A lifeline, or a drain on resources?

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UK commercial maritime activity

CMA CGM Platon

Maritime Media Awards 2008 Brochure
Mark Rowbotham, Co-Chairman of the Freight Forwarding, Ports and Maritime Policy Forum of the Chartered Institute of Logistics and Transport, examines the issues

Photo: Sea Vision UK

Like so much of British industrial enterprise, shipping, shipbuilding and ports increasingly are controlled from abroad. The United Kingdom is more dependent than ever on foreign flags, Far Eastern shipyards and overseas investors. Should we be concerned? After all, shipping services have never been cheaper.

On the other side of the coin there are different sets of problems. National transport infrastructure planning becomes almost impossible, and the training of future marine personnel has become dislocated, thus making a maritime career less attractive. Economically the major shipping consortia and port interests will take decisions in boardrooms distant from these shores, and strategically there is now only a tenuous link between this country and ownership.

Consider the following scenario. A major UK port owner is sold to an overseas concern on the grounds of investment opportunities. The port authority is scaled down as more container vessels head for European ports on the grounds of the inability of the UK port structure to accommodate them because of their increasing size. The UK ports become no more than a feeder link to the continent, and eventually the overseas concern decides to close a sizeable chunk of the facility because of its lack of viability, coupled with congestion on the road system. The UK becomes reliant on these feeder services to and from the continent for the vast majority of its maritime container traffic.

Deep sea

The trend in the container sector is increasingly towards the use of vessels exceeding 10,000 TEU (twenty-foot equivalent unit) capacity, limiting to a certain extent the number of ports they can serve. Although the cost of constructing these vessels is huge, this is offset by the sheer volume of cargo they can carry at a lower operating cost compared with the smaller vessels of the early years of containerisation, even compared with the costs of operating a vessel of 2,500 TEU capacity. Present capacities of 8,000+ TEU are already stretching the resources of many ports, including those in the UK. There are at present four UK ports handling large-scale container traffic, with three of these located in the south of England. These three are also fully or partly overseas-owned. Only the Port of Liverpool seems set to remain in UK hands for the moment, although that may eventually change. It is admitted that the estuarial and port capacity considerations imposed in the southern UK ports will severely limit the ability of these ports to compete with their European neighbours such as Rotterdam and Antwerp. As the average tonnage of container vessels increases, so the ability of many ports, including those in the UK, is decreased. This will result in an increasing reliance by the UK on feeder services from the UK ports into the European ports to connect with the deep-sea sailings out of and into Europe. This trend is exemplified by the decision of the Danish carrier Maersk not to incorporate a UK port in the service operated by its latest 10,000 TEU vessels – because the UK ports cannot cope with their size.

The majority of the larger UK ports are owned by overseas concerns. Only Peel Holdings and Forth Ports may be seen as the major UK port owners. A number of smaller ports along the east and west coast of the UK are still privately owned, but these are of a much lower status than the large southeastern ports. P&O Ports was taken over by the Dubai-based World Ports Group. Hutchison Ports, which owns the UK ports of Felixstowe, Harwich and Thamesport, is based in Hong Kong. Associated British Ports has also effectively passed to overseas ownership.

Short sea

The short-sea sector is no less gloomy as far as UK interests are concerned. There are only a handful of UK-owned ferry operators plying the short-sea business out of the UK to other destinations. The vast majority of the ferry services out of the UK are owned elsewhere, with only P&O Ferries being seen as remotely UK in its origins. The rest are owned from other parts of Europe, and simply serve a variety of UK ports.

The British Rail/Sealink fleet was long since sold to overseas interests, namely Stena Line of Sweden. P&O Ferries was sold to Dubai. Norfolk Line and Norse Merchant Ferries are now part of the Maersk Group, the Superfast service from Rosyth into Zeebrugge is Greek-owned, and the sailings from the Tyne to Ijmuiden, Kristiansand and Göteborg, as well as those to Scandinavia out of Harwich, are dominated by Danish-owned DFDS, which bought out the Fjord Line services from the Tyne to Stavanger and Bergen, with the result that DFDS now controls all ro-ro services out of the Tyne. DFDS has decided to end its services to Norway from the Tyne, citing the economic downturn as a principal reason.

The services from Hull to Europort and Zeebrugge are run by P&O Ferries, formerly P&O North Sea Ferries, which is now Dubai-owned. The Irish Sea services are run either by Stena Line (Swedish-based) or by Irish Ferries (based in the Republic of Ireland). The Swansea–Cork ferry service is also Irish-owned. What a far cry from the days when British Rail dominated these services – even the Isle of Man Steam Packet Company is Australian-owned.

Only the Scottish services of the Western and Northern Isles services are UK-owned, by Caledonian MacBrayne/Scottish Executive. CalMac has been forced to submit tenders for all its routes as a result of a directive from the European Commission, although it has been confirmed as the owner/operator on the NorthLink services to Orkney and Shetland. Any tender for the services to the Scottish islands must take into account the nature of the economic lifeline at stake, as the routes cannot be seen as being totally profitable, given the conditions and seasonal considerations under which they are operated. Considerable subsidy is required from the Scottish Government, and any future operator must realise that substantial profits from the network, should it remain an integrated entity, are out of the question.

Economic lifelines

To a territory that is completely reliant on a maritime service – whether involving ferries or deep-sea vessels – that service is an economic lifeline. The service thus operates as a necessity, rather than purely as a commercial profit-making enterprise. While such arguments prevail over the status of the services to the Scottish Islands, the same definition could be given to the whole of the maritime sector operating into and out of the UK. The UK relies heavily on its maritime links, with approximately 90% of its trade with the rest of the world undertaken by maritime means. This position can therefore be seen as representing a vital economic lifeline. Although it is recognised that the maritime sector operates on a commercial basis, profit must not be seen as the only deciding factor in how the sector is maintained. For centuries, the British maritime sector has been seen as providing the lifeblood of the economy. British ownership and maintenance of a share of the maritime sector has become part of the global business strategy – until recently. The successive erosion of that status through the selling-off of the vast majority of British maritime assets to overseas bidders has severely undermined this strategy, and has rendered the UK increasingly vulnerable to the takeover of our maritime economic lifeline by overseas interests. At one time, the resources in the UK maritime sector were British, using British ships and British crews – but this is no longer the case. Although many deck officers on vessels sailing out of the UK are still British, the majority of most crews are not. The vessels themselves are owned by overseas companies, although some are registered and flagged in the UK.

The European Union’s abolition of the liner conferences in October 2008 will mean a significant change in how the major shipping lines operate into European waters. The original conferences, which pooled liner resources concerning the carriage of containers from the Far East and North America, will be replaced by a system of alliances, controlled by a loose ‘umbrella’ system. However, the EU’s insistence on a competitive system of operation may lead to a situation where more companies merge to form strategic alliances, thus ultimately reducing the effective level of competition on the high seas as far as the major carriers are concerned.

The conference system has also revealed the extent of the imbalance in freight traffic between the Far East and Europe (including the UK), and to a certain extent it reveals the problems that will be faced by the shipping lines once the conference system is abolished, especially concerning the economic imbalance of traffic movements. The graphs on the right of the page show the quantity of freight carried in each direction in each of the past six years. At the European level, the quantity of westbound traffic has been double that of eastbound traffic from 2005 onwards, while traffic to the UK is almost three times that from the UK to the Far East, thus showing a pronounced divergence in import/export figures.

A further drawback of the removal of the conference system is a risk of overcapacity on some routes, with the major shipping lines gaining the business from less powerful lines, thus leading to a dominance of the largest shipping companies. As the tonnage and capacity of container ships increases, the lines operating such vessels will seek more business to maintain their viability, thus forcing the smaller vessels (and operators) off some routes. The inevitable result of such a policy will be to reduce the number of shipping lines operating on the major routes around the world.

Appraisal

It would be too simple to say that everything pertaining to the UK maritime sector is overseas-owned. This is not quite true. The family silver has not been entirely sold off as yet. A small amount remains in the vaults, and several UK ports and a few shipping companies are still UK-owned. But the vast majority of the sector has been sold off, and the UK has, to a large extent, lost the basis of its proud maritime heritage, mainly in the name of a quick financial fix. But there is a huge difference between a financial fix and an economic future. The nature of the UK’s economic status lies in the maritime sector. The unfortunate fact is that in the past fifty years, the national maritime heritage which made the UK a great nation has been progressively eroded to the point of virtual non-existence. The maritime resources Britain once boasted have been drained away or sold off to the highest bidder.

There is no one reason for this decline. The decline in the British shipyards stemmed from a mixture of industrial unrest in the shipbuilding sector coupled with the cheaper costs of constructing vessels overseas, the increasing size of deep-sea vessels, and eventually the inability of many yards throughout the world, especially in the UK, to construct the larger vessels of the present day. The need for rationalisation in the container market has resulted in an increasing number of mergers and acquisitions of shipping lines throughout the world, resulting in the mega-carrier organisations of the present.

In an economic crisis, the UK would become totally reliant on outside forces to maintain its maritime links, a situation never known before. The overseas-owned deep-sea cargo and ferry services would become a vital necessity to the nation. However, a nation cannot live on past traditions. It has to adapt to meet a world of constant change. Unfortunately, as far as the UK is concerned, the cost of adaptation has been too great to bear, and the UK maritime sector has suffered as a result. The UK is no longer the great maritime nation it once was, despite the efforts to maintain a shipping industry in the UK. In these respects, Britannia no longer rules the waves. Indeed, the UK is now forced to rely on the economic lifelines provided by other nations, rather than providing its own lifelines to other nations. UK maritime resources have been severely drained over the years, with a near-total reliance on other countries to provide the services it so badly needs.

There is no sign of a slowdown in the growth of the UK population, and these rising numbers have to be supported by an appropriate transport infrastructure. This growth has to be planned for, but there are protests whenever the status quo is disturbed. In government, the responsibilities for transport, environment and maritime services are quite separate from the departments which cover migration in and out of the country, and the demographic movements caused by changing industrial patterns.

The interlinking of world trade, made possible by cheap and reliable shipping services, makes conflict less likely between trading nations – but the fact remains that the UK is an island nation, and it needs security in outreach as well as security at home.

About the Maritime Foundation

The Maritime Foundation is a not for profit organisation promoting Britain’s interests across the entire maritime sector.

Its purpose is to inform and raise public and parliamentary awareness of the importance of Britain’s maritime industries, commerce and defence through education, training and research, as well as through the Foundation’s annual Maritime Media Awards.