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

Examination of witnesses (Questions 202 - 219)




  202.  Would you be kind enough to introduce yourselves for the record.
  (Mr McCoy)  My name is Hugh McCoy and I am the Chairman of the Baltic Exchange. I hold a number of other directorships, including the Hadley Shipping Company, London.
  (Mr Buckley)  I am Jim Buckley. I am the Chief Executive of the Baltic Exchange.

  203.  Do you have any opening remarks or would you like to go straight to questions?
  (Mr McCoy)  Madam Chairman, with your permission, I would like to make some opening remarks which will take a minute or so. Firstly, the Baltic Exchange is very grateful for the opportunity to give evidence to the Committee. There are some points I would like to make regarding the maritime services sector to set our own written evidence and your discussions in perspective. I recognise that the function of this Committee is largely to discuss British shipping, flag ownership, seafarers, et cetera, and I would like to say that in terms of enhancing the British flag, we, the Baltic Exchange, totally support the Chamber's position. The Baltic Exchange, simply stated, is an international market with some 250 years' standing. We are not large; we are 700 corporate members, making up 1,600 individual members who arrange cargo for ships, much of which has no bearing on the UK at all. The commissions earned on our business are some 5 per cent of financial services from overseas. The Baltic also produces a useful forum for maritime lawyers, ship finance, classification, education and other services, and I think you know, Madam Chairman, that these contribute to the UK invisibles to the tune of £1½-2 billion a year. In terms of Maritime London where the Baltic is at its centre, this is a great success story currently. The void left by the absence of the British deep-sea fleet operating the bulk trades in which our members are engaged has largely been filled by foreign shipowners who do their business in London mainly because of the marine skills which exist in our market. The Baltic has always relied upon foreign trade, but that reliance today is even greater than it has ever been, and the Committee should be aware that an essential ingredient of our market is the presence of agents in London who represent overseas ship-owning interests. The best example of all are the Greeks who are, by a modest count, estimated to own over 25 per cent of the world's bulk carriers and tankers, and it is very important that they continue to do their business in London. Our written submission highlighted the consequences if the benign tax regime in this country moved those principals overseas. I would only add, in conclusion, Madam Chairman, that the London market is not invincible; we are in a highly competitive business and we believe it is very important that the Government give positive signals to those people who do business in London that this is here to continue. May I say, in absolute conclusion, that we are very pleased to help the Government with their chartering programmes, as we have done in the past, where there have been conflicts and I think today the very fact that we are here before your Committee perhaps acknowledges in some way the contribution we do make and we are grateful to be here. Thank you.

  204.  Thank you, Mr McCoy. Can I ask you about the proportion of your work and of Maritime London which involves UK-owned and UK-registered shipping?
  (Mr McCoy)  Yes, I think this is a question which is difficult to be precise about because the business affected by Baltic members is done individually, not centrally through the Exchange, but—

  205.  You must have some estimate.
  (Mr McCoy)  I am going to give it to you, but I am just giving it as an estimate. If we took the figure which we use in terms of turnover of freight handled by London brokers with the sale of ships, that is something in the order of $50 billion a year, so commissions earned of about $½ billion a year. If we put that into proportion to the British fleet, either owned or registered, it would probably be meaning that 4 per cent of the British fleet versus 4 per cent of our earnings would mean that the contribution is about £1 million a year, very small.

  206.  What about UK-registered?
  (Mr McCoy)  UK-registered would be even smaller. In terms of the work-horse of the tramp market in which many of our members are engaged, Panamax bulk carriers, 70,000 tonne ships carrying grain and coal, there are about 1,000 of these ships in the world and, as far as I can see, there is only one which is British-owned, so the contribution is very small.

Mr Gray

  207.  What percentage of British ships looking for cargoes or British cargoes looking for ships will go through the Baltic Exchange?
  (Mr McCoy)  Again, Chairman, these figures are difficult to be precise about.


  208.  Mr McCoy, we promise not to haul you to the tower if you get it wrong. People have been known to get things wrong about things before, but we need some indication of the degree.
  (Mr McCoy)  I am going on to give that, but I am just giving you a general precautionary note. We would think that dependent on the trade, world trade, depending on which sector, 30 to 50 per cent would pass through the London market, dry cargo 30, ship sale and purchase 50, and crude oil tanking about 50 per cent each.

Mr Gray

  209.  So the Baltic Exchange provides an essential function for British shipowners and British cargoes, quite apart from anything else that the Exchange does?
  (Mr McCoy)  Yes, and, if I may say, there is a great emphasis on charterers in London who are British-based and these will easily come to mind. These include the major ore companies, British Steel. The chartering element is still very strong in London, but not the ship-owning.

Mr Stevenson

  210.  You have been good enough to give us an estimate of what the situation is today. Are you in a position to indicate what it was ten years ago or 15 years ago and what has changed and why?
  (Mr McCoy)  We did a recent survey regarding the business that is done by Baltic brokers and the interesting thing is that our income has actually gone up while the British fleet has gone down, and I think the background reason for that is that world trade has expanded so much. In the late 1960s, the world bulk carrier fleet was about 80 million tonnes, whereas today it is 270, so that sheer growth has actually overtaken the void left by British shipowners, but just think how great it would be if they were still there.

  211.  Yes, indeed, and sorry to interrupt, but that is the point I am trying to get at, that we have a vastly expanded market and demand and yet an enormously contracted UK presence in it, and you have illustrated that. I would be ever so grateful if you could tax your expertise a little bit further and perhaps venture to suggest why it is and what are the main elements which have contributed to that.
  (Mr McCoy)  I think, as I have said, the main element is the growth in world trade. It is running at about 4 per cent a year.

  212.  Why have we not captured some of that growth? Why have we gone the other way?
  (Mr McCoy)  I think one has got to go back to the history of the Merchant Navy, and I realise, Chairman, we have little time on this. British merchant shipping, in my view, was built on the empire and coal. At the end of the First World War, the South Wales coal ports were the biggest in the world, as big as Richards Bay in South Africa today, and I think the loss of the empire and the coal trades and manufacturing base in this country which were so dominant, that is what the British Merchant Navy was based upon. What we now have is an entrepreneurial world fleet and of course much of it is based on indigenous trade in Japan where the Japanese have a huge fleet, the Koreans are building their fleet, and the Chinese. The entrepreneurial element now for the British owners is much smaller and there is no home-based manufacturing business to rely upon, so they are competing now in a marketplace where the tax regime is in general benign for most of the world registry and British operating costs, because of the costs of seafarers, is, and I am using the words, not competitive, but I think, in fairness, British shipowners themselves could probably answer that better.


  213.  I want to bring you back to some of the evidence that was given to us last week. Can I ask you, first, if in fact both the UK owned fleet and the register continued to decline would you assume that Maritime London would not be able to continue with the growth figure or are you really saying that we are now just an international trading floor and we are attracting a reasonable percentage of that overseas trade?
  (Mr McCoy)  I think the answer to this is that the fleet is now so small that it is hardly significant whether it disappears completely. I am sorry if that sounds a very brutal thing to say.

  214.  No, we are asking questions and we would like answers.
  (Mr McCoy)  I would like to turn the question on its head slightly. Historically we have had tremendous support from British shipowners. Where will a British shipowner fix or buy and sell his ship? He will do it through the London market. There is a loyalty there. I would just say how much greater it would be if we had more British shipowners. There is a vulnerability in this. Because we are now so reliant on foreign shipowners, if there was a tax regime change in this country of if there were incentives offered from other centres, which is certainly the case, we are at a very fragile stage here.

  215.  Let us come on to the whole business of training. Do you acknowledge that without an adequate number of trained seafarers coming ashore the service industries would be affected?
  (Mr McCoy)  I do not think that the service industries that we are involved in would be greatly affected. I was here last week listening to the evidence which, I have to say, I do not think was completely clearly stated. There is a difference between the commercial world in which we are involved and those parts of Maritime UK which rely heavily on technical expertise. I have noted that Lloyd's Register is not here. I am on the General Committee of Lloyd's Register. Lloyd's Register must be one of those voices who would say clearly and loudly we need people from the sea to maintain the staff that we have. I think they employ about 1,200 highly technical people. It is not for me to speak for them but if we just look at the dimension of it, they class 21 per cent of the world's tonnage.

  216.  So you are really saying in effect that although some shore based industries would be local some would, in fact, go elsewhere?
  (Mr McCoy)  I think I would say that the Baltic Exchange ship brokers, banks, financiers would survive on commercial trading from elsewhere, not necessarily from a seafaring background and therefore we would stay in London with people inputting into our industries who are not necessarily from a seafaring background.

Mr Gray

  217.  How many of your 1,600 individual members, roughly speaking, would have had previous seafaring experience?
  (Mr McCoy)  We estimate between five to ten per cent including myself who went to sea 42 years ago today.


  218.  Today?
  (Mr McCoy)  This very day.

  219.  But how long have you been ashore?
  (Mr McCoy)  I was one of those that you mentioned, Chairman. I fell in love and left after eight years. I have been ashore for the majority of my working life.

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