Forging ahead?: UK shipping strategy - Transport Committee Contents


2  Promoting the UK as a globally competitive location for shipping

Introduction: the new shipping strategy

5. Shipping, and the services associated with it, is fiercely competitive: maritime transport has been described as "probably the most globalised of industries".[7] The biggest shipbuilding firms are in South Korea; the three leading operators of container vessels are European; more than one quarter of the world's seafarers come from the Philippines; the biggest container ports are in Singapore and China; around one third of the global fleet sails under a Panamanian or Liberian flag; the UK is the leading shipping insurer; and most ships are scrapped in Asia.[8]

6. There are significant challenges associated with developing and maintaining the UK's competitive advantage in the global market. Nigel Palmer, chairman of the Maritime Skills Alliance, said:[9]

    Our competitors in this market are not necessarily those from Europe. They are increasingly from the Far East and emerging economies. In the past cost was their advantage, but these days cost is diminishing as an advantage as their economies evolve and they are improving in quality. We have to keep ahead of the game in order to maintain our competitive position.

Maritime UK, which represents ports, shipping and maritime services firms, said that the industry was looking for "predictability and stability", particularly in relation to regulation and taxation.[10] It welcomed moves to develop a partnership between industry and Government as "steps towards a more mature discourse" and advocated more cross-departmental collaboration on maritime matters.[11]

7. The trade unions also broadly welcomed the publication of Shipping Strategic Partnership. Nautilus International echoed Maritime UK's call for predictable, stable and joined-up policy-making.[12] Don Cockrill, chairman of the UK Maritime Pilots Association (UKMPA), said the strategy "needs to be an active strategy that is continually reviewed and not something which, having been published, ends up on a shelf somewhere with very little reference in years to come".[13] Both the UKMPA and the National Union of Rail, Maritime and Transport Workers (RMT) argued that the strategy overlooked important employment issues,[14] matters which we will cover in the next section of this report.

8. As with its sister document on ports, Shipping Strategic Partnership provides a framework for policy on shipping rather than a list of specific actions for the Government to take over the next few years. For example, on joined-up Government the document aims:

    4.1 To ensure cross-Whitehall policies take maritime interests into account including:

    Addressing any unintended or indirect consequences on shipping of wider legislation.

    Ensuring marine environmental policies (e.g. marine planning and licensing of maintenance dredging) take into account maritime activities such as shipping.

    Ensuring that the importance of protecting vital shipping lanes is taken into account in marine planning.

    Ensuing that necessary controls on entry of ships, cargo and passengers into the UK do not impede trade and growth.

The crucial test for Shipping Strategic Partnership will be whether articulating aims such as this has a demonstrable, positive impact on policy-making.

9. We welcome the publication of the Government's Shipping Strategic Partnership, which could provide a sensible framework for Government policy on maritime issues into the next Parliament. We recommend that:

·  The framework and actions which flow from it be subject to meaningful discussions with both the industry and trade unions;

·  The framework be sufficiently flexible to accommodate changes in policy and circumstance, including ministerial changes;

·  Policy should flow from the framework, rather than the framework being used to legitimate a series of disconnected policy announcements; and

·  Ministers address the clear call from business and unions for a more joined-up approach to maritime policy-making.

London International Shipping Week

10. Shipping Strategic Partnership, and its counterpart for ports, were both issued at the start of the inaugural London International Shipping Week. This was an industry-led event to showcase the UK maritime sector, and it had significant Government input.[15] Our breakfast reception and oral evidence with the Shipping Minister were both included in the programme for the week.

11. London International Shipping Week was well regarded by witnesses. For example, Mark Brownrigg, Director-General of the UK Chamber of Shipping, said:[16]

    From the shipping, ports and maritime business services' perspective, the UK and London stood up and shouted. It has not done that for a while. Other competitor countries like Singapore and aspects of China, Hong Kong and Dubai will have noticed that. I think that is a big message to have sent.

Trade union witnesses also welcomed the event. However, Don Cockrill of UKMPA suggested that, if repeated, it should have a less London-centric and more public-facing focus.[17] A second London International Shipping Week has been announced for 2015.[18] We welcome plans to hold a second London International Shipping Week in 2015 and recommend that the Government ensures that it showcases maritime industries across the UK.

The UK-flagged fleet

12. DfT figures show that, as at 31 December 2012, there were 675 UK-owned trading vessels of over 100 gross tons. This compared to 731 such vessels in 2009.[19] The MCA enforces regulations on vessels registered under the UK flag, including those relating to inspection, certification, and matters relating to safety and pollution.[20] Just under one half of these vessels was UK-flagged. The chart overleaf hows how the size of the UK-flagged fleet compares with other flagged fleets.


13. The number of UK-owned and UK-flagged vessels increased significantly from the late 1990s to the late 2000s, since when numbers have fallen away slightly. In terms of tonnage, UK-owned vessels have trebled since 1999 while UK-flagged vessels have increased sixfold.[21] DfT attributed this change to the introduction of the tonnage tax by the previous Administration in 2000 and registration reforms by the MCA.[22] The tonnage tax involves the taxable profits of UK shipping firms being determined according to the carrying capacity of the ships in their fleet. Firms generally pay less corporation tax than would have been the case before, in return for committing to train new recruits each year, something we will return to in our next chapter. Maritime UK described the introduction of the tonnage tax as "the single biggest maritime policy achievement of the UK Government for many decades".[23]

14. The Minister said the Government wanted to "see a growth of the flag". This would have a positive effect on employment, strengthen the UK's hand in negotiations in the European Union and the International Maritime Organization, and strengthen sectors associated with shipping, such as maritime finance and law.[24] Mark Brownrigg of Maritime UK said that "the real economic value to the country" from there being more UK-flagged ships "is establishment of shipping businesses in the UK".[25] His organisation drew attention to research into the economic effect of expanding the UK-fleet following the introduction of the tonnage tax:[26]

    According to an Oxford Economics report of 2013, based on a counterfactual scenario whereby tonnage tax was not introduced and the UK-fleet continued its long-run trend of decline, it is estimated that the direct GDP contribution of the UK shipping industry would have been approximately £4.4 billion lower in 2011 than it actually was, supporting 37,800 fewer UK-based people in employment and generating around £455 million less for the UK exchequer to fund important public services... When considering the wider multiplier impacts on the UK economy, the counterfactual scenario would have contributed nearly £8.2 billion less in GDP, supported around 115,100 fewer UK jobs and left a shortfall in government revenue of over £1.6 billion.

15. The growth in the size of the UK-owned and UK-flagged fleets in the decade from 1999 was a significant achievement which had a substantial, positive economic impact. We welcome the Government's commitment to continue to "promote the UK flag as the register of choice for high quality ships"[27] but it is not clear what steps are being taken to achieve this. The recent recession halted the growth of the fleet. We recommend that the Government set out what policy measures it will use to ensure that the UK-flagged fleet begins again to grow in size.

16. We are also mindful that UK maritime firms provide services to shipping firms and vessels of all nationalities and are not necessarily dependent on the UK fleet. We recommend that Government explain how it will "promote the UK as a global shipping base and centre for maritime services"[28] available to vessels of all nationalities.

RED ENSIGN GROUP

17. UK crown dependencies (the Isle of Man, Jersey and Guernsey) and overseas territories (such as the Cayman Islands) have their own shipping registers, which are overseen by the Maritime and Coastguard Agency. According to UNCTAD, the Isle of Man fleet is larger by tonnage than the UK-flagged fleet.[29] Nautilus International was critical of the support provided by successive UK governments to these other registers, known collectively as the Red Ensign Group: [30]

    In the context of international competition, we believe questions should be asked about the UK's relationship with the Red Ensign Group and the way in which government policy essentially props up the competition from these registries - particularly given the amount of UK-owned/controlled tonnage still registered outside of the UK. Some of these registries are classed as flags of convenience by the International Transport Workers' Federation or are located in what the OECD defines as tax havens - raising questions about their long-term political sustainability.

18. Sir Alan Massey defended the UK's role in relation to the Red Ensign Group, arguing that it gave the UK "a big voice" at the IMO to be associated with several other flags. He added that:[31]

    keeping [ships] inside the REG family means that you still have some influence over their quality and performance... We can take administrative measures against members of the REG if we want to so as to ensure that safety is brought up to the necessary standards.

The DfT provided us with examples of action taken against Red Ensign Group vessels in recent years, including expanded inspections and the service of improvement notices.[32]

19. Mr Woodman of the DfT said that employment law was a key factor for shipowners deciding between the UK and a Red Ensign Group flag:

    If you flag outside the EU and outside of the UK's dependent territories, you can obviously choose the employment parameters. We would see the ability to flag with the Red Ensign Group as giving the employer that kind of option while still maintaining that link to the UK and that very high standard of safety and performance.

The Red Ensign Group territories which maintain registers for larger vessels (Isle of Man, Cayman Islands, Bermuda, Gibraltar and the British Virgin Islands) are, or will become, signatories to the Maritime Labour Convention, which establishes basic employment standards.[33]

20. Given that the UK Government has a stated aim of expanding the UK-flagged fleet as "register of choice for high quality ships", it is surprising to find that it also oversees a number of competing shipping registers. Furthermore, the primary attraction of some of these registers to shipowners is that they offer a lower standard of employment rights than does the UK flag. The Government has acknowledged that growth in some of the registers is linked to the tax haven status of the territories concerned.[34] The Red Ensign Group does not feature in Shipping Strategic Framework and we question whether it contributes to the UK's shipping strategy. It is not clear that the benefits to the UK from overseeing the Red Ensign Group outweigh the costs of doing so. We recommend that the Government review the support it provides to the Red Ensign Group, with a view to raising the standards of the vessels which fly under the flag.

21. We also call on the Government to review whether the MCA could provide registry support to other flags, as another way of ensuring that the UK provides a global lead in high-quality shipping standards.


7   Benamara, H., Hoffman, J., and Valentine, V., "The maritime industry: key developments in seaborne trade, maritime business and markets", in Cullinane, K., (ed.), International Handbook of Maritime Economics, Edward Elgar, 2010, p21.  Back

8   Ibid, pp21-29. Also see Q1. Back

9   Q48. Back

10   Q47. Back

11   Ev 50. Back

12   Q83. Back

13   Q85 Back

14   Qq 84-85. Back

15   Ev 43 paragraphs 32-34. Back

16   Q80. Also see Ev w20. Back

17   Qq108-10. Back

18   http://www.londoninternationalshippingweek.com/date-announced-for-london-international-shipping-week-2015/.  Back

19   For a historical perspective see Ev 33 paragraphs 4.1 and 4.2. Back

20   For reasons why UK-owned vessels might not be UK-flagged see Q70. Back

21   https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/243906/shipping-fleet-statistics-2012.pdf.But also see Ev 33 paragraphs 4.3 and 4.4. Back

22   Ev 41 paragraph 15. Back

23   Ev 49. Back

24   Q7. Back

25   Q69. And see Ev 26 paragraph 4. Back

26   Ev 49. Back

27   Shipping strategic partnership, box 2.1 Back

28   Ibid. Back

29   UNCTAD, Review of Maritime Transport 2013, Table 2.4. Also see Partnership with the Overseas Territories: An update, DfT, 2012, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/3977/overseas-territories.pdf (hereafter Partnership with the Overseas Territories) p11. Back

30   Ev 31, 32 and 34 paragraphs 1.4, 2.2, 5.1 and 5.4. Also Q89. Back

31   Q8. Back

32   Ev 51-52. For a different view of standards on REG vessels see Ev w21. Back

33   Ev 52. Back

34   Partnership with the Overseas Territories, paragraph 3.8.

 Back


 
previous page contents next page


© Parliamentary copyright 2014
Prepared 26 March 2014