2 Promoting the UK as a globally competitive
location for shipping |
Introduction: the new shipping
5. Shipping, and the services associated with it,
is fiercely competitive: maritime transport has been described
as "probably the most globalised of industries".
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
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,
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.
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
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
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". Both
the UKMPA and the National Union of Rail, Maritime and Transport
Workers (RMT) argued that the strategy overlooked important employment
issues, 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:
framework and actions which flow from it be subject to meaningful
discussions with both the industry and trade unions;
framework be sufficiently flexible to accommodate changes in policy
and circumstance, including ministerial changes;
should flow from the framework, rather than the framework being
used to legitimate a series of disconnected policy announcements;
address the clear call from business and unions for a more joined-up
approach to maritime policy-making.
London International Shipping
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. 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:
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.
A second London International Shipping Week has been announced
for 2015. 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.
The MCA enforces regulations on vessels registered under the UK
flag, including those relating to inspection, certification, and
matters relating to safety and pollution.
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.
DfT attributed this change to the introduction of the tonnage
tax by the previous Administration in 2000 and registration reforms
by the MCA. 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".
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.
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".
His organisation drew attention to research into the economic
effect of expanding the UK-fleet following the introduction of
the tonnage tax:
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"
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"
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.
Nautilus International was critical of the support provided by
successive UK governments to these other registers, known collectively
as the Red Ensign Group: 
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:
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
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.
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
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
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.
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
Ibid, pp21-29. Also see Q1. Back
Ev 50. Back
Qq 84-85. Back
Ev 43 paragraphs 32-34. Back
Q80. Also see Ev w20. Back
For a historical perspective see Ev 33 paragraphs 4.1 and 4.2. Back
For reasons why UK-owned vessels might not be UK-flagged see Q70. Back
also see Ev 33 paragraphs 4.3 and 4.4. Back
Ev 41 paragraph 15. Back
Ev 49. Back
Q69. And see Ev 26 paragraph 4. Back
Ev 49. Back
Shipping strategic partnership, box 2.1 Back
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
Ev 31, 32 and 34 paragraphs 1.4, 2.2, 5.1 and 5.4. Also Q89. Back
Ev 51-52. For a different view of standards on REG vessels see
Ev w21. Back
Ev 52. Back
Partnership with the Overseas Territories, paragraph 3.8.