Select Committee on the Crossrail Bill Minutes of Evidence

Examination of Witnesses (Questions 8920 - 8939)

  8920. LORD BERKELEY: Perhaps we could have slide 8 please, and we will try and get through this as quickly as possible. Could you introduce your company and tell us what your own qualifications and experience are?

   (Mr Cann) I work for Hutchison Ports UK which is an arm of Hutchison Whampoah Ltd. Hutchison Ports is the largest operator of ports in the world and we operate in 44 countries. I am a project manager for Hutchison Ports and have been so for two years, but I have actually worked there since I joined as a graduate trainee.

  8921. I just have two or three slides to help explain the container business in a bit more detail and hopefully it will help Lord James as well. If we go to slide 9 please, could you explain the UK container trade?[21]

  (Mr Cann) If you look at the blue line across the top there (indicating), that represents, from the DfT's own figures, the potential growth in the UK container trade from 2005 through to 2030. Of particular interest is the green line which shows the growth from the east-of-England ports, those being the ports of Felixstowe, Bathside Bay, which is yet to be constructed, but has planning consent, the Port of Tilbury and the London Gateway, which again has planning permission, but is yet to be constructed.

  8922. If we turn to slide 10, can you just explain the capacity that exists now for importing containers and the future capacity which has been given permission, and maybe you could explain what a `TEU' is at the same time?[22]

  (Mr Cann) If I deal with the TEU first, the TEU is an ISO-classification. What it actually means is a 20-foot-equivalent unit, so a 20-foot-equivalent unit is, as it says, a 20-foot-long container. A 40-foot container is two TEUs, so it is a measure of capacity.

  8923. LORD JAMES OF BLACKHEATH: What has not been clear from this morning was that we heard all about these containers, but nobody ever told us if there was a standard width to them.

   (Mr Cann) Yes, there is a standard width, Lord James; it is eight foot. All the containers are in the standard width which, I believe, is eight foot. The only thing that varies is the length of the container and the height of the container.

  8924. Does that have any implications or change at all if it goes on to any European network which has a different standardisation or is that completely compatible with European standards?

   (Mr Cann) Western Europe, yes, but, I must admit, Eastern Europe I am not that familiar with, but generally in Western Europe the gauge is wider than that which is available throughout most of the UK, so it would not be an issue.

  8925. LORD BERKELEY: Is it a deep-sea standard though?

   (Mr Cann) Yes, it is. It is an international standard used across the world. If we turn to the slide and if you look at four lines from the bottom, they show the current capacity in the ports east of London, this is in terms of TEU, those 20-foot containers, so at the Port of Felixstowe where I work there is capacity for 3.8 million movements of TEUs per annum, at the Port of Tilbury 0.9, Thamesport 0.7, which makes a total current capacity east of London of 5.4. Now, the reason for showing that is to demonstrate how much movement there currently is, but also to juxtapose that with the four lines at the top which are the new consented developments that are going to come on stream which the Secretaries of State have given permission for. The Port of Felixstowe is to expand by a further 1.5 million TEUs, Bathside Bay at Harwich, a brand-new container terminal, by 1.7 million TEUs, the London Gateway at the Thames, a brand-new container terminal, by 3.5 million TEUs. If you look at the total, that means that the total capacity for the movement of containers east of London is going to more than double in developments that are already consented.

  8926. CHAIRMAN: The Thames Port is on the Medway, is it?

   (Mr Cann) That is right, yes.

  8927. Will it affect Crossrail very much?

   (Mr Cann) No, it will not.

  8928. LORD BERKELEY: The London Gateway is on the south or north bank of the Thames?

   (Mr Cann) It is on the north bank.

  8929. So that is affected by Crossrail?

   (Mr Cann) Yes, it is.

  8930. If we could move on to slide 11, could you explain the number of containers from these different ports which might go by rail, or would go by rail, as part of the planning conditions?[23]

  (Mr Cann) In the previous slide I demonstrated the planned consent for the increase in capacities of terminals. Now, with that will come more trains and this slide attempts to graphically demonstrate how many more trains we are actually talking about in terms of the containers on the railway. If you look at the bar on the left, 2005, it is about 0.4 million containers moving from two ports, the Port of Felixstowe and the Port of Tilbury, which are currently on the trains, and through to 2010 you will see there is some growth there and that is due to the organic growth mainly at the Port of Felixstowe. Then, if you look further outwards towards 2030, you see the effect of both the new developments of Bathside Bay and London Gateway and further growth at the Port of Felixstowe coming on stream. That is both growth in terms of the capacity of the ports themselves, but also in terms of the improvement in the percentage share, the modal split, if you like, of the current trade as well.

  8931. LORD JAMES OF BLACKHEATH: In putting these figures together, how far has one been allowing for the possible replacement trade effect because, if you look at the 2030 effect, is it really correct that that is all going to be incremental trade coming in? Surely it is going to substitute for a lot of trade that is already here in the United Kingdom and, therefore, it is not a growth, that figure, but it is actually a substitution of UK freightage?

   (Mr Cann) Well, as you are aware, Lord James, in granting planning permission, all of the ports that have been granted planning permission have to show that there is a need, they have to show that there is an overriding public interest. In demonstrating that, the Secretaries of State have accepted the evidence that we have provided, that there is the requirement for that capacity to provide for the demand that is there, so yes, I do not accept what you are saying. That growth will come and it is coming. It has been demonstrated over the last few years that the growth in containers at those ports already that are there has been considerable and will continue, and the DfT's own figures say so.

  8932. What is the reaction time to creating the capacity to deal with this? For example, if you start off in 2010 with the figure that you have got there and the markets do develop in line with 2030, how far ahead do you have to create the infrastructure to cope with it and what reaction time do you have available to do it? In other words, are you sure you do not have to build the capacity before you nearly know you have got the market? Which comes first—the chicken or the egg?

   (Mr Cann) Well, if you lived in Suffolk, you would find that people are already saying that they feel that the capacity is not there, both Hutchison Ports and our competitors, DP World, who are promoting the London Gateway.

  8933. LORD JAMES OF BLACKHEATH: People who live in Suffolk are not all running a freight company, but you are, so it is not the people in Suffolk that we want to know about.

  8934. LORD BERKELEY: Perhaps I can help you by asking a completely specific question before you go back to Lord James because that may come out further on in our examination. He is quite right to ask questions about a four-times growth between 2010 and 2030. Could you confirm that the growth is in line with the Government's own forecast, but it is also because of conditions put on by the Government and the planning authority as to what proportion of containers go by rail?

   (Mr Cann) Yes.

  8935. Has that changed?

   (Mr Cann) As I said, in proving the overriding public interest we had to demonstrate that the capacity is needed to come on stream in order to deal with the growth the Government itself is saying will come. We demonstrated that case; that is why ourselves and our competitors have actually got our planning permissions. However, in with those permissions there were a number of commitments, and one of the commitments that is common to both of Hutchison's schemes is the need to grow the modal share—the number of containers that are going on rail rather than road. So, for instance, in the Bathside Bay scheme, we are required for 22 per cent of movements to be put onto the rail. At the Port of Felixstowe the minimum requirement is 26 per cent to go on to the rail. London Gateway is a competitor but I understand that they have made a commitment that up to 30 per cent of the containers from that brand new, 3.5 million TEU port will be going on the rails. So, in a sense, the developers have been making the commitments but it has been in line with what the Government, through its various agencies, have actually been requiring. So, in a sense, they have both been backing each other up.

  8936. Mr Cann, if I can just move on to the next slide, I believe it will answer Lord James's question. Slide 12.[24] Were you required by the conditions of the planning permission to invest in extra infrastructure to carry the extra trains that will come from these forecasts?

  (Mr Cann) Yes. Hutchison Ports was working at a very early stage with the Strategic Rail Authority in order to identify how we would achieve high rates of modal shift on to rail. If you look at the slide above, it just shows you two elements of the quite considerable amounts of money that we are spending in order to satisfy those requirements. For instance, at the port of Felixstowe, there are six kilometres of branch line that are going to be doubled, and gauge and capacity works all the way up to Doncaster on the East Coast main line that we have committed to in order to mitigate for our effect in order to put more of the traffic that is going to come through that port on to the rail. Those commitments also include freight terminals at both the port of Felixstowe and Bathside Bay. In addition to that, DP World, I understand, have committed to up to £100 million in new rail commitments. So we think that the industry is doing its bit—is mitigating for the growth and the effect on the roads that would otherwise be there, and that is the way that normal industry processes work.

  8937. LORD JAMES OF BLACKHEATH: I am very worried about any business which creates capacity before it has a market. If you draw a line through the last 30 years, all the major organisations that have gone bust have not gone bust because they have not got a market; they have gone bust because they grew a capacity too big for their market at the time when they had the money available. I have a caution about this particular situation. You create this capacity and that market does not turn up and you are all going to put each other out of business.

   (Mr Cann) Hutchison Ports is going to be investing £1 billion in building those two ports, those railway infrastructures, roads and all the other commitments we need to make. We build ports in 44 countries around the world. We are quite confident when we build the port that growth will come, because that is our industry, my Lord—that is what we do.

  8938. Mr Cann, the banks were saying that about mortgages a few months ago as well.

   (Mr Cann) They may be saying that about mortgages, my Lord, but we will not be building a port until we have got the customer signed up—I can tell you that—and that is the degree of certainty we need internally with our shareholders in order to make huge investments in this country, and the degree of certainty we need to give over in terms of our planning permission. It has to be remembered that at the public inquiries at both of our developments we had to demonstrate that we had money, that the demand was there and that the customers required it. Customers turned up at the planning inquiry and gave evidence to support that.

  8939. If you want to put your real scare hat on, though, you would look at this and you would say: "Good gracious, if we are going to have that amount of port activity going on, it suggests that we are going to blow the Balance of Payments in this country to pieces because we are going to have such a flood of imports, just to give you a market, that we will not be able to afford anything".

   (Mr Cann) I have an opinion about that, my Lord, but I have an opinion about many things.

21   Committee Ref: A52, UK Container trade continues to grow (LINEWD-34_05-010) Back

22   Committee Ref: A52, East Of England Container Ports Expansion (LINEWD-34_05-011) Back

23   Committee Ref: A52, More Containers on the railway (LINEWD-34_05-012) Back

24   Committee Ref: A52, Ports paying for rail upgrades (LINEWD-34_05-013) Back

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