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


Memorandum by the Department of the Environment, Transport and the Regions (FUS 27)

THE FUTURE OF THE UK SHIPPING INDUSTRY

INTRODUCTION

  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 Paper.

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 interests—the shipowners, the maritime-related industries, the maritime unions and government—to 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 training.

  5. The total deadweight tonnage of UK owned trading vessels (over 100 gross tons), at end-December 1997, was registered as follows:

    UK Register:

    20.3 per cent

    Other Red Ensign*

    53.8 per cent

    Other EU Registers

    0.2 per cent

    Foreign Registers

    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 of Man.

  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 navy—including UK and non-UK registered vessels—also 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[82] (based on an analysis of certificates and assuming a "realistic" retirement age of 57) as follows, as at mid-1997.



Total certificated officers1 15,000
Officer cadets1,130
Active ratings10,860

Total26,990

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 Union

  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 ship-owning community.

  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 maritime-related sector.

December 1998


82   UK Seafarers-An analysis, The London Guildhall University, 1997. Back


 
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