Memorandum by the United Kingdom Major
Ports Group (P 24)
OPPORTUNITIES AND DEVELOPMENT PROSPECTS AT
1.1 The United Kingdom Major Ports Group
(UKMPG) welcomes the opportunity to assist the Transport Sub-Committee
in this inquiry, following the publication of the Government's
recent paper Modern Ports.
1.2 UKMPG is one of two trade associations
which represent the UK ports industry. We have eight members as
Associated British Ports (who own Hull, Immingham,
Southampton and twenty others),
Belfast Harbour Commissioners,
The Bristol Port Company,
Forth Ports Plc (who also own Dundee and Tilbury),
Hutchison Ports (UK) Limited (who own Felixstowe,
Harwich International and Thamesport),
The Mersey Docks and Harbour Company (who also
own the Medway ports),
The Port of London Authority,
Tees and Hartlepool Port Authority Limited
Members of UKMPG operate 43 ports which between
them account for about 70 per cent of all cargo handled in the
UK. Two of our members, the Port of London Authority and Belfast
Harbour Commissioners are trust ports. Our remaining members are
all either plcs or subsidiaries of plcs, the shareholdings for
which are all in private hands.
1.3 The other trade association is the British
Ports Association which represents almost the whole of the rest
of the industry. The two associations work in close collaboration.
We also collaborate with British Ports Industry Training (BPIT)
the industry's training body and with the Port Safety Organisation
(PSO), which covers safety issues in the industry. These are separate
organisations, but most members of UKMPG belong to both. UKMPG
is a member of the European Sea Ports Organisation (ESPO) and
the Federation of European Private Port Operators (FEPORT).
2.1 The contribution which the port industry
makes to the UK economy is self-evident. About 25,000 people are
employed in the industry, but perhaps more importantly, 95 per
cent of the country's trade (by volume) passes through our seaports.
We are an island trading nation and it is clearly in the interests
of both importers and exporters that their business should be
supported by an efficient and cost effective port industry.
2.2 Total traffic through UK ports is growing
slowly but steadily. In the ten years to 1999 tonnage has risen
by about 16 per cent. Tonnage has increased every year except
for a minor "blip" in 1999 caused by the cessation of
sewage dumping at sea. But most of the increase in traffic in
the past ten years is in the unitised sector (containers and ro-ro
vehicles). During the past ten years the total number of containers
handled has risen by almost 60 per cent, and the number of goods
vehicles by 50 per cent. Other traffics, such as liquid bulks
(oil and chemicals), dry bulks (coal, iron ore, aggregates etc)
and general cargo have remained at broadly constant levels. The
number of accompanied passenger vehicles handled has increased
by 28 per cent over the period, notwithstanding the opening of
the Channel Tunnel.
2.3 In the past twenty years the UK port
industry has gone through a period of major structural change.
This has happened for two main reasons. First, privatisation.
The previous Government promoted the privatisation of the former
British Transport Docks Board, which was a nationalised industry,
and is now Associated British Ports (ABP) which represents roughly
25 per cent of the industry. That Government also encouraged the
privatisation of the major trust ports, and as a consequence the
ports of Clyde, Forth, Tees and Hartlepool, Tilbury, Medway, Ipswich
and Dundee were converted into private companies. Adding in ports
such as Felixstowe which were already in the private sector we
have reached a situation in which about three quarters of the
industry, in terms of tonnage handled, is now in private ownership.
2.4 The second major reform was the repeal
of the Dock Labour Scheme in 1989. The Scheme was introduced as
a means of protecting dockworkers from the worst effects of casual
employment. In its day it was an enlightened piece of social legislation,
but with the passage of time, and in particular the introduction
of containerisation, which requires much more sophisticated cargo
handling techniques, the Scheme had outlived its usefulness, and
was becoming a drag on the ports in which it applied. Its repeal
led to great improvements in the efficiency of cargo handling,
and assisted the renaissance of ports such as London and Liverpool.
2.5 The UKMPG believes that the combined
effect of these two reforms has been a dramatic improvement in
efficiency of the industry. The Chamber of Shipping are on record
as saying that they believe that the UK industry is the most efficient
3. PROBLEMS AND
3.1 In addition to the growth in unitised
cargo referred to above, the pattern of shipping, and the size
of vessels, are also changing. In particular deep sea container
ships are getting larger. They require deeper channels to approach
the ports and larger cranes to load and unload their cargo. Thus,
the port industry needs not only to equip itself to handle rising
volumes of unitised traffic: it also needs to adapt and enlarge
its facilities to accommodate changes in the shipping industry.
UKMPG believes that deep sea container traffic will continue to
grow by about 6 per cent pa for the foreseeable future. Even after
making optimistic assumptions about the scope for improvements
in efficiency this will mean that all current capacity will be
fully utilised in three years time. This prospective shortfall
in capacity was recognised in Modern Ports. Thus, the growth in
trade is both a threat and an opportunity. There is also an issue
of the level playing field with Europe which is discussed more
3.2 There are currently four main areas
of concern for the section of the industry which we represent.
(i) The competitive position in relation
to European ports.
(ii) The threat posed by the proposed Directive
on access to port services.
(iii) The application of new environmental
(iv) The planning process and its implications
for sustainable development.
The four issues are to some extend inter-related.
(i) The Competitive Position with Europe
3.3 Ports in the UK receive virtually no
financial support from central or local Government. Their operating
and maintenance costs have to be financed from revenue, and new
investment has to be financed either from profits or from borrowing
in the commercial market. We have no complaint about this, and
we are not looking for any fundamental changes in the UK regime.
However, the structure in most Continental ports is different.
Although precise arrangements vary from country to country, the
general pattern is that the infrastructure of a port (ie the land,
the sea approaches, the breakwaters, the quays etc) are owned
and operated by a public body, which in many cases receives financial
assistance towards the maintenance and development of its facilities.
The dredging of navigational channels, for example, which can
be a major component in port costs, is frequently funded by public
authorities on the basis that a navigational channel is a piece
of public infrastructure like a road and should therefore be supported
from public funds.
3.4 Although it may seem surprising at first
sight there is keen competition between UK and Continental ports
in certain areas and in certain sectors of the market. Deep-sea
container traffic, referred to above is the most obvious example.
If the UK ports are not able to accept the largest round the world
container vessels they will call at ports in mainland Europe and
traffic to and from the UK will need to be transhipped, either
by feeder vessel or, which is increasingly common, on lorries
using a ferry or the Channel Tunnel. This will potentially increase
the costs of our imports and exports and lose jobs as well as
adding to road traffic. A similar situation arises with the servicing
of oil and gas installations n the North Sea, and it can affect
other traffic such as imported cars. We would have no complaint
if traffic were lost to European ports because of their greater
efficiency or for reasons of geography, but it is a matter of
great concern if traffic is lost as a result of subsidised competition.
3.5 The problem is compounded by the system
of light dues, whereby shipping using UK ports has to pay towards
the costs of lighthouses and other navigational aids, whereas
these services are provided free in most Continental countries.
Around £60m pa is raised in this way and we estimate that
on average a container imported into the UK attracts a light due
charge of £7, and 20 tonnes of exported steel attracts a
charge of £12. It is a further distortion of competition
that users of UK ports have to pay these charges.
3.6 We accept that these are not straightforward
issues. Under the European Treaty, financial assistance toward
the provision of public infrastructure does not fall within the
definition of a state aid. However there are significant grey
areas surrounding what is and what is not public infrastructure
and there is also suspicion that financial support which purports
to be for infrastructure leaks into the provision of other services.
The fact that many European ports do not publish proper accounts
makes the whole area difficult to expose.
3.7 For a number of years the UK port industry
has been pressing for this issue to be addressed, but with little
success. Eventually, in 1997, the Commission published a Green
Paper, which did start to examine the problem. The solution which
was favoured was the introduction of a Directive designed to ensure
that port charges properly reflected the costs of the services
concerned. Our preference would have been for the issue of state
aids to have been tackled more directly, with a proper definition
of what is a state aid in a port, and with arrangements for improved
transparency. Nevertheless, although we had some reservations
about the practicability of the proposals, we did welcome the
Green Paper as an important step in the right direction.
3.8 Unfortunately however with change of
personalities at Commissioner and official level the Commission
has now adopted a different approach. The idea of an initiative
on charging has been abandoned, and instead the Commission are
proposing a Directive concerned with access to port services.
In our view this will do little to address the problems with which
we are primary concerned, but has the potential to do considerable
damage to our industry.
(ii) The Proposed Directive on Access to Port
3.9 The Commission's proposals are expected
to be published very shortly, but we already know, from discussion
with Commission officials and from other sources the form which
the Directive is likely to take.
3.10 The key to the thinking is the distinction
which the Commission draw between public services and commercial
services. Public services consist of the provision of public infrastructure
(dredging, breakwaters, navigational aids etc) while commercial
services are the associated services provided for users of a port
(cargo handling, warehousing, pilotage, towage, linesmen etc).
The Commission's proposals assume that commercial services are
provided through a system of authorisations or concessions, awarded
by the port authority. This is frequently not the case in the
3.11 The Directive will be designed to open
up access to the market for the provision of commercial services,
thereby encouraging competition. However it is accepted that situations
will arise in which there has to be a restriction on the number
of providers of these services, either because the market will
not sustain more than a small number of providers, or because
there is physically not enough room to admit newcomers. The proposal
therefore makes a distinction between ports where there are no
restrictions on the number of providers and ports where there
has to be a restriction.
3.12 In the unrestricted ports it is envisaged
that all providers of commercial services will need to be authorised
by the port to ensure that they meet the required standards of
safety, training of personnel and so on. Where the port itself
provides such services there will be a requirement for the keeping
of separate accounts to expose any cross-subsidy.
3.13 Greater problems arise in situations
where the number of providers has to be restricted. All ports
have only finite space and could potentially be held to be "restricted".
In such ports the concession to provide the services would need
to be awarded by means of competitive tender and concessions would
be for a limited period (length determined by the nature of the
investment involved). Existing concessions would require to be
re-tendered within a maximum period (length again depending on
the nature of investment involved). Where the port itself provided
such services the award of concessions would be taken out of its
hands, and placed with a separate independent body.
3.14 The most important area is cargo handling.
There is no standard pattern in UK ports, but in a number of ports
cargo handling is provided by the port authority itself. Many
of these ports would fall into the "restricted" category,
which would mean that existing arrangements would have to be phased
out, with new concessions being offered for tender. Ports providing
their own cargo handling believe in the philosophy of the "one
stop shop" whereby a port has direct control over the main
services which its users require.
3.15 European countries have traditionally
had schemes for the reservation of dock work, designed to give
a measure of protection for dockers in days when cargo handling
was undertaken by semi-casual labour. With modern cargo handling
techniques the need for such schemes has much diminished, but
they are still to be found in many Continental countries. In the
UK the Dock Labour Scheme was abolished in 1989. This reformed
cargo-handling arrangements and allowed many ports to offer stevedores
permanent pensionable employment. The proposal to require a scheme
of concessions would be a retrograde move in this country, reintroducing
3.16 The "integrated" ports have
made substantial investment in facilities: if they were forced
to give these up they would look for compensation, More importantly,
there would be far less incentive for investment in new facilities,
and in the UK all investment in ports has to be privately financed.
3.17 There would also be issues of safety,
notably in relation to pilotage, which is one of the services
to which the Directive would apply. It is hard to see how a system
of concessions could be made to work without jeopardising safety.
In the first place the only people competent to provide pilotage
in a particular port are the existing pilots, as they alone have
the necessary local knowledge. Moreover pilotage in the UK is
administered by the ports, and it forms part of the port's total
safety management system, an approach endorsed in the Government's
Port Marine Safety Code. If ports had to look to an independent
contractor for the provision of pilotage this valuable linkage
would be lost. It may be that in some Continental ports there
are restrictive practices in pilotage, but here again, the Commission's
ideas for reform could be damaging to the safety of UK ports.
3.18 To summarise, we understand the thinking
behind the Commission's proposals (and as a general principle
we support fair competition in open markets), but we feel that
the proposals are designed to address problems which do not exist
in the UK and could, unintentionally, harm the UK port industry
and UK competitiveness. In particular, to require cargo handling
to be subject to time limited concessions would discourage new
investment and would be retrograde in terms of safety and conditions
of employment. We are urging the UK Government and UK MEPs to
use all their influence to ensure that the Directive does not
harm UK ports in the way we fear.
(iii) The Application of New Environmental
3.19 The coastline of the UK and the species
and habitats which it contains are a valuable part of our environmental
heritage. The port industry is fully aware of its responsibilities
toward the environment and does not oppose the principle of environmental
legislation designed to protect this heritage. But sustainable
development will perforce on occasions come into conflict with
the aims of conservation, and, as in many other fields, a sensible
balance needs to be struck. Sustainable development cannot be
assured if environmental legislation is given primacy over the
other aspects of sustainability as defined by the Government.
The industry is very concerned that recent developments, many
of them stemming from European legislation, notably the Birds
and Habitats Directives are tending to tilt the balance too far
in one direction which will tend to hamper the investment in new
facilities required to meet the country's economic needs. Although
the problems derive from European Directives we have strong evidence
that the implementation of these Directives by the UK Government
and its agencies have been significantly harsher on the UK port
industry than the regimes applied elsewhere in Europe.
3.20 A particular example is the designation
of Special Areas of Conservation (SACs) under the Habitats Directive.
Under this Directive Member States are required to identify sites
of particular interest, which contain examples of habitats and
species listed in the Directive. Estuaries are one of the types
of habitat identified in the Directive, and a number of estuaries
which contain major ports have been proposed as SACs.
3.21 Once an area has been designated as
a SAC a rigorous regime comes into place controlling activities
which may take place within or near it, with a strong presumption
against any new development which might affect the species or
habitats in question. Approaches to ports typically have to be
dredged regularly to maintain a minimum depth of water, and if
the port is to be developed to handle vessels with a deeper draft
the depth of the channels need to be increased. If a SAC is designated
which includes the approach channels to a port special procedures
are required to justify even dredging to maintain the existing
depth of water, with a strong presumption against any dredging
designed to increase that depth.
3.22 The port of Bristol has undertaken
extensive research into Continental practice in this area and
has submitted to the Committee a dossier which demonstrates that
in a number of major Continental ports such as Antwerp, Emden,
Bremerhaven. Esbjerg and Bordeaux the boundary of the SAC has
been so drawn as to exclude the existing navigational channels
into the port, thus ensuring that the port activities are not
interfered with. This has not been the practice in the UK, notably
on the approaches to Bristol in the Severn and on the Humber,
where the proposed area of designation includes not only the approach
channel but the port facilities themselves.
3.23. The Bristol case has recently been
the subject of litigation in the European Court of Justice. The
Court upheld the UK Government's treatment of the Severn estuary,
but nevertheless acknowledged that social and economic factors
should be taken into account in the operation of the Directive.
It is far from clear how this is intended to work, and it would
also seem that the practice in most continental European countries
is at odds with the judgement. We are urging the UK Government
to have the situation clarified as a matter of urgency.
(iv) The Planning Process
3.24 The particular problem in securing
approval for new developments in SACs are part of a wider issue.
As we noted above, the port industry recognises that sustainable
development involves the balancing of environmental and conservation
objectives with wider economic considerations. The port industry
is concerned that the time and cost of securing consent for major
developments are now potentially so great as to be a potential
deterrent for developers, regardless of the merits of the case
concerned. To quote an example from another sector, the planning
enquiry into the proposed fifth terminal at Heathrow began in
1995 and a decision seems unlikely until late in 2001 at the earliest.
Similar problems arise with other major infrastructure developments.
Regardless of the pros and cons of individual proposals, it cannot
be in the national interest that so much time and money has to
be expended before the case for a development is settled.
3.25 In the case of port developments the
problem is compounded by the various different consent regimes
to which a port development will potentially be subject. A proposed
new port development will require some or all of the following:
a Harbour Revision Order;
an order under the Transport and
planning approval from the local
consent under the Coast Protection
consent under the Food and Environmental
Protection Act (FEPA).
Additional approvals such as:
consents from the Environmental Agency;
approval from the Crown Estate Commissioners.
Many of which are subject to a range of assessment
an environmental impact assessment
(under the EIA Directive);
an appropriate assessment (under
the Habitats regulations);
an assessment under the FEPA regulations;
a combination of the three assessments
above applied to one or more of the approvals referred to.
3.26 The Government has made a modest start
with a proposal to coordinate consents under FEPA and CPA, which
is a welcome development but only a small one. The problem lies
in different sets of legislation, enacted at different times and
for different reasons, which tend to overlap one another. We believe
that a review of the whole consent procedure is overdue, which
should consider both the general problem of major developments
as well as the particular problem of the tangle of consents which
a port development requires. In this respect, the commitment given
in Modern Ports (para 1.2.2) to "make regulation add value
rather than unnecessary cost, ensuring that regulators coordinate
their overall demands" is particularly welcome. It may be,
however, that such a departmental initiative will require the
explicit support of Government, perhaps from the Better Regulation
Unit, if it is to achieve significant progress.
4. OTHER ISSUES
4.1 Your inquiry's terms of reference also
raise the issue of cooperation between ports, and safety.
4.2 On cooperation we understand that the
Committee may be concerned that the competitive situation within
the UK port industry may lead to excessive investment in competing
facilities. Such concern is understandable but we do not consider
that this is a serious problem in practice. The majority of the
country's major ports are now owned by private sector companies
who are accountable to their shareholders. Market pressures within
the industry will tend to stop unjustified investment projects.
Certainly, traffic can and does switch between ports, but we believe
that, overall, healthy competition tends to promote efficiency
and eliminate waste. It is also worth recalling that past attempts
to coordinate investment in port facilities were conspicuously
unsuccessful. The National Ports Council, whose function this
was, was abolished in 1980 and few regret its passing.
4.3 Safety within ports is an issue which
has attracted some attention in recent years. On the marine side,
the Government conducted a review following the Sea Empress incident
at Milford Haven, and this led to the production of the Port Marine
Safety Code. The Code, which was produced in close collaboration
with experts from the industry, will, we believe, provide a foundation
for robust safety procedures on the marine side of port operations.
As regards shore-side safety, there is no doubt that cargo handling
can be a dangerous operation. Although the accident rate has much
reduced in recent years, there are, regrettably, still a number
of accidents each year. The Government drew attention to this
in Modern Ports, and we stand ready to work with the Government
to improve safety standards further. But to get the matter in
perspective, it is worth recalling that there were three fatal
accidents in ports in the past year, compared with 85 in the construction
industry. But even three accidents are too many, and the industry
will be glad to cooperate with the Government to reduce accidents
5. MODERN PORTS
5.1 The Government's policy paper Modern
Ports was published at the end of the last year; it was the first
comprehensive review of ports policy for many years and as such
we welcome it. There is very little in the Paper with which we
would take issue. We were pleased to note the assurance that "commercial
decisions as well as responsibility for port operations lie with
those that have the powers and duties that go with them"
and that no fundamental changes in the Government's relationship
with the industry are contemplated. We also welcome the acceptance
that capacity needs to be increased to meet the prospective shortfalls
in container and ferry ports.
5.2 Our main concern with the Paper is with
the issues which we feel are not adequately covered. As explained
in section 3(i) and (ii) above, there is major concern within
the industry at the way in which European Commission port policy
is developing, and with the potential damage to the UK industry
which this could cause. We were disappointed that the Paper only
commented on this topic very briefly, and then in non-committal
terms. Our concerns about light dues were also dismissed. In addition
we feel that the Government ought to review the issue of sustainable
development within the port industry. We would have liked to see
more evidence in the Paper that the Government recognises this
as a serious issue.
6.1 Although there is much in Modern Ports
which we welcome, there are some issues which we feel deserve
greater emphasis. In particular we would have liked to see:
a. An assurance that the Government will
undertake a robust defence to UK port interests in relation to
the proposed Directive on access to port services.
b. A commitment that the Government will
use its influence within the European Union to see that the issue
of state aids to Continental ports is properly addressed.
c. A more balanced approach to sustainable
d. An undertaking to review procedures for
securing planning approval for major port developments.
6.2 We would be pleased to supply the Committee
with any further information which they may require in connection
with their inquiry.
19 January 2001