet, they will have no significant influence on the size of the national register if the administration of the register is not efficient and user-friendly. Currently, other high-quality registers appear more attractive. While, clearly, maintaining high standards of quality and operation in the fleet must continue to be paramount, there is scope for improvement in Britain and the Chamber is already working closely with the Marine and Coastguard Agency to ensure that comes about.

  Our detailed proposals on (1) and (2) are spelled out later in the Employment chapter (pages 82-83).

  The proposal in (3) is not brought out in the Committee's other questions, but was considered in detail by the Shipping Working Group. The Group acknowledged that international shipping operated in a fiercely competitive and low-tax environment, which provides an incentive to companies to flag their ships and locate their corporate structures in low-tax countries. As described below in the chapter on experiences of other countries (pages 82-83), many countries in Europe—whose fleets are in close competition with ours—have taken action to align the position of their shipping companies with conditions in the international markets, e.g., through reductions in the rate of corporate taxation applicable to shipping operations; allowing off-shore structures which effectively reduce tax liabilities to zero; adopting corporate tax regimes specially tailored to the shipping industry, which assess tax liability on the basis of the size (i.e., tonnage) of a company's fleet; and other fiscal measures.

  Drawing on the Dutch model, the Chamber and unions have proposed that the UK should introduce the option of a ring-fenced, tonnage-based tax regime for shipping profits within the current corporate tax regime. Similar schemes also exist in Norway, Germany and Greece and are under consideration in Denmark, Finland and Sweden. Increasingly, this is becoming the conventional method of taxing shipping activities and has the explicit blessing of the EU Commission and member states. Other states, such as France and Italy, have achieved a similar result through other means.

  Such a change would improve both the rate of investment and average age of the UK fleet and establish a level playing field with other major competitor countries. It would send the message to observers and investors that the ship-operating environment—in the UK as elsewhere—is low-tax and would help recreate the necessary "confidence factor" that is essential to the revival of the UK fleet.

  It is difficult to isolate the beneficial impact of a tonnage regime in a particular country from the impact of the total support package, including any employment measures. However, both the Netherlands and Norway report successful results after introducing new policies in 1996. Both have seen sudden and significant increases in their owned and their registered fleets; in employment at sea; and in ancillary maritime-related activity ashore. As one example, there has been a net gain of 120 ships on the Dutch ship register.

  In the UK, a strong partnership has already been developing with the Government during the activity of the Shipping Working Group (and over a number of years within the industry itself). The Chamber hopes that the fruits of that will become evident over the next three months, with the publication of the "daughter" paper and the next Budget in early March.

  It is important that Government and Parliament as a whole appreciate the urgency of the position currently facing British shipping. This has been intensified by the emergence in the last two years of cross-national mergers in the shipping industry, in which a single company may be based in two countries, one of which offers a positive shipping environment and the other not. This is particularly poignant in instances involving the UK and the Netherlands, where any objective business evaluation would currently tend to direct all shipping activity towards the Netherlands.

  It should be recalled that the main competitive yardstick remains the international shipping markets and, particularly, the tax and employment arrangements in the Far East and other low-cost areas. Actions taken by higher-cost countries, including in Europe, are aimed above all at reducing the cost gap with those competitors. To the extent that the UK—almost alone among the major maritime countries in Europe—may choose not to adopt similar policies, it will demonstrate that it is prepared for shipping and wider maritime activity increasingly to shift to those countries.

The benefits of encouraging UK's ship registration, the extent and implications of "flagging out", and the specific position of the Isle of Man registry

  In recent years, there has been an absolute decline in the size of the fleet owned by British shipping companies and a significant relative shift between the ship registers they use.

  Currently only 20 per cent of the UK-owned fleet is registered on the UK mainland, although a further 49 per cent is registered in the Crown Dependencies and Dependent Territories (i.e., flying the Red Ensign). Thirty-one per cent is registered elsewhere in the world. In Europe, only Sweden currently has a smaller proportion of its owned fleet registered at home, although a large proportion of the UK-owned fleet has remained within the Red Ensign group. There is every indication that the trend will continue.

  Since 1985, against the overall background that the UK-owned fleet under all registers has contracted by 47 per cent by tonnage and 40 per cent by number, the fleet registered in the UK mainland has contracted severely, while the UK-owned fleets registered in the Crown Dependencies and under foreign flags in particular have expanded hugely.

  The average size of UK-owned vessels registered in the UK is now much smaller than it was (from 20,000 dwt in 1985 to 6,000 dwt today), while that of vessels registered in the Crown Dependencies and Dependent Territories have increased substantially.

  The following general conclusions can be drawn in regard to the major sectors:

    —  tanker: the deep-sea fleet is almost entirely flagged abroad, while UK-registered tankers are much smaller and therefore almost certainly coastal;

    —  dry bulk: the same applies to an even greater extent here, with only 17 per cent (by number) and 3.6 per cent (by tonnage) remaining on the UK register;

    —  container: the flagging-out process here began later. Currently 40 per cent of the fleet (by tonnage) and 33 per cent (by number) remain registered in the UK;

    —  passenger ferry (including ro-ro freight operations): as might be expected, a higher proportion—60 per cent—has remained on the UK register;

    —  cruise: a similar picture, but accompanied by substantial overall growth. The percentage of UK-owned cruise vessels on the UK register has declined from 70 per cent to 60 per cent, with foreign registers attracting most of the additional tonnage;

    —  off-shore support and specialist: these have tended to remain on the UK mainland register, but the trend to register abroad is growing here too.

  The choice of a ship's flag is a question which has faced shipowners and operators since the beginning of time. It is important to recognise that "flagging-out" does not in itself imply a loss of standards. Clearly, the choice of flag (and therefore commitment and strength of the enforcing administration) has a direct relationship with the formal standards which will apply to the ship and how they will be implemented. However, the primary factor is the involvement of a responsible parent company determined to maintain a quality operation. That is why the UK shipping industry has encouraged the UK Government to press for strong and proactive enforcement of international standards by both flag and port states.

  From a business viewpoint, encouraging UK registration brings a few practical benefits. The main arguments in favour include:

    —  emotional attachment;

    —  acceptance by other countries of the quality of the shipping operation, because of the respect worldwide for UK standards; and

    —  status of the UK Government in, and its ability to influence, international organisations dealing with maritime trade, safety and environmental issues (e.g., IMO, ILO, OECD, UN);

    —  demonstration to passenger customers of high standards.

  In purely commercial terms, except marginally for the last, these do not justify a cost premium.

  On the other hand, there may be good, commercial reasons for UK owners and operators to choose not to use the UK register, including the ability to achieve more cost-competitive operations, particularly relating to crewing; the availability of a user-friendly, high-quality administration, which is more flexible in its approach; and, in some cases, access to particular financing arrangements. The value of the overall package differs from register to register, from company to company, and from ship to ship.

  The advantages of the Isle of Man register are that it:

    —  is a high-standard, Red Ensign country;

    —  is geographically close to the UK;

    —  offers companies a package which does incorporate flexibility, a user-friendly regulatory environment, employment cost advantages, etc.

  It is important that companies using the Isle of Man or other Red Ensign registers should continue to be able to do so in future. Any change to that or to the current status of these registers (to the limited extent this is within the influence of the UK), in the belief that owners would return to the UK register, would be mistaken unless the latter can be guaranteed to offer the same freedoms, benefits and service. It would, more likely, drive owners further offshore.

  The best way to reverse the flagging-out trend is to encourage a revival in the use of the UK register in an organic and soundly-based way, i.e., by establishing a business-friendly environment for shipping in the UK. If conditions are right, more ships will register here.

The contribution that shipping can make to achieving the objectives of the Transport White Paper

  We refer to our comments in connection with the Committee's separate Inquiry into the Government's Integrated Transport White Paper. We welcome the Government's assurance that it intends to develop a new policy based on a long-term, strategic vision of the importance of British shipping to the nation and achieving the maximum national economic and environmental benefit from shipping.

  The Chamber's evidence highlighted four key factors which strengthen the contribution which shipping can make to the objectives of sustainable development and integration:

    —  maritime transport has virtually no capacity or "track" limitations;

    —  in the UK in particular, shipping already pays its full infrastructure cost, through port charges and light dues;

    —  in terms of energy efficiency and air pollution, shipping is already the transport mode which is least harmful to the environment, taking place away from populated areas; and

    —  British shipping companies provide a high standard of training and safety, meeting well-policed national and international standards.

  A number of proposals were set out in the White Paper, on which the Chamber commented in its evidence dated 24 September. Some of these items are likely to be taken up in the shipping "daughter" paper. They are supported, subject to the qualifications set out in our earlier memorandum.

  We believe that there is scope for a modest but significant expansion in the proportion of the UK's domestic cargoes which move by sea, from the current level of 25 per cent. With the right policies, that would make a useful contribution to reducing congestion ashore and to reducing pollution generally.

Whether enough UK registered shipping is available to fulfil the country's strategic needs and international obligations

  All recent investment in the Armed Forces has been aimed at increasing their flexibility, mobility and deployability. The Government acknowledges that an assured supply of merchant shipping and seamen is essential to fulfil these objectives. In anything but a small-scale deployment, existing national policy is to obtain merchant ships, and the seafarers to crew them, on the commercial market as and when required. Requisitioning could be used in appropriate circumstances.

  The Chamber shares the view that, in many scenarios, especially where the UK is acting in conjunction with allies or with general world approval, access to the commercial market would probably provide sufficient ships and seafarers to fulfil military's requirements. However, that is not certain in regard to all necessary types of vessel. Nor has that capability been tested in a "shooting war" at sea—the 1991 Gulf conflict was mercifully free of direct attacks on the allied supply chain. Moreover, as has been acknowledged by Government, the UK is still likely to have to act alone in certain circumstances.

  The shipping industry does not believe that a policy of obtaining merchant shipping in an emergency from the international market can guarantee to provide sufficient numbers of the right ships and seafarers to crew them, within the time required, for all currently outlined defence tasks. Our Armed Forces now rely effectively on the commercial market, and on the willingness of foreign owners and foreign crews, to facilitate the much vaunted flexibility and mobility that they are committed to provide, rather than British owners, British ships and British seafarers. There are insufficient ships of specified types in the British merchant fleet to provide the lift required to perform the equivalent of the Persian Gulf deployment or to repeat the Falklands operation. This would appear to be acknowledged by the recent decision of the Ministry of Defence to charter six roll-on/roll-off ships, in order to strengthen its response capability. The Chamber believes this a sensible approach to achieving a basic lift capacity, but they will have to be supplemented extensively in a major conflict.

  Similar concerns were expressed by the House of Commons Defence Committee in its report of June 1995, exemplified in the statement that: "The Government has no recent evidence on which to base its confidence that the UK merchant fleet can meet our defence needs".

  While there is some debate whether the current number of British seafarers is adequate today for defence purposes, there is agreement between the industry and the Ministry of Defence that this cannot be guaranteed in the longer term. Specifically, there are doubts that sufficient trained British seafarers will be available to replace foreign, non-committed crews on chartered or bought-in merchant vessels and there are unlikely to be powers to direct labour in any crises short of war. These doubts will grow into certainties in the short term, unless the number of British seafarers in employment and training increases.

  The Chamber's view is that investments designed to improve the flexibility, the mobility and deployability of our Armed Forces will be wasted unless sufficient British ships and skilled seafarers can be guaranteed to move and sustain those forces. The best way of underpinning our defence requirement continues to be through viewing our merchant fleet as a key national asset, available at low cost in times of need. The Shipping Working Group considered the viability of maintaining a strong national merchant fleet into the future in the round. That cannot be guaranteed—indeed is unlikely—if the right investment and operating climate does not exist in the UK. From the defence point of view, a larger, more versatile pool of British (i.e. requisitionable) merchant ships and seafarers will be essential in the future to provide an assured lift capacity for the military and for resupplying our nation.

The present level of employment of UK seafarers, effects of any present and future shortages of skilled personnel in the shipping industry and in related on-shore industries, and how the training and employment of UK seafarers can be promoted

  The numbers of UK officers and ratings serving on board Chamber of Shipping member company vessels has shrunk from 52,000 to 20,000—down by more than 60 per cent—since 1980. The trend reflects the decline in the UK-owned fleet as well as increased productivity and changes in manning practices.

  The current position has been confirmed by a study by the Centre for International Transport Management at London Guildhall University in 1997 which found that, taking a 57-year retirement age, the total number of active British seafarers was 24,510 including just over 6,000 officers employed by foreign companies. In addition, there were some 1,130 cadets undergoing training. Of great concern, 71 per cent of UK officers and 53 per cent of ratings were aged between 40 and 65 years. This compared with 43 per cent of the total UK male workforce in 1991 (the last census date) and an average of 28-29 years (for officers) in the early 1980s.

  Chamber members alone have over 30,000 officer and rating posts on their ships in total. While it is true that there is a growing shortage of officers both in Europe and worldwide and that this will be exacerbated as the 1995 amendments to the IMO Convention on Standards of Training, Certification and Watchkeeping come into effect, generally speaking, it is possible to find suitably qualified officers and ratings to crew ships at the present time. There are areas of difficulty, particularly arising from the differential impact of the income tax position of UK resident seafarers. The key questions for the UK, however, are how many of those seafarer posts can be filled by British nationals and whether enough suitably qualified British seafarers are available.

  The Shipping Working Group considered this issue in detail. It is hoped that the "daughter" paper will make positive recommendations on this aspect. All the industry partners accept that, if British shipping companies are to be competitive in the harsh world markets, British nationals have to add value in the shipping industry, as well as in any other international industry, and thus justify any additional cost which their employment may entail. By and large, the cost differential for officers is relatively small and the qualifications and experience of British officers—particularly seniors—such that they remain the strong preference of the British shipping companies. For ratings, the differential is considerably greater and the cost pressures on companies therefore all the stronger. In the deep-sea trades, very few British ratings are employed at present, except by the Royal Fleet Auxiliary (which is not subject to commercial pressures). Realistically, that will remain the general rule in future, except in a few very specialist positions. The opportunities for British ratings in the short and medium term remain most strong in the short-sea and near-coastal trades.

  The Chamber has set up a separate Ratings Task Force with RMT, NUMAST, and the DETR, to consider practical opportunities for the future employment and training of British ratings.

  The shortage is most evident in levels of recruitment. New officer trainee entrants numbered about 450 per year over the last three years. This compares badly with the desired level of 1,200 identified by both the Cardiff and London Guildhall Universities' studies, if the future needs of both the British shipping industry and the shore-based maritime businesses are to be satisfied. Overall, there has been a long-term recruitment deficit of officer trainees going back to the early 1980s. There is therefore much ground to be made up if the national requirement of maritime skills is to be met. This has led to shortages of junior officers for UK shipping company employers and—in view of the increasing age profile—of seafarers coming ashore to posts in other, related industries and services. The study by the University of Wales in Cardiff in 1996 highlighted almost 17,000 posts in more than 20 different sectors which needed to be filled by former seafarers, mainly qualified with a Class 1 certificate (i.e., Master, Chief Mate or Chief Engineer). These sectors included shipbuilding, marine equipment, ports, ship classification, surveyors (including the Marine and Coastguard Agency), training establishments, consultancy, and the whole range of maritime financial services in the City of London (broking, insurance, financial and legal services, etc).

  If Britain does not maintain its core maritime skills, it will soon lose the businesses that depend on them. The key issue is to persuade, encourage and assist all those who employ British seafarers to play a full part in ensuring that the future supply is maintained.

  The whole area of training and employment of UK seafarers was at the heart of the work of the Shipping Working Group. The Chamber and the unions have made the following specific proposals, which they believe would be effective in reducing a large part of the cost gap between employing British seafarers and costs in the international markets:

    —  upgrading of the assistance available under existing training programmes (mainly SMarT);

    —  removal of unnecessary restrictions on ships where seafarers can be trained;

    —  encouragement for the development of alternative career structures for seafarers, including more rating/officer conversion training and enhanced training for ratings undertaking specialised tasks;

    —  expansion of crew travel assistance under the current crew relief costs scheme;

    —  elimination of employers' National Insurance contributions for British seafarers (and, in parallel, allowing more British seafarers employed on non-UK ships to pay, on a voluntary basis, Class 1 NI contributions, which they are currently not able to do);

    —  extension of the current foreign earnings deduction which applies to seafarers' income tax liability, to cover all genuine seafarers (rather than just those in deep-sea trades).

  If these measures (and the fiscal measures proposed, particularly the tonnage-based tax option) are adopted, the Chamber has given a commitment to make every effort to increase the recruitment and training of British cadets and ratings by 25 per cent each year for a period. The Chamber and the unions have also jointly proposed that some of the new measures should be dependent on the beneficiary shipping companies undertaking a firm commitment to train, or fund the training of, an agreed minimum number of new seafarers in the future.

What the UK can learn from the experience of other countries in dealing with similar problems and the role of the European Union

  The UK is coming from behind in developing a pro-active policy for shipping. Most other major European countries—and others such as the United States—already have measures which encourage both investment and employment in this sector.

  In terms of the general corporate tax regime and incentives to invest in shipping, the UK is at the bottom of the league in Europe—even though the general corporate tax arrangements here have improved in recent years. The following graph shows the value of the fiscal systems which apply to shipping in a number of countries, expressed as the effective discount on the purchase price of a new acquisition that their systems represent. Compared to the UK, companies in other countries may have an advantage of 2-2½ times the discount in this country. The rate of investment by British shipping companies has suffered accordingly.

  The disadvantage that this implies for Britain is most evident in the increasing trend towards cross-national mergers, particularly where the merger is with a company from one of the countries where the shipping fiscal system is most favourable. Practical examples exist of cross-national mergers or joint ventures involving both other European and Far Eastern businesses. Inevitably, with time (and sometimes quickly), Britain loses out. The most clear and immediate example is a merger (50/50) with a Dutch company. Decisions on location of different parts of the operation and on future investment will inevitably be heavily influenced by the relative attractiveness of the corporate tax regimes and investors can be expected to disapprove of the current UK regime.

  On employment costs, the differential between a UK and a low-cost (say, Far East or East European) crew may be as much as 2:1. More than 10 European countries currently reduce the cost gap for the employment of their national seafarers through income tax and social security alleviations. These countries include Denmark, France, Germany, Greece, Italy, Netherlands, Norway and Sweden among others. In most cases, the cost of employing a national crew is reduced below the current cost of employing a UK crew on normal terms, even though the UK seafarers will receive less in take-home pay.

  New EU Guidelines on State Aids for shipping, adopted in July 1997 by the EU Commission following consultations with member states, generally endorsed both the fiscal and employment measures taken by these other countries. The Guidelines state clearly that:

    —  "maritime transport presents a special case";

    —  "the fiscal costs (corporate taxation and wage-related liabilities in respect to seafarers) have been shown by different studies to be the critical and distortive factor";

    —  "the problem of the competitiveness of the EU fleet on the world market is a structural one . . . As the immediate prospects of resolving this cost-gap problem do not appear good, the need for aid measures . . . is not likely to be short-term"; and

    —  "at this stage, there is no evidence of schemes distorting competition in trade between member states to an extent contrary to the common interest".

  Therefore, despite current reports in the press that the EU may move towards fiscal harmonisation, particularly in cases where individual national arrangements favour one or other industry, uniquely, the shipping industry is subject to EU guidelines which acknowledge the international yardstick of a low-cost and no- or low-tax operating environment and allow governments to encourage increased investment and employment in shipping.

The role and importance of on-shore shipping services provided in the UK

  The Chamber has tried to identify 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". The total net output (or value added) from such activity is estimated—on the basis of readily available material—to be over £7.5 billion, or 1.1 per cent of GDP. The turnover (or gross earnings) from these activities is estimated at around £20 billion, of which £5 billion directly from merchant shipping activities and about £4 billion from suppliers to shipping operators.

  Some other sources make a broader assessment relating to all activities having any connection with the sea (e.g., including naval activities, seaside leisure services, and fishing). That produces figures which are substantially higher, but have a different focus.

  Using the Chamber's definition, at least 1,200 companies with over 112,000 employees (both conservative estimates) form part of this wider maritime "constituency". They are spread throughout the country, including in areas of regional priority. The largest sectors in terms of employment are shipping, shipbuilding and repair, marine equipment manufacture, the ports, education and the financial and other maritime services (particularly in the City).

  The Chamber believes that the linkages between a national, owned or controlled shipping fleet and the long-term viability of these wider, shore-based industries and services are strong, in economic and in other terms. They derive from both the business and the essential skills which the national merchant fleet provides to them. Of course, in a number of cases, substantial earnings arise for these industries from non-British shipping. That is self-evident for an island nation with more than 100 active commercial ports and for the City's maritime services whose customers come from the world over. However, the Chamber believes that historical precedent shows that the presence of a substantial national fleet (both ships and seafarers) is important for the long-term health of these maritime-related businesses. The example of the decline of New York as a maritime centre in the 1960s demonstrates that. Similarly, there is clear evidence that policies supporting a strong national merchant shipping industry can create a confidence and a positive environment in individual countries which will enable those wider maritime, shore-based businesses—or "cluster"—to grow.

  Studies have been undertaken by the Chamber of Shipping and by British Invisibles in recent years assessing the value of the City's maritime services. The 1996 BI report on Maritime Services (part of its City Business Series) suggested that the earnings of maritime services within the City were between £1.5 billion and £2 billion. That contribution was in addition to the earnings of the UK shipping industry itself. The precise calculations differ in their presentation from sector to sector and the report itself acknowledges that the present statistical base relating to the UK shore-based maritime sector is limited. On the other hand, it provides the best possible estimate under current circumstances and is based on practical inputs from each sector. It also found that overall employment in City-based maritime service activities was likely to exceed 10,000.

  One practical example of the linkages which operate between the different maritime-related sectors is the cruise ship "Oriana". Since no UK shipyards were willing to tender for the order, it was placed with the Meyer Werft shipyard in Germany. Nevertheless, the fact of UK ownership of this £200 million ship automatically generated a series of UK connections which are not immediately evident. A large proportion of the equipment and fittings on board were made in the UK, with some 50 British companies contributing directly to its building and fitting-out. Behind those companies lie many unidentified suppliers of general materials used in the production of particular items. (The British products on board included: stabilisers, steering gear, boilers, electrical installations, fire and safety equipment, life raft equipment, paint, seals, marine growth prevention system, plumbing, plant and pumps, pallet trucks, baggage-handling systems, lubricants, and other maritime equipment as well as hotel supplies such as laundry, carpets, furniture, restaurant materials, china, cutlery, linen, interior design and leisure spaces outfitting leisure facilities, security safes, shop equipment, and works of art.)

  In addition, this ship—although not "built" in the UK—is registered in the UK, crewed by British seafarers, surveyed, classed, and insured in the UK. Hence, the economic benefit from UK-based shipping activity courses through the arteries of the nation. Without UK-owned or UK-controlled shipping, that benefit would simply not arise.

  A strong, efficient shipping industry benefits UK Plc more broadly, through providing security of trade for UK importers and exporters and through supporting the national defence capability. Encouragement of shipping also brings environmental benefits:

    (1)  generally, since shipping is the least harmful transport mode;

    (2)  specifically, by maintaining a strong UK presence in trading around the UK coast;

    (3)  by creating an option which enables shippers to move goods by sea where that makes sense (and thereby reducing congestion inland); and

    (4)  by enabling the Government to maintain a strong voice in international organisations dealing with safety and the environment.

4 December 1998

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