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

Memorandum by the United Kingdom Major Ports Group (P 24)



  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 follows—

    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 in Europe.


  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 fully below.

  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 legislation.

    (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 Services

  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 UK.

  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 unnecessary rigidities.

  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 Legislation

  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:—

    Grants of power through:

    —  a Harbour Revision Order;

    —  an order under the Transport and Works Act.

    Project approval via:

    —  planning approval from the local authority;

    —  consent under the Coast Protection Act;

    —  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 regimes including:

    —  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.


  4.1  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 still further.


  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 development.

    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

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