Memorandum by F T Everard & Sons Limited
We are fully supportive of the initiative taken
by the Deputy Prime Minister to address some of the basic problems
of the shipping industry due to unfair competition.
F T Everard are members of the Chamber of Shipping
and agree with their submission to the Committee establishing
an Investment, Employment and Training environment which matches
our European competition.
It is not our intention, in this paper, to go
over all the ground mentioned by the Chamber. It is, though, our
view, for British Shipping to thrive a substantial package is
required in order to improve our competitiveness.
We intend to highlight two particular ideas
from a Short Sea Owners point of view.
2. Seafarers tax situation.
By way of background, F T Everard & Sons
Limited is a private family company which has been in existence
since 1880. In shipping terms we have two distinct short sea fleets.
We have over 20 dry cargo ships, some involved in regular forest
product movements, mainly timber, from Sweden to UK and Ireland.
The remainder of dry cargo ships are involved in short sea and
coastal bulk trades and in heavy or awkward lifts. We are one
of the largest UK dry cargo operators and are in a highly competitive
market. There is a need to maintain current traffic and increase
the amount transported by water. This includes ensuring small
bulk ships through transport costs (including the high port interface
cost) remain competitive against long haul road direct and switching
supply sources from medium haul road to longer haul sea supply.
We have a fleet of 10 small tankers carrying a significant share
of the refined product shipped coastwise from the oil refineries
to the regional market storage and distribution facilities. This
highly specialised niche oil trade now represents the major part
of the UK coastal shipping volume. Coastal tankers carry some
35 per cent of refinery primary distribution, against pipeline,
rail and road, but the share has declined by about one-sixth over
this decade partly due to closure of coastal distribution terminals
resulting from rationalisation and the high costs of environmental
upgrading; this tends to increase road tanker miles.
The Company has played its full part in the
training of people both afloat and ashore. We have recruited both
officer and deck trainees every year over the last few decades
and did not reduce our training budget during the shipping recession
in the 80's. Last year we received the major shipowner/manager
award for long term training by the international daily shipping
newspaper, Lloyd's List, presented by Neil Kinnock. Our recently
retired Company Secretary was recognised in the New Year's Honours
List for his contribution to training. Safety and Training are
given the highest priority in the Company, for instance as Chairman
of the Company, I chair our Safety Committee.
1. ROADS TO
My submission is concerned with the role of
shipping in intra UK/European transportation. Shipping is seen
as an environmentally friendly form of transportation and we believe
we could make a significant impact on the level of (long haul)
road haulage traffic. The recent White Paper on the Future of
Transport states that one of the four broad aims of the Government's
integrated shipping policy is "to facilitate shipping as
an efficient and environmentally friendly way of carrying out
trade". The submission shows how short sea shipping could
be assisted in increasing its contribution to this objective.
1.1 The focus in the short sea sector is on reducing
road miles by substituting sea miles:
by seeking new traffic for coastal
shipping and preventing further loss of coastal traffic to road;
by routing traffic, with the Continent
and with Ireland, on more sea intensive routings through (regional)
ports closer to the points of origin and destination of the traffic;
by maintaining a diversity of competitive
ports and ensuring development of competitive shipping services,
competitive on cost, frequency, transit time, etc., serving directly
into the regions of cargo origin and destination.
Coastal and short sea dry cargo where
there are large volumes of traffic moving around Europe, any individual
company has an overall small market share.
Coastal petroleum product distribution
where the need is to halt the decline in the proportion carried
by sea and, if possible, increase it.
Unit load (container and trailer) transportation
is an area where Everard has only an indirect involvement through
its bulk timber services from Scandinavia to UK/Ireland and finds
itself in direct competition to more road intensive trailer ferry
services and it cannot economically operate multi-port services.
The need is to enhance the competitiveness of the longer haul
and regional sea routes, with a focus on the northern ports and
northern services in particular, and to switch away from driver-accompanied
freight trailers on the short Dover ferry crossings to the unaccompanied
trailer ferry services.
The potential road-mile savings, as a percentage
of the overall UK road freight market, are relatively small but
they are significant in terms of actual tonne-miles and on certain
congested road corridors such as the A1/M25/M2/M20. UK port traffic
now represents over 10 per cent of UK road freight tonne-miles
and it is growing as the UK becomes more integrated with Europe.
Short sea shipping, on the longer sea routes
and to the regional ports, can be likened to a by-pass. I like
the concept of maintaining and creating port pairs and shipping
networks, defining the by-pass routes and promoting these to the
1.2 The UK domestic short sea shipping sector
seeks a levelling of the playing field and some positive discrimination
Although if we are to achieve a really significant
shift from the roads then radical measures are necessary. However,
Government policies currently are essentially non-interventionist
and we do not expect subsidies, nor seek any market distorting
Road transport does impose "external costs"
whilst shipping with its unlimited highway has the lowest external
costs in relation to degrading the environment, destroying the
countryside, noise, traffic accidents, etc., and it is generally
much less fuel intensive. Discriminatory taxes and controls on
road transport are still not politically acceptable and will be
seen as a tax on distribution by industry. We can only seek the
same positive assistance as received by rail and more encouragement
for our industry, including the funding of certain research projects.
There are four positive measures upon which I wish to focus
with the Committee:
Ensuring a strong, vibrant and responsive
industry: there will be no innovation and renewal whilst the
profitability and return on investment remain inadequate. As a
start there should be equal tax treatment on capital and employment
for the UK domestic shipping industry as its competitors abroad.
Freight facilities grants and port costs:
the port interface cost is a very major element in through transport
involving a sea move, just as the rail to road transfer cost is
a major cost item for rail movements. These interface costs make
it hard for sea and rail to compete with road over shorter distances;
we need to reduce them, by reducing capital and operating costs
and ship time in port, or even eliminate them, by having the industrial
process or distribution system at the quayside. The Government
provides assistance on capital expenditure through Freight Facilities
(S 36) grants for railway facilities and for certain quays, terminals
and marine craft where a substantial proportion of the freight
movement is within an inland waterway and its estuary. Justification
for assistance is based on road-miles saved. This assistance has
benefited rail also, to a limited extent, inland waterways and,
for equality, should be extended to short sea shipping in a form
more suitable for this sector, taking into account a more flexible
traffic modelling and forecasting approach to road-miles criteria
and covering also improved cargo handling systems, dust suppression
equipment, upgrading of petroleum product terminals (see above)
Forty-four tonne concession: short sea
shipping should have the same concessions as rail, in particular
relating to movements to the port, including the 44 tonne lorry
concession for combined transport movements to/from railheads.
There clearly will need to be an inland mileage limit (say 100
miles or further in peripheral areas) as the purpose is to encourage
the regional longer sea routings in order to safeguard abuse.
There may also need to be some control over which roads are used.
The concession would give maximum trailer load compatibility with
Europe and tend to shift heavy traffic such as steels and chemicals
through ports closer to their origin/destination.
Planning: location of industry is key
in reducing road-miles. In the long term the number and location
of a company's factories and distribution centres, and its import
and export logistical facilities, affect the level of road traffic
more than anything else does. The trend has been to fewer manufacturing,
assembly and distribution centres, within the UK and the wider
European market, and a focus on the motorway, whilst road transport
costs have continued to fall in real terms. Some re-balancing
is required. Industry should be encouraged to utilise port areas,
particularly in a wider European trade context. Planning procedures
should be reviewed and planning controls eased to provide incentive
for manufacturing/assembly and warehousing/distribution activities
and freight villages/logistical centres to be set up ports. The
tendency has been to sterilise waterside land. The planning procedures
should take account of the potential reduction in road-miles,
using cost benefit criteria.
These measures will go some way towards meeting
the objectives of the White Paper.
2. SEAFARERS TAX
Most of our European competitors operate an
income tax scheme which means that either their individual seafarers
pay no income tax or, in the case of many countries (including
Denmark, Germany, Netherlands and Sweden), the owners keep all
or much of the income tax that the seafarer would otherwise pay.
In the UK, seafarers qualify for a "foreign
earnings deduction" provided they are away from the UK for
183 days in the year.
Many foreign shipsincluding ships operated
by European and Far Eastern competitorsoperate freely in
the UK coastal trade. These ships have crews which benefit from
tax relief. This puts our own crews, who do not qualify for the
foreign earnings deductions since they may not be away from the
UK for a full 183 days, at a serious disadvantage. Moreover, we
train seafarers, some of whom go to our direct competitors with
whom they can obtain the UK tax alleviation.
We have to be competitive in the market, which
has meant that we fly about 20 Canadian officers to work on our
coastal tankers. Of course, these officers receive full income
tax relief in Canada. We believe that the present UK income tax
concession, which is one British shipping overall needs in order
to remain competitive with its counterparts elsewhere in Europe,
should be extended to all British seafarers who sleep aboard vessels
for 183 days (not just those who are away from a UK port). They
are effectively away from home and in the same position as somebody
working abroad. It is extremely frustrating to train people for
our competitors to use against us. Our seafarers feel very strongly
on this point. The current situation could affect our future recruitment
and training policy.