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

Memorandum by the Freight Transport Association (P 12)



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 global remit.

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 scrutiny.

  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.


  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.


  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 importance.

  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 as promised.

  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 these exemptions.

  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.


  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.


  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 elsewhere.

  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.

3.  Competition

  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 priced.

  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 is avoided.

  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 coast.

  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 UK.

  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 unique—there 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 and growth.

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.


  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 UK.

  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

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