Examination of witnesses (Questions 202
WEDNESDAY 27 JANUARY 1999
and MR JIM
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.
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.
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.
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
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
(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.
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.
(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.