Select Committee on Transport Written Evidence

Supplementary memorandum by the Chamber of Shipping (TT 05A)

  At the Tonnage Tax hearing on 23 June, the Chamber of Shipping was asked to provide clarification regarding the proportion that crewing costs represent of operating costs, and to elaborate on their relationship with capital costs. We were also asked to present further information regarding the ability to perform marriages on board UK-registered ships. These and supplementary comments in regard to other figures on employment and training numbers quoted during the evidence session are given below.


  The Select Committee asked how important crew costs were as a proportion of operating costs. Maurice Storey suggested that, in some sectors, they could represent as much as 70% of operating costs. Michael Hassing said that the figure was somewhat less in the container sector.

  The proportion clearly varies considerably from sector to sector and by size of ship. It is also dependent on the specific elements which are included in the term "operating costs".

  Annex 1 shows a number of practical examples (a modern roll-on/roll-off ship, a deep-sea tanker trading world-wide, and a passenger ferry) taken from the Chamber membership.

  Annex 2 reproduces two tables issued in a report by Drewry Shipping Consultants entitled "Ship Operating Costs—Annual Review and Forecast—2004-05". This was published in June 2004 and is an authoritative source which illustrates the varying proportions well. In these tables, which are produced by Precious Associates:

    —  Table 1.2 considers a wide range of bulk carriers and tanker sizes. It is clear from this that the crewing costs of these vessels increase from 30-35% of total operating costs for the largest ships to around 45-52% for the smaller sizes. For operators of the sizes more typically used in the UK coastal and short-sea trades, the proportion is likely to be around 50%.

    —  Figure 1.6 shows a schematic presentation of a sample of other ship types, including LNG (including liquefied natural gas, container, refrigerated, and multi-purpose vessels). These show variations in the range of 40-50%.

  (These comparisons do include insurances; if they were excluded, the proportions would increase correspondingly.)

  It is important to note that all the crews in question in Table 1.2 use as their reference point crew costs at standard international rates (ie not including high-cost European crews). Figure 1.6 is more varied, but the one ship cited as employing European officers is based on a British Master with the remainder of the officers and ratings Polish.

  The cost premium represented by the employment of British crews would be likely to represent an additional 15-20%.

  This is evidenced by the attached table (again from Precious Associates) which shows comparative wage costs for British seafarers and a range of other nationalities (it should be noted that, even in the British case here, the ratings are Filipino).


ComplementUS$ per month
British Officers/Filipino Ratings9/10 78,000
Chinese Officers/Ratings9/10 37,000
Indian Officers/Ratings9/9 47,000
Filipino Officers/Ratings9/9 47,000
Polish Officers/Ratings9/9 48,000


Numbers of UK Certificated Officers

  The most recent source for these is the United Kingdom Seafarers' Analysis 2003 produced by London Metropolitan University in March this year. This presents data using retirement ages of 65 and 57. The Government's Shipping Task Force sub-group on seafarer and training numbers has decided that future publications should focus on a single retirement age of 61 (although figures will continue to be produced for 65 and 57). The following table uses an interpolation of the report data for certificated officers. It should be noted that it excludes "non-certificated officers" (a survey of Chamber members in 2003 showed that these included at least 900 technical officers and 1,230 catering/hotel/other uncertificated officers).


AS AT 30 JUNE 2003
Retirement Age61
Certificated Officers at Sea14,305
Total Active Seafarers at Sea25,387

Source: London Metropolitan University.

  There has been a certain volatility in the time-series for certificated officers over the reports for recent years, largely owing to the bedding-in of the system for re-validating certificates issued under the IMO Standards of Training, Certification and Watch-keeping Convention 1995.

  It is additionally difficult to make a true estimate of change since 1997, as the criteria for inclusion in the re-validation process have altered over the period. There was an apparent decline of 14% up to 2002 (the actual figure was under 12% when some 500 Irish officers are stripped out of the earlier figure); whereas the same calculation for the period to 2003 indicates virtually no change since 1997.


  The suggestion was made also that the cadet numbers had increased only from 560 to the current 627. The Chamber stands by the table contained on page 3 of its earlier memorandum that the 1999-2000 figure for British new officer entrants was 446. This compares with similar figures as at April 2003 of 606 and the current provisional figure for April 2004 of 627.

  As indicated in our earlier memorandum, this information is derived from returns to a Merchant Navy Training Board enquiry, which are subsequently adjusted in the light of Government information from the Support for Maritime Training (SMarT) Scheme. They do not include other EU/Irish nationals, nor trainees undertaking rating-to-officer conversion courses.

  The figure of 560 appears to have been taken from an estimate in evidence given by the Chamber to an earlier Select Committee enquiry, report issued on 26 May 1999; the final figure showed that this had been substantially over-estimated.


  A number of questions were raised during the hearing on the impact of the tonnage tax regime on ratings, in the light of the fact that there are no formal training or numerical commitments in regard to ratings. It may be of interest to the Committee to know that, despite this, monies arising from the tonnage tax commitment have been allocated by the Maritime Training Trust to encourage the training of ratings on rating-to-officer conversion courses. The Trust has to date allocated a total of £600,000 to the John Slater Fund, which is dedicated precisely to this purpose.


  A separate note is attached at Annex 3 to this memorandum of the subject of marriages and UK-flag ships.

7 July 2004

Annex 1


% excl capital
% incl capital
Crewing (All UK Crew)71 39
Fixed Operating Costs29 16
Total Operating Costs100 55
Capital/Lease Cost45
Total, incl Capital Costs 100

    UK Officers     Filipino Ratings   All Indian Crew

% excl capital
% incl capital
% excl capital
% incl capital
Crewing—7034 5320
Fixed Operating Costs30 154718
Total Operating Costs100 4910038
Capital/Lease Cost51 62
Total, incl Capital Costs 100100

    UK Officers     Filipino Ratings   All Indian Crew

% excl capital
% incl capital
% excl capital
% incl capital
Crewing—7029 5317
Fixed Operating Costs30 134715
Total Operating Costs100 4210032
Capital/Lease Cost58 68
Total, incl Capital Costs 100100

% excl capital
% incl capital
Crewing (All UK Crew)67 29
Fixed Operating Costs133 15
Total Operating Costs100 44
Capital/Lease Cost56
Total, incl Capital Costs 100


1.  Fixed operating costs include provisions, stores, lubricating oils, spares, repairs and maintenance, communications and management fees, etc.

2.  Operating costs here do not include voyage costs such as bunker fuel or port costs (both of which are normally borne by the charterer); or insurances.

3.  Capital costs will vary depending on ship size, price paid, ability to obtain low-cost finance, etc.

Annex 2



Table 1.2


 (a)  Bulk Carriers

Manning H&M InsuranceP&I Insurance Repairs and MaintenanceStores/Supplies/Spares AdminTotal
Handy:20031,625 190150490 5255253,505
26-28,000 dwt20041,690 245190525 5305703,750
20051,725 260210535 5455753,850
20061,775 250220515 5505753,885
20071,830 250220510 5655903,965
Handymax:20031,625 240190650 6155303,850
40-45,000 dwt20041,690 340245685 6255704,155
20051,725 360270700 6355754,265
20061,775 350280680 6455804,310
20071,830 350280675 6605904,385
Panamax:20031,725 280220820 6455904,280
65-73,000 dwt20041,790 380270865 6556304,590
20051,825 400300885 6706354,715
20061,880 380310865 6806404,755
20071,935 380310855 6956504,825
Cape:20031,725 3252801,005 8256904,850
140-160,000 dwt20041,790 4503251,060 8357355,195
20051,825 4703501,085 8557405,325
20061,880 4503651,060 8707455,370
20071,935 4503651,050 8857605,445

 (b)  Tankers

Manning H&M InsuranceP&I Insurance Repairs and MaintenanceStores/Supplies/Spares AdminTotal
Products:20032,290 230200965 8655755,125
35-45,000 dwt20042,380 3402201,020 8806155,455
20052,425 3552401,045 8956205,580
20062,495 3502601,020 9106255,660
20072,570 3502601,015 9306355,760
Aframax:20032,350 3302601,230 9107055,785
80-110,000 dwt20042,440 4903251,285 9257456,210
20052,485 5103551,315 9457556,365
20062,560 5003751,290 9607606,445
20072,635 5003751,275 9807756,540
Suezmax:20032,350 4203301,405 9557456,205
140,000 dwt20042,440 5504101,470 9757906,635
20052,485 5754501,505 9957956,805
20062,560 5504751,475 1,0108006,870
20072,635 5504751,460 1,0308156,965
VIcc:20032,400 4904401,935 1,4659207,650
280,000 dwt20042,490 7655502,020 1,4909608,275
20052,535 8006052,070 1,5209708,500
20062,610 7606302,035 1,5459758,555
20072,690 7606302,015 1,5759958,665

Note:   Stores/Spares/Supplies includes lubricating oils (lubes).

Note:   Data estimates for 2003 are provisional.

Sources:   Drewry Shipping Consultants Ltd, Ensign Marine Consulting Ltd, Precious Associates Ltd, D M Jupe Consulting.

Annex 3


  English law does not recognise marriages performed on board ship. Scottish law does, but only if the marriage is performed when the ship is tied up in a Scottish port. There is however a strong demand from couples to get married on board ships, especially in the spectacular setting of a cruise vessel mid-ocean, which supports a lucrative weddings business on ships registered in jurisdictions that do recognise onboard ceremonies.

  Experience gained by P&O Princess Cruises with cruise vessels registered in Bermuda shows clearly that the option of getting married on a Red Ensign ship, with all the attendant trappings of a traditional wedding, has wide appeal. Their Grand class ships were built with "wedding chapels" and the need for the facility was a significant consideration in their decision to place these ships on the Bermudan rather than UK register. (Purpose-built chapels are ideal from a customer perspective, but for ships-in-service public rooms can readily be adapted to provide the right setting.)

  The ability to offer the same weddings service onboard ships registered in the UK would enable cruise ship operators to place their ships on the UK register without losing valuable weddings business. It would also enable the owners of the 20 or so cruise vessels and cruise-ferries already registered in the UK to match the services already offered by competitors under foreign flags.

  It is likely that the ability to offer onboard weddings would also be of value to operators of shorter-haul ferries and locally-operating cruise boats, with couples attracted to the option of getting married against a pleasing backdrop of Britain's coastal scenery. This would be an entirely new area of business, to which the current ability to host weddings on ships tied up in Scottish ports is of little guidance, and its value is therefore difficult to assess.

  The Chamber has therefore advocated the introduction of legislation that would confer legal recognition on civil marriages performed on British ships. The marriage law of Bermuda, which recognises any marriage performed on board Bermudan-registered ships by a celebrant (typically the ship's captain) authorised by the Bermudan authorities to conduct marriages at sea, could serve as a model.

  In view of the separate legal bases for civil marriage in England and Wales and in Scotland, the Chamber has recommended that legal recognition for marriages performed on British ships be conferred through a piece of Merchant Shipping legislation so that all British ships were covered.

  The Chamber understands that the Department for Transport is currently preparing the specification for such a piece of legislation, with the intention of securing its promotion as a Private Member's Bill.

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