Select Committee on Transport Written Evidence


Memorandum by CBI (POR 23)

INTRODUCTION

  1.  Increasing globalisation of business means that effective and efficient international communications, as well as transport infrastructure, are becoming ever more critical if UK businesses are to compete effectively in international markets. The quality of the UK's domestic and international links is particularly important to the CBI in this respect and we welcome the opportunity to present a written submission to the Transport Sub-Select Committee's Inquiry into UK ports.

THE IMPORTANCE OF PORTS TO UK ECONOMY AND COMPETITIVENESS

  2.  The UK's ports are an essential part of the transport infrastructure on which the economy and many businesses depend. The UK is an island but also more crucially an open and international economy, with strong, long-standing historical links around the world, supporting trade. Connectivity is important to business, a firm with good international transport links can receive supplies quickly, easily and cheaply, sourced from and supplied to markets around the world.

  3.  The importance of our ports to the UK economy cannot be understated, currently around 95 per cent (by volume) of the UK's exports and imports go through UK ports. The UK's total trade was worth around £500 billion (2000), compared to total GDP of around £800 billion. This volume of trade is continuing to grow, doubling over the past 40 years and it is trade still dominated by goods and not just the service sector.

  4.  As well as handling the import and export of goods directly into and out of the UK, ports act as a gateway for much of the deep-sea container shipping into and out of Europe, where goods are carried to their final destinations on short-sea trips. Containerised traffic accounts for an increasing proportion of goods carried by sea.

  5.  It is essential for the UK to retain direct deep-sea container shipping to keep UK transport costs and journey times down as it obviates the need for off-loading and trans-shipment of goods from the rest of Europe. Ports are also an important factor in the success of the UK in attracting foreign direct investment (FDI) as many international firms benefit greatly from the direct links major international hubs such as ports and airports provide.

  6.  UK Ports are of course important for trade but they also offer wider economic benefits. If all marine related activities and supporting industries are included the industry contributes around £28 billion to UK GDP, in the City of London alone there is a £1 billion maritime services industry consisting of insurance, finance, brokering and legal services.

  7.  Our ports are also important to supporting UK tourism. In 2000 around 5.8 million visitors arrived in the UK by sea (around 23 per cent of all visitors) highlighting how our ports are still an important means of access to the UK for visitors from the near continent. In total there were 39 million international sea passenger movements, earning revenue of around £631 million (2000).

  8.  The majority of freight handled by UK ports is bulk goods such as oil, in 2000 this accounted for around 71 per cent of tonnage handled at UK ports. Containerised and Ro-Ro traffic accounted for 24 per cent of tonnage but are a rapidly rising areas of port activity and are increasingly important for the efficient handling of goods at ports as well as to the shipping industry.

CONTRIBUTION TO THE REGIONAL AND LOCAL ECONOMY

  9.  Ports also provide significant benefits for the regional and local economy, not just through direct employment at the port and in port related industries but also by producing wider multiplier effects—supporting the creation of business clusters, providing better transport infrastructure and international links thus boosting the overall attractiveness of the area to business.

  10.  The role ports play in contributing to regional and local economic and social objectives is recognised by the Regional Development Agencies (RDAs). For example, SEEDA has set the establishment of strong, global international links as a key objective of their economic strategy. One North East, as part of its Regional Economic Strategy, includes an objective to encourage more national and international service providers to locate in the region bringing a wider choice for passengers and freight.

  11.  Ports very often support the development of strong specialist skills in their areas, ranging from logistics to marine surrounding safety, maintenance, design, research and development and training. These can help the area achieve competitive advantages that benefit the regional and local economy.

  12.  Ports can also help in the development of business clusters (A key Government competitiveness objective) both through the range of skills they support and their role as major inter-modal transport hubs, a factor also recognised by both SEEDA and One North East. SEEDA have chosen the transport and logistics cluster as one of the sectors selected as having a strong growth potential. One North East also has plans to establish a Logistics Development Cluster Team that will review global transport trends to assess their impact on the North East.

THE GROWTH IN THE CONTAINER MARKET

  13.  The volume of use of UK ports grew by 14 per cent between 1991-99 and the majority of this growth has been driven by the growth in containerised traffic. Containerisation reflects the rapid and ongoing technological changes within the ports and shipping industries that have led to more efficient handling of goods within ports and use of huge container ships of up to 100,000 tonnes gross registered weight. Thus ports are not only handling greater volumes but have to provide greater quayside and deep-water berths to handle larger ships. These developments have increased the efficiency and competitiveness of both the port and shipping industries. UK ports must be able to maintain and develop their infrastructure to meet the demands of the shipping industry if they are not to lose out to major competitor ports on the Continent.

  14.  The growth in containerisation has in fact been faster than that of the economy as a whole. Over the past 10 years, container traffic has increased by 73 per cent compared to GDP growth of 27 per cent. This strong growth reflects the globalisation of trade with the increased use of multi-sourcing of supplies and finished products; this is likely to be a continuing trend of modern production techniques and necessary to maintain the competitiveness of UK industry.

  15.  With increased globalisation there is no sign that this strong growth trend in the use of containerised traffic will not continue, even if not at the same pace and despite the current slow down in the world economy.

GROWTH FORECASTS FOR UK PORT CONTAINER TRAFFIC

  16.  The Government does not provide formal forecasts of future growth of ports activity. Its policy has been to leave developments to the commercial judgement of the ports themselves. There have been a number of independent forecasts using different methodologies that have inevitably provided a range of different projections. However, they all point to a clear pattern of continued strong growth in demand for containerised traffic at deep-water container ports. Typically these forecasts maintain the recent trend of container traffic growth running ahead of forecast GDP growth.

  17.  MDS Transmodal have forecast an increase of five per cent per annum in the use of containers (1994-10), Ocean Shipping Consultants have produced a forecast for container growth of 5.5 per cent of twenty foot equivalent units (TEU's) between 1997-08. A third study by Drewry Shipping Consultants Ltd (DSCL) produced a range of forecast based on different scenarios for GDP growth over a longer period between 2001-20 predicting a growth range of between 3.0 per cent to 5.6 per cent per annum. Recent growth in the UK container market has been 6.6 per cent per annum.

  18.  Taking a conservative estimate of the mid-range value would suggest a growth rate of around four per cent per annum. Using the same methodology as Drewry Shipping Consultants and based on current capacity of around 5.15m TEU, this would lead to an overall supply capacity need of around 7.9m TEU by 2011 and 11.0m by 2020. (It is also important to note that past forecasts have tended to under estimate actual growth).

  19.  It is reasonable to conclude there is a clear case for significant additional capacity within the UK. Current forecasts show that UK ports will run out of capacity within the next three to five years if no further capacity is provided. In fact our ports are already running up against capacity constraints reducing the efficiency and operational flexibility ports require, for example to allow for seasonal fluctuations in demand or the effects of weather.

  20.  Certainly over the longer term there is likely to be insufficient capacity for UK Ports and given the long-term nature of port development it is important that the right decisions are made now to ensure the provision of additional capacity in the future. There are currently a number of major port developments under consideration—Bathside, Dibden Bay, Felixstowe and Thames Shell Haven. All will be needed over the long term to supply the capacity to allow our ports to remain competitive and to capture an increasing share in the growth in world trade, and continue to handle our own trade.

  21.  Decisions made now are also important to underline the continued confidence of the shipping lines in using UK ports which is in part based on the long-term plans of ports to provide additional capacity and maintain their commitment to meet the operational needs of their customers. Indeed as our ports get nearer to their maximum capacity the harder it becomes to maintain operational efficiency and flexibility.

  22.  Constraining capacity would inevitably lead to a rise in port fees to deal with excess demand and also reduce the flexibility and efficiency with which they are able to handle ships. This would not only lead to higher transport costs for UK business but could also cause the shipping companies to move to other ports in Europe and make trans-shipments to the UK, undermining the UK's gateway status and the associated benefits this brings in terms of FDI and industrial location.

  23.  Furthermore, with the increase in the size of ships the shipping companies have made it clear they intend to reduce the number of calling points within Europe and therefore the competition to attract deep sea container ships to our ports will become more fierce. They will look for ports that can handle the largest ships, have the best facilities, flexible operations and competitive charges. The UK enjoys a degree of competitive advantage through its location along major shipping lanes, however it is an advantage we could lose if our ports are not permitted to develop to handle ships as efficiently as their owners demand.

PORTS AND THE PLANNING SYSTEM

  24.  If the UK is not to miss out on its share in the growth of world trade, our ports will need to expand to provide increased capacity. However, as with many other major transport infrastructure projects, ports face persistent delays due the planning system, creating uncertainty and reducing their ability to take long-term decisions on investment to develop ports facilities.

  25.  Of particular concern is the tendency for the planning system to concentrate on local factors such as the potential disbenefits from increased noise and traffic etc and not adequately take into account the wider national/regional strategic importance of ports and the economic benefits they provide. The CBI welcomes the recent Government proposals to reform the planning system, achieving a better balance between the interests of local stakeholders and the national interest must be a key outcome of these reforms.

  26.  The role and performance of the statutory agencies, such as English Nature, Environment Agency and the Countryside Commission, is also of concern in terms of controls on development. The ports sector often find dealings with these agencies can be time consuming and there is often a lack of transparency in the decision making process.

  27.  Again there is a tendency for these organisation not to take into account the operational needs of ports to sustain their operations as well as make provision for the need for future expansion. For example, in designating land that has been set aside by ports for expansion or changing needs as protected sites for either bird life or flood prevention. These buffer sites are important operationally but as they can be left undisturbed for a number of years they attract wildlife, are then treated as valuable wildlife sites and ports are then prevented from using this land.

  28.  Similarly with regard to permitted development rights, ports have certain powers to rearrange some of their facilities (storage areas, cranes, warehouses etc) without applying for planning permission, so long as it is all within their boundaries. This is important to enable them to operate efficiently, but the freedoms of permitted developments rights have been undermined as more and more restrictions are put in place such as the need to produce an environmental impact assessments.

  29.  The UK ports industry understands the need to address the environmental concerns and impacts of their development and indeed does not take issue with the high environment standards they need to meet. However, taken together the ports face a series of planning hurdles involving different Government bodies with differing objectives. Greater consideration should be given as to how these differing planning and environmental stages can be made more streamlined to reduce the time taken to gain a decision on a particular development.

  30.  Government can play a vital role in developing a more efficient decision making process through policy statements supporting the essential expansion of key national gateway ports. These offer the ability to take advantage of strategic natural locations and make the best use of existing infrastructure (such as deepwater channels, inland transport corridors), where the need for expansion can be demonstrated.

SURFACE ACCESS

  31.  Improved surface access is essential to support port development and reduce the impact on the local and a regional transport network. This must apply to both road and rail, some port traffic is particularly well suited for transportation by rail. Increasing the amount of port related freight by rail not only helps the sustainable development of ports but can often supply a critical mass that supports other non-port related rail freight services and contribute further to the Government's objective of increasing the amount of goods carried by rail.

  32.  There are a number of important road and rail schemes under consideration eg The SRA has plans to upgrade important rail links such as the link between Southampton and the West Coast Main Line and Felixstowe to Nuneaton. The Multi-modal studies programme (assessing options for transport developments along key transport corridors) such as the Hull and South Coast Multi-modal studies are similarly considering proposals for improving access to ports and minimising the impact of port traffic on the local transport network. It is vital that these studies produce definite commitments to schemes and will require close co-operation with ports, transport operators and planning bodies to ensure the right amount of capacity is provided.

LIBERALISATION OF PORTS SERVICES

  32.  The CBI welcomes moves to introduce greater competition for port services at the European level. However, policies must recognise that UK ports are already highly competitive and unlike many Continental ports are operated by the private sector, free from state subsides and therefore offer a high level of customer service. It is vital that moves to liberalise port services take account of the status of UK ports and do not put them at a competitive disadvantage with their European counterparts. The CBI believes the EU should also encourage the greater commercialisation of Continental ports and above all there must be greater transparency for the payment of subsidies and state aid to ports.

SUMMARY

    —  UK Ports are essential to the country's trade and in an increasingly global economy to UK competitiveness. Our ports must be able to expand if we are to capture an increasing share of the growth in world trade

    —  Containerisation now dominates the way loose goods are handled at ports. The use of containers not only represents the greater efficiency of handling goods in ports but also reflects modern manufacturing techniques as many companies now source for production lines from the world market. The increased use of containers is being matched by the use of larger ships, up to 100,000 gross registered tonnes which require ports with deep-water berth capabilities

    —  Current forecasts all point to the continued strong growth in the container market and UK ports are beginning to run up against capacity constraints. In addition there are only a limited number of ports that have deep-water berths needed to handle larger ships. There is therefore a need for additional capacity and deep-water berth capabilities to handle larger ships

    —  Many UK ports are well located on international shipping lanes making it an attractive calling point for ships into and out of Europe for transhipment as well as for UK goods, thus helping the UK remain as one of the main European gateways. This not only helps to reduce overall transport costs for UK business but also helps to attract FDI and increase the willingness of businesses to locate in the UK

    —  However, the shipping companies are looking to make fewer calls within Europe. Without the provision of additional capacity, not only will the ability of our ports to handle our own trade be undermined, but we risk losing the gateway status and the associated benefits it provides to major competitive ports on the Continent

    —  Port development also brings significant regional and local benefits. They not only increase employment at the port and in related industries, but also help to maintain existing employment contributing to the competitiveness of their region as a whole

    —  The Planning system must be reformed to better reflect the national and strategic importance of port development

    —  Ports require increased and better surface access, both road and rail, which must be upgraded to meet the increased movement of freight to and from ports.

April 2002


 
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