Memorandum by the Freight Transport Association
OPPORTUNITIES AND DEVELOPMENT PROSPECTS AT
The Freight Transport Association
The Freight Transport Association represents
the interests of British industry as users of freight transport
services. The Association's remit covers all modes of transport,
and the 11,000 members of the Association are drawn from all sectors
of industry from throughout the UK and Northern Ireland.
Members of the Association account for 80 per
cent of Britain's exports by sea and air. FTA is widely recognised
by governments and other bodies from around the world as the authoritative
voice of the users of both shipping and airfreight services from
the UK. The Association also provides the secretariat for the
European Shippers' Council, which represents the interests of
exporters from throughout Europe, and provides FTA with a genuine
The Sub-Committee's Investigation
Exporters welcome the Sub-Committee's investigation
into the opportunities and development prospects at major ports
in the UK, believing it to be particularly timely. UK industry
is facing increasingly difficult export markets, meaning that
all aspects, including ports, of its maritime supply chain have
to be operating to their maximum potential for exporters to be
able to successfully serve their overseas customers.
The ports industry in the UK is also going through
a particularly critical time. The recent White Paper covering
the sector (which FTA participated in the development of and welcomed),
along with increased interest in the sector from the European
Commission means that UK ports are coming under increasing political
The shipping industry is itself also undergoing
a period of rapid change. As the industry consolidates into fewer
and fewer players, ports are going to have to become increasingly
competitive to retain existing business and win new customers.
Competitive pressures on ports are being further intensified as
the size of ships gradually increases, as ship owners seek to
fully exploit the economies of scale that modern technology allows.
The new larger vessels are seeing the numbers of ports that are
served by direct liner services gradually reducing, whilst the
investment by port authorities needed to attract such ships is
far higher than before.
This potentially could see fewer direct services
to UK ports, with UK cargoes being transhipped through Continental
ports. This would result in delays to cargo and also creates a
higher risk of consignments being damaged or lost.
Exporters therefore welcome the Sub-Committee's
inquiry, believing that it offers a valuable opportunity to review
the performance of the UK ports sector and ensure that it is well
placed to face the very real challenges of the future.
2. PORTS IN
Exporters believe that the UK has a strong and
thriving ports sector that compares favourably with ports found
in Europe and elsewhere. This manifests itself in the UK enjoying
a far greater number of direct liner services than our peripheral
position on the edge of Europe perhaps justifies, and that this
is a consequence of the competitive, market led policies that
have been followed by successive governments in the UK. Because
UK ports can handle vessels and cargoes far more rapidly than
those on the Continent, ports here have been able to retain services
and become an attractive transhipment point for consignments from
the Continent heading away from Europe.
However, this enviable position is coming under
increasing threat. As ports on the Continent are gradually liberalised,
and as antiquated working practices are gradually ended, UK ports
will no longer be as attractive to shipping lines as they once
were, unless they are able to continue to improve their efficiency
and the services that they are able to offer.
3. THE CONTRIBUTION
With 95 per cent of exports from the UK going
by sea, the importance of ports to exporters becomes apparent
and with international trade accounting for six million (one in
three) jobs in the UK, the contribution that ports make to the
economy is clear. With almost all of the UK's exports going by
sea, the importance of efficient maritime connections from the
UK to the rest of the world becomes apparent.
Industry is now operating on a global basis.
Members of the Sub-Committee will be only too aware of recent
events in sectors such as the motor industry where manufacturers
have chosen to relocate production away from the UK. With industry
now making strategic investment decisions on such a global basis,
the transport links to and from a country become of paramount
No longer are manufacturers using locally produced
materials to make products, a small number of which are then exported
through the local port. They are now importing raw materials from
around the globe and assembling them into finished products that
are then exported across the world. The operation of supply chains
of such complexity is dependent upon efficient and reliable transport
services that enable companies to move products around the world
easily and efficiently, and know that consignments will arrive
Shipping lines enjoy the benefit of very generous
exemptions from competition laws around the world which allows
them to collude to fix prices and other conditions that affect
service levels. FTA has spearheaded the global campaign against
However, the effect of the exemptions is that
shipping lines all tend to offer similar levels of service to
their customers, and it becomes difficult for their customers
to then differentiate between them. Lines are even operating similar
types of ship, meaning that speeds, and therefore transit times,
are all similar.
As a consequence, one of the key criteria that
determines the line that a company uses is the port that it serves.
With reliability being such a key issue, lines that are able to
utilise efficient and reliable ports are always going to be able
to attract business from carriers that serve less efficient ports.
As a consequence for ports to be successful they must be able
to attract such carriers.
The highly competitive nature of the ports sector,
and the lack of public financial support for UK ports when compared
to their competitors on the Continent, means that ports have been
compelled to compete with each other for business. To remain viable,
they have had to be able to offer efficient and competitive services
that are attractive to both shipping lines and also to exporters.
This has been instrumental in ensuring that
the UK remains well served by a large number of direct liner shipping
services. That the UK is able to boast such excellent shipping
links with the rest of the world is a critical factor encouraging
companies to locate in the UK.
Were these shipping links to be lost, then the
attractiveness of the UK to inward investors would be reduced.
Likewise, the competitiveness of British produced goods would
decline in world markets as transport costs increased.
4. MODERN PORTS:
A UK POLICY
Exporters have welcomed the recent publication
by the DETR of its White Paper covering the sector, Modern
Ports: A UK Policy. FTA believes that the paper complements
the recent Modernising Trust Ports: A Guide to Good Governance
publication from the Department, and that both will benefit ports
and their customers.
With much of the Modern Ports: A UK Policy
paper covering safety and other operational and environmental
issues within ports, there are many parts of the paper that the
association is unable to comment on. There are other organisations
that are better able to comment on these issues than FTA.
There is, however, much in the paper that is
of interest to exporters, and that FTA welcomes. Exporters believe
that the paper and, more specifically, many of the initiatives
that it will set in place will be able to make a very real contribution
to improving the quality of shipping services to and from the
UK in the future.
Particularly welcome is recognition of the important
role that ports play in both local economies and the benefit that
they bring to the prosperity of the UK as a whole, and the dependence
of the UK economy on the development of the sector for the future.
FTA fully welcomes and supports the Government's intention to
ensure that further developments in the ports sector should be
in accordance with this aim, and look forward to seeing the benefits
in the future.
FTA has a number of specific areas of interest
that were covered in the White Paper, and they are outlined further
in the following section of this submission.
5. THE WAY
The UK currently has a world class ports sector
that enhances the ability of the UK to compete in overseas export
markets, whilst also attracting inward investment from elsewhere.
However, the competitiveness gap between UK ports and those on
the Continent will gradually diminish as continental ports are
opened to competition, unless the UK port sector continues to
improve the services that it offers.
To combat this, further action will have to
be taken by all sectors of the maritime supply chain to ensure
that UK ports continue to serve British exporters effectively.
These actions are outlined below:
1. Performance Improvement
UK ports must strive to improve all areas of
their performance, to ensure that they continue to be able to
offer a high quality service at competitive rates.
Exporters believe that the best way for ports
to do this is through the use of Service Performance Indicators
(SPIs). Only when critical service performance indicators are
measured can port operators identify where service levels are
falling down and where action is needed to ensure that service
levels are upheld. Such indicators are also vital for ports to
allow them to benchmark their performance against similar ports
Techniques such as SPIs have been extensively
used elsewhere in industry to improve service levels and customer
satisfaction. The Freight Transport Association played a pivotal
role in the development of the first global performance indicators
for the airfreight sector, and now many of the major users of
airfreight services, airlines, forwarders and airports are working
together and successfully using the indicators to improve the
services that they offer.
Exporters fully support the Government's intentions
outlined in the Modern Ports: A UK Policy paper to develop
performance indicators for ports. Members of the Sub-Committee
may be aware that FTA will shortly be starting, under the auspices
of the DETR sponsored Competitiveness Forum, to discuss the development
of service performance indicators for the shipping industry. This
will be undertaken with leading shipping lines and ports, and
it is anticipated, based on the airfreight experience, that these
will impact heavily upon operations in ports.
FTA also shares the Government's desire for
the increased use of short sea shipping. For the operators of
such services to be able to win business from land transport operators
they are going to have to develop services that meet only the
highest levels of service performance and customer satisfaction.
To ensure that this takes place, the use of service performance
indicators is particularly critical.
Not only will the development of SPIs allow
short sea operators to demonstrate the service and reliability
levels that they are achieving, but performance measurement will
also be critical in enabling participants in short sea supply
chains to improve the quality of services that are being used.
UK ports must work with their partners to develop
service performance indicators that allow them to improve the
quality of services that are offered. Government must support
them in these aims.
2. Safety and Environment Protection
Exporters share the Governments concerns that
shipping and port activities should be carried out to high safety
standards, and that the impact of ports on local environments
should be minimised. FTA welcomes the Government's intention outlined
in Modern Ports: A UK Policy to develop guidelines on the
best practices associated with environmental management.
One area of particular concern for industry
is the safety of the ships that it is using. Members of the Sub-Committee
will be only too well aware of the environmental problems that
have been caused by several recent high profile casualties in
the bulk sector.
Companies chartering ships do exercise due diligence
over the vessels that they hire, trying to ensure that they are
only chartering ships that meet the very highest standards of
safety and reliability. Charterers have found to their cost that
vessels that are badly maintained and that have poorly trained
crews also tend to be the vessels that arrive late and have damaged
cargoes and no company can afford the huge negative publicity
that accompanies an environmental disaster such as that which
accompanied the recent "Erika" disaster.
As a consequence, FTA has, through its European
organisation, the European Shippers' Council, recently developed
a code of best practice for charterers of bulk vessels. Adherence
to the code shows a company's commitment to operating only the
safest ships, and the code requires that it's users seek guarantees
that the ship meets all of the required safety standards. The
Code is now being used by most of the major charterers of bulk
vessels in Europe.
However, charterers would like to see the Code
go further than it does at present, but they are finding that
it is almost impossible to discover anything but the most basic
of information about the ships that they are considering hiring.
Such is the veil of secrecy that exists over ownership that it
can be difficult to identify the true owner of a vessel and its
record of safety inspections.
Exporters would like to see a tightening of
the requirements for ship owners. Before a ship can trade in British
waters it should be clear to a potential charterer who the owner
of the vessel is. The owner should be of sufficient financial
repute to be able to meet the costs of any pollution that the
vessel may create. Financial fitness criteria have to be met by
operators in almost all transport modes bar shipping, and exporters
believe that such a requirement would significantly improve the
safety of vessels operating from British ports and see a consequential
reduction in accidents and pollution.
Government must work with other international
agencies to make ship owners more responsible for the condition
of the vessels that they operate. It must also ensure that port
state control measures continue to discourage poorly maintained
ships from entering UK ports.
One of the key factors that has lead to the
UK enjoying the very successful ports sector that it currently
has is the high level of competition that exists both between
ports and between service providers within them. This ensures
that ports are actively competing with each other for business,
whilst competition between service providers has ensured that
services within ports are both of high quality and competitively
The Government must guarantee that this situation
is both sustained and improved. Competition, coupled with the
need to make a return on investment, ensures that the quality
of service remains high and that costs remain equitable. Only
the stimulus of competition ensures that services remain of high
quality and that charges to not become excessive.
Exporters are fully aware of the situation at
smaller ports where volumes do not warrant large numbers of competing
cargo handlers or other service providers. However, exporters
do not believe that competition should be prevented at such ports
by the provision of local monopolies. In such a situation, even
though there may be a monopoly situation, existing service providers
or the port authority itself should not be able to prevent new
entrant companies offering services. The threat of potential competitors
should ensure that companies offer high standards of service.
The high service levels that are being offered would then serve
as a disincentive to new entrants, ensuring that wasteful duplication
Where a service in a port is operated on behalf
of the port authority by an independent third party, the contract
should only be awarded following a competitive and transparent
tendering exercise. The tendering exercise should be open to all,
and the criteria for selecting the winner should be publicly known.
Contracts should also only be given for a specified period of
time, and should not be renewable without a further tendering
exercise taking place. This should ensure that new companies have
an opportunity to tender for new opportunities at ports and that
companies offering a service that fails to compare favourably
with other ports would not be in place for lengthy periods.
Exporters uphold the Government's views that
what financial assistance is available from central Government
should not be used to re-locate traffic from other ports. The
Government should not seek to support or involve itself with proposals
that would distort competition between UK ports, or similarly
try to favour one port over another. Such action merely serves
to increase costs yet reduce the standards of service that are
available to users, and serve as a further disincentive to other
ports nearby to try to compete with them and improve the services
that they offer. While such action can often be of short-term
benefit to the port concerned, it can also lead to a longer-term
decline in the ability of it to compete with its competitors and
to develop innovative new services.
The Government must continue to ensure that
fair and effective competition exists in the UK ports sector,
both between ports and also, where appropriate, between service
providers within ports.
4. Land Access
Almost all consignments need to travel beyond
the immediate area of ports to their hinterlands where they are
consumed. Likewise, few consignors are located close to ports,
meaning that consignments can often have lengthy journeys to the
The advent of containerisation, with the need
for the specialist handling equipment that is needed to service
container vessels, has seen the numbers of ports that are being
used by industry gradually declining, as the numbers of ports
that are able to handle such vessels has declined. Likewise, there
has been a further reduction in the numbers of ports served as
ships have gradually increased in size. As a consequence, there
are now only a small number of container ports of note in the
This means that whereas consignments would have
traditionally travelled the short distance to a nearby port to
catch a ship, they are now travelling to the other side of the
country. As a consequence, in view of the distances that are being
travelled, efficient, reliable, intermodal links to port's hinterlands
are of paramount importance.
It is imperative that Government looks beyond
the immediate vicinity of the ports and investigates problems
further inland. Particular issues that many exporters have raised
are congestion problems on the A14 around Cambridge. Although
this is well away from any ports, it is on the main route from
the UK's industrial heartlands to its major port (Felixstowe).
While the rush hour traffic of Cambridgeshire may not seem like
a major issue affecting the ports sector, it does have a major
bearing on the efficiency of companies sending goods to the UK's
major port. This example is not uniquethere are many other
inland bottlenecks that are hampering the efficient transportation
of consignments to and from ports.
The same goes for rail. Rail enjoys a relatively
high market share of consignments travelling to and from ports.
However, just like for consignments travelling by road, there
are a number of bottlenecks that are emerging on the rail network
that are themselves proving to be equally problematic, and that
are expected to worsen in the future.
A particular issue of concern for rail users
is the difficulties that can be encountered in gaining access
to ports. Although ports may have rail access, in many ports that
access is only allowed exclusively to one operator. Additionally,
when investment in rail infrastructure is required, the burden
of funding the investment can often fall entirely on the company
that is planning to utilise the new service. FTA believes that
ports should not be able to set such requirements and that rail
infrastructure should be open to all potential users.
This would not only boost the carriage of consignments
to ports by rail, but could also help promote the use of rail
freight from the area around the port by allowing its use as a
rail freight hub for the region.
Any problems that are encountered by consignments
travelling to or from ports, therefore, will increase the costs
of the overall journey, and thus impact negatively upon the overall
competitiveness of the consignment. Whilst such delays will increase
costs, they also have the equally damaging potential to mean that
consignments arrive at their final destination late, which can
mean disappointed customers and a loss of goodwill.
Government must ensure that land access to ports
continues to be of high quality. Government must also recognise
that port hinterlands can stretch far inland, away from the immediate
vicinity of the port.
5. Management Best Practices
Exporters believe that the strategic importance
of ports is such that they should be managed to the very highest
standards. Exporters therefore welcome the Government's intention
to develop guidance and standards for accountability and establish
requirements for ports to publish more detailed financial information.
FTA doesn't believe that just because a port
is small, or because a local authority or a trust runs it, it
should be exempted from the same requirements for accountability
and good standards of management than a business of a similar
size in a different sector. We feel that publicly owned ports
should be required to not only publish financial information,
but also be required to outline on a regular basis their plans
and targets for the future.
This need not be an onerously bureaucratic requirement.
This would only be mirroring the best practices that are used
in the private part of the ports sector, where port managers regularly
have to produce plans and targets to meet the needs of their shareholders.
Port managers should be made accountable for achieving their plans,
whilst benchmarking techniques should be used to compare the performance
of similarly sized ports.
This does not necessarily mean that ports should
be operated at a profit. They should, however, be expected to
set financial targets and to then meet or exceed them. Managers
should be made accountable for those targets, and their performance
judged on how they achieve them.
Exporters believe that introducing the disciplines
of the commercial sector to the publicly owned ports in this way
would result in ports becoming more focussed on the needs of their
customers and attracting new business to them. This should see
an expansion in the choices and types of services available to
all types of ports user, and ports investment being carried out
in line with the stated objectives and aims outlined in the plan.
This should ensure that the ports become subject
to the same commercial imperatives that the rest of industry is,
and that as a consequence they will start to offer the types of
service that are both efficient and responsive to customers needs.
Government must ensure that ports are only managed
in accordance with the highest standards, and that managers are
expected to establish and meet ambitious targets for future performance
6. Land Use in Ports
While many ports have very large areas of land
that they are not utilising, others find that space is at a premium,
and that future expansion of the port will only be able to take
place outside of its existing boundary. Additional problems are
created by the location of many ports in urban areas or that alternatively
are in areas that are subject to tight environmental controls.
FTA believes that ports should be able to use
land within their boundary for whatever purpose they see fit.
This should only be subject to two considerations that they have
secured the appropriate planning approval and that the plans are
properly costed and outlined in their business plans. New revenues
obtained through diversification could potentially make a significant
contribution to the costs of running many smaller ports, lessening
their reliance on central or local government.
There are other areas where ports find themselves
located in areas that are subject to environmental constraints.
This could be a consequence of being in an area of natural importance,
or a port with historic sites within its boundary. Clearly, port
development in such areas should only take place following the
scheme's approval by the relevant planning procedures and enquiries.
Exporters were heartened by the Government's
recognition that there may be situations where the economic benefits
of port development may outweigh environmental dis-benefits. FTA
urges port developers to take all available steps to mitigate
the effects of their developments on the areas around ports, and
for recognition of such steps to be given by planning authorities
when coming to their final decision.
Government must remove constraints on land use
within ports and ensure that ports that take their environmental
responsibilities seriously are rewarded for their efforts.
7. FUTURE ACTION
For the UK to prosper in the future, it is imperative
that that industry is able to compete in overseas markets. To
be able to do this, exporters must be able to continue to further
develop and improve the efficiency of their supply chains to allow
them to continue to trade in overseas markets to generate the
wealth that we all need.
As evidenced in this submission, the UK port
sector has a critical role to play in achieving this goal. FTA
recognises that UK ports are currently some of the best in Europe
and beyond, and that they are playing a critical role in serving
UK based companies and attracting overseas investment into the
However, this advantageous position that the
UK currently enjoys is under threat from Continental ports that
are gradually being subjected to greater commercial pressures
and that will consequently have to respond to them by improving
the quality of the services that they offer.
If UK ports are not able to compete effectively
with such ports, then the UK will find that shipping lines choose
to omit UK ports from their direct schedules, and feeder lines
will serve the UK from the major continental ports. This will
increase transit times to major export markets, increase costs
and make consignments more prone to damage, loss and delay. This
is turn will mean that UK products are less competitive in the
global market place, and companies will choose to locate away
from the UK.
Exporters welcomes the publication by the DETR
of the Modern Ports: A UK Policy White Paper and the earlier
Modernising Trust Ports: A Guide to Good Governance paper.
FTA believes that they will both provide the building blocks on
which the UK port sector can begin to move forward to meet such
challenges, and that the Government must now work with all parts
of the maritime supply chain to ensure that the proposals contained
in the papers are realised.
FTA, on behalf of the UK's exporters, is committed
to working to bring about improvements to the maritime supply
chain and how that impacts upon the port sector. The Freight Transport
Association looks forward to working with Government to achieve
such a goal.
12 January 2001