Memorandum by the Department of the Environment,
Transport and the Regions (FUS 27)
THE FUTURE OF THE UK SHIPPING INDUSTRY
1. The Transport Sub-Committee has agreed to
accept the Government's Shipping Policy Paper, published on 16
December 1998 as a daughter paper to the White Paper on the Future
of Transport (Cm 3950), as the Department's main evidence to their
inquiry into the Future of the UK Shipping Industry. This memorandum
therefore provides summarised responses under each of the Sub-Committee's
terms of reference with guidance to the sections of the Shipping
Paper which have particular relevance to the topic, together with
additional supporting information not included in the Shipping
What action and partnership is required of the
industry and government to develop a sustainable, internationally
competitive shipping industry?
2. The Shipping Paper maps out a comprehensive
strategy to secure the future of UK shipping in the form of 33
inter-related measures, grouped under four broad headings: increasing
skills; encouraging employment; increasing the UK's attractiveness
to shipping enterprises; and gaining safety and environmental
benefit. These actions are discussed in Chapter 4 of the Paper
and, for ease of reference summarised at the end of Chapter 5.
3. The Paper argues (paragraphs 81-82) that
success in creating the necessary "virtuous circle"
of growth will rest greatly on the synergy generated by its integrated
policy proposals, and that this can be achieved only by a committed
partnership between all the various intereststhe shipowners,
the maritime-related industries, the maritime unions and governmentto
ensure full implementation of the "package".
The benefits of encouraging UK ship registration,
the extent and implication of "flagging out", and the
specific position of the Isle of Man Registry
4. The benefits of encouraging UK ship registration
are addressed in the Shipping Paper (see especially paragraphs
59-60 and 77-78). In essence, a strong UK registered merchant
fleet engenders the closest regulatory, economic and social ties
to UK and contributes to the achievement of the other three broad
policy aims set out in the Transport White Paper, particularly
that of maintaining the skills base by promoting employment and
5. The total deadweight tonnage of UK owned
trading vessels (over 100 gross tons), at end-December 1997, was
registered as follows:
20.3 per cent
53.8 per cent
0.2 per cent
25.7 per cent
*The other Red Ensign commercial shipping registers
are the UK Overseas Territories & Crown Dependency Shipping
registers of Bermuda, the Cayman Islands, Gibraltar and the Isle
6. The Isle of Man Shipping Register is an offshore
British shipping register, established and operated by the Isle
of Man Government under local legislation, bound by international
shipping Conventions to which the United Kingdom is the signatory,
and which have been extended to the Island by the UK. Ships registered
in the Isle of Man are British ships and powers for the UK Secretary
of State to regulate such ships (other than small ships and fishing
vessels), by reference to categories of registry, are contained
in section 18 of the Merchant Shipping act 1995.
7. The Merchant Shipping (Categorisation of
Registries of Overseas Territories) Order 1992 (S.I. 1992
No. 1736) designates the Isle of Man Register, together with the
registries of Bermuda, Cayman and Gibraltar, as "Category
1" registers. Category 1 status authorises these registries,
in principle, to register vessels of unlimited tonnage and type.
8. The assignment of regulatory responsibilities
between the UK Maritime and Coastguard Agency and the Isle of
Man Maritime Administration, and conditions relating to the operation
of the Isle of Man Register, are set out in a Memorandum of Understanding
between the UK Department of the Environment, Transport and the
Regions (DETR) and the Isle of Man Department of Trade and Industry
(which has local responsibility for the Manx Marine Administration).
This MOU, and the close working relationship between the UK and
Manx authorities, ensures that shipping registered in the Isle
of Man maintains the same high standards as that on the UK Register.
The contribution that shipping can make to achieving
the objectives of the Transport White paper
9. The White Paper on the Future of Transport
set out the four broad aims of an integrated shipping policy (White
Paper paragraph 3.181):
to facilitate shipping as an efficient
and environmentally friendly means of carrying our trade;
to foster the growth of an efficient
UK-owned merchant fleet;
to promote the employment and training
of British seafarers in order to keep open a wide range of job
opportunities for young people and to maintain the supply of skills
and experience vital to the economy;
to encourage UK ship registration,
to increase ship owners' identification with the UK, to improve
our regulatory control of shipping using UK ports and waters and
to maintain the availability of assets and personnel that may
be needed in time of war.
10. Shipping can be environmentally friendly
only if it is also safe. The Government will continue to enforce
the safety of the UK registered merchant fleet through the setting
of standards and through regular surveys and inspections required
by the Maritime and Coastguard Agency. Tradtionally we have relied
on other flag states to do the same for their fleets, in accordance
with their international obligations. In recent years it has become
apparent that some flag states do not control standards on the
vessels for which they are responsible. This is why we work with
our neighbours in enforcing standards on foreign ships coming
into European ports through "port state control" measures.
At the same time we press in the International Maritime Organisation
(IMO) for early action on the assessment of flag state performance,
and we look to IMO for further effort in encouraging the consistent
application of proper safety and counter-pollution standards.
11. More widely, shipping is an important and
integral part of Britain's industry and trade and a successful
shipping industry may be expected to contribute to the achievement
of a raft of national economic and industrial aims, with the central
objective of achieving high and stable levels of growth and employment.
The Shipping Paper reviews these issues in paragraphs 56-62.
Whether enough UK registered shipping is available
to fulfil the country's strategic needs and international obligations
12. The strategic requirement for UK merchant
shipping and British seafarers in military terms is a matter for
the Ministry of Defence whose requirement and views are summarised
in paragraphs 14-16 of the Shipping Paper.
13. However, the UK merchant navyincluding
UK and non-UK registered vesselsalso plays a strategic
economic role in maintaining the supply of British seafarers who
provide the maritime expertise and experience required in some
17,000 jobs in more than 25 shore-based sectors. The University
of Wales study found that the level of merchant navy recruitment
was only about one third that required to maintain the status
quo either at sea or ashore in the maritime-related sector. The
lack of "training berths" in UK shipping (reflecting
inter alia the decline in UK shipping) would act as a constraint
on the necessary expansion of seafarer training to meet this requirement.
The Shipping Paper discusses this issue and proposes a number
of possible remedies.
14. There is no international obligation to
maintain nationally registered shipping. However, as an island
nation, shipping clearly has very great importance for the UK
in respect of shipping standards, safety and pollution prevention,
particularly in respect of vessels operating in our waters. This
is discussed in paragraphs 8-22 of the Shipping Paper.
15. As noted above, our influence over international
shipping is exercised indirectly through multi-national bodies,
principally the International Maritime Organisation. We have recently
appointed a senior official as the UK's first Permanent Representative
to the IMO, in order better to co-ordinate our IMO-related work
and to focus our efforts on achieving key objectives relating
to maritime standards and their proper implementation. We are
respected in IMO for our acknowledged maritime expertise. However,
the perpetuation of this competence is clearly related to practical
involvement in maritime regulation and thus the UK's international
influence cannot be divorced from our maintenance of a healthy
national shipping industry.
The present level of employment of UK seafarers,
the effects of any present and future shortage 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.
16. Securing the UK's future maritime skills
requirement is a central objective of the Government's shipping
policy. The requirement for maritime skills is outlined in paragraphs
12-13 of the Shipping Paper, and a summary of the 1996 study by
the University of Wales UK's Requirement for People with Experience
of Working at Sea is provided at Annex B. Specific proposals
for increasing skills are discussed in paragraphs 83-97, and measures
for encouraging employment in paragraphs 98-120. Although government
has no direct influence over private sector employment, it can
seek to improve the cost environment, reinforce the regulatory
framework or otherwise try to facilitate British seafaring employment.
17. The UK is strongly supportive of a current
regulatory initiative by the European Commission in relation to
the manning conditions for regular passenger and ferry services
operating between Member States. At present, such services remain
very largely crewed by Community seafarers (in the case of the
cross-Channel services, by British and French officers and ratings).
However, we share the Commission's view that there is a serious
risk that competition will be distorted, and national seafaring
employment lost, by the substitution of third-country seafarers
on terms and conditions below Community norms. The Commission
have proposed a draft directive which would remove the cost advantage
by providing seafarers employed in this sector with minimum standards
of social protection, as are available to public transport workers
in other modes within Europe.
18. UK and Irish seafarer numbers were estimated
by the London Guildhall University
(based on an analysis of certificates and assuming a "realistic"
retirement age of 57) as follows, as at mid-1997.
|Total certificated officers1
|1 Of the officers, 13,650 were estimated to be at sea, of whom 7,500 were serving with UK companies.
What the UK can learn from the experience of other countries
in dealing with similar problems, and the role of the European
19. The Shipping Paper considers the European experience,
outlining European Community shipping policy (paragraphs 64 to
71) and summarising the European Commission's maritime State aid
guidelines (at Annex D). It notes the interventionist approach
of several Member States, particularly in respect of the adoption
of modified fiscal regimes (paragraphs 121-125) and specifically
considers the Netherlands' new shipping policy initiative (paragraphs
72 to 75) which the Dutch authorities claim has succeeded in creating
the conditions in which their maritime industry is now enjoying
an economic renaissance.
The role and importance of on-shore shipping services provided
in the UK, such as ship insurance and ship broking
20. The shipping industry underpins a wide range of shore-based
and maritime-related businesses in the City and throughout the
country. Related financial and other services include marine insurance,
protection and indemnity, shipbroking, ship classification, maritime
law and arbitration. The City maritime sector insures 25 per cent
of world marine risk; provides the world's only regulated market
place for shipbroking; contains the leading classification society;
excels in financial and legal services to world shipping; and
continues to attract representation from a substantial overseas
21. Maritime London rests heavily on the fiscal attractiveness
of the UK as a place to do business, for foreign as well as British
shipowners, and the Government recognises the need to exercise
vigilance to ensure that its plans and activities on specific
issues do not inadvertently damage the maritime-related sector
(Shipping Paper paragraph 126).
22. As noted above, the University of Wales study identified
about 17,000 jobs in more than 25 shore-based sectors which employers
preferred to fill with ex-seafarers. Given the forecast rapidly
worsening shortfall in the supply of maritime skills, it concluded
that those shore-based UK businesses which were sufficiently flexible
may relocate abroad to obtain the required ex-seafaring staff
(although the shortage is expected to be worldwide) and that the
long term effect of this may be a considerable erosion of London's
UK Seafarers-An analysis, The London Guildhall University,