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Developing Britain’s ports

Britain’s gateways to trade

Richard Clayton, Chief Correspondent of Lloyd’s List, explains why British ports must be included in national strategic thinking, if their potential is to be realised

Nationally significant elements of infrastructure such as ports require years to plan, more years to build, and even more years to link up in a coordinated fashion with roads, rail, warehousing and the rest of the transport and distribution network. Long-term strategic thinking for the future direction of the UK’s ports is fundamental to the success of infrastructural investment.

The performance of the ports sector is dependent on the performance of other sectors of the British economy. Given the volatility that has characterised the country’s economic development over the past decade, it is hard to identify clear trends over the short term, let alone into the middle years of this century.

Identifying trends

Liverpool 2 installation
Container terminal: the new Liverpool 2 installation. Photo: Peel Ports

Port investors need to identify clear economic trends that support investment. That has been in short supply lately. In the Department for Transport (Df T)’s publication UK Port Freight Traffic: 2019 forecasts, released in January 2019, reference was made to the previous freight traffic forecasts of 2006. That study used 2004 data, and forecast in five-year intervals to 2030.

However, those forecasts were swiftly overwhelmed by the financial crash of 2007–08 and the concomitant global recession which rendered the conclusions hopelessly optimistic.

So any investment that had been based on the 2006 forecast – and begun immediately – would have suffered years of under-utilisation.

Even with the benefit of hindsight, forecasting can be a precarious business. Key economic drivers (critical factors affecting performance) used by the Df T include, among other sources, population projections from the Office of National Statistics, National Grid gas supply projections, and GDP forecasts from the non-departmental Office of Budget Responsibility. However, there is a generous dressing of assumptions based on historic levels and patterns. In certain cases, it was not possible to identify key drivers for some cargo categories, so it was guesstimated that traffic would follow the trend seen in earlier years.

The publication calculated short-term port traffic forecasts (2017–2035) by using the forecast trends of the key drivers, and long-term forecasts using the growth rate for the very same short-term forecasts. The result of that is that in the period up to 2035, port throughput is forecast to grow very slowly, rising more steadily thereafter; by 2050, port traffic is forecast to be almost 40 per cent higher than it was in 2016.

In the energy sector, coal and crude oil throughput is expected to shrink significantly, while liquefied gases and biomass throughput will see solid growth. For agricultural and iron/steel products, throughput will be flat in the period to 2050, although this prediction makes assumptions about population trends.

The key driver of the roll-on/roll-off (ro-ro) trade is thought to be gross domestic product (GDP), a widely accepted measure of production. For imports, the forecast assumed that the split between lift-on/lift-off (container shipping) and ro-ro would reflect what has historically been the case: 39 per cent handled by container ports, 61 per cent by ro-ro terminals. Both are forecast to rise rapidly by 2050; British ports are expected to handle 10.6 million TEU (twenty-foot-equivalent units) in 2020, and 21.9 million TEU in 2050.

When the January 2019 forecasts were released, the UK was preparing to leave the European Union, following the referendum of May 2016 and the triggering of Article 50. That prospect weighed heavily on investment in all sectors, including ports. While some believed a withdrawal would have little economic impact, others feared congestion at the ferry ports closest to the European Union. Just before the March 2019 withdrawal deadline, the uncertainty was extended until the end of October 2019, effectively undermining any prospect of new port infrastructure investment for the year. The Port of Dover, the conduit for about 10,500 lorries every day, was expected to be the focus of congestion, although other ports such as Portsmouth were also expected to be hit. Container ports, specifically Felixstowe, London Gateway, Southampton, and Liverpool, were not, however, expecting to suffer from Brexit fever, because much of their cargo comes from China and the wider Asia Pacific region, and elsewhere beyond the European Union.

Ports as part of the UK’s transport infrastructure

An earlier Df T study assessing port connectivity, released in 2018, observed that UK port infrastructure is commonly excluded from government strategies and policy decisions on transport, as these focus more on land-based transport infrastructure such as road and rail. This approach was seen as unhelpful by the British Ports Association (BPA), whose chief executive, Richard Ballantyne, argued that this should change because, after Brexit, British ports ‘will be crucial to forming beneficial trade partnerships with third countries’.

‘The economy and our ports need to be able to compete and continue to facilitate trade and enable valuable coastal activities,’ said Mr Ballantyne. He commented that port investment should not be ended by Brexit: ‘We need to ensure ports and regional economies are connected with a world-class transport network. This would help drive efficiencies in the transport of goods and passengers and would also support coastal communities, businesses and tourism strategies.’

Realising the economic potential of the UK’s ports

Avonmouth Dock, Bristol Port
Car transporter and tug in Avonmouth Dock, Bristol Port. Photo: Louis Mackay

In March 2019 BPA, together with the UK Major Ports Group (UKMPG), launched a 10-point plan to ‘turbocharge’ British ports and give them greater ability to invest and grow. The plan included proposals to increase the scope of permitted development rights within ports to make investment faster and easier. Port zones around specific ports and their hinterlands would focus on boosting trade and investment, while port masterplans should be given the same weighting as other local masterplans. UKMPG chief executive Tim Morris described the plan as focusing on the ‘common-sense, pragmatic, and practical’ ways the government could create a better environment for ports, trade, and investment, ‘helping not just the ports themselves but coastal communities all over Britain’.

The plan also included a proposal for a revised definition of ‘operational land’ so it would better reflect the modern major ports business, and cover the full area used by multimodal ports. ‘There is an urgent need for regulation to recognise that the activities of modern ports are important centres for distribution chains and manufacturing activities, and provide a wide array of services,’ Mr Morris added. The concept of port zones could be extended further to free trade zones, although research published by the University of Sussex-based UK Trade Policy Observatory found that free ports would have little impact on economic growth in a post-Brexit Britain.

Brexit uncertainty has not, however, paused all port investment. While ports on the east coast have waited for politicians to decide the future of Britain’s trade with the European Union, prospects on the west coast have been opening. For example, on the Mersey the planning of the Liverpool 2 terminal had begun long before the EU referendum; it opened in November 2016, its £400 million deep-water terminal able to accommodate the largest container ships, and it is connected by road, rail, and the Manchester Ship Canal to a catchment area of 35 million people, more than half the UK’s population. In November 2019, three new ship-to-shore gantry cranes are scheduled to arrive, with 10 cantilever rail-mounted gantry cranes. The project, which is expected to be completed in 2021, looks out across the Atlantic to trade links with the United States.

Looking north

Liverpool 2 and the wider Peel Group investment are important for another reason: the UK government’s commitment to a ‘Northern Powerhouse’. Maritime infrastructure has traditionally focused on ports in southern and eastern England, linked to the North by the road and rail network. Increasingly the Brexit discussions have opened the door to a future for British ports that lie closer to the concentrations of population in the Midlands, the North and the Scottish Lowlands.

Ports as ‘gateways to international trade’ are expected to reflect the locations of new economic centres in the future, especially as the carbon footprint of lorry transport is analysed more forensically. New investment is likely to be seen in the short term in Hull and Bristol, and perhaps on the Clyde and the Tyne. Short-sea shipping will be viewed as a more environmentally acceptable alternative to congested motorways, while deep-sea throughput will be spread further afield.

Uncertainty, whether caused by external economic factors or by the shifting sands of EU withdrawal, is likely to result in a port business for the UK that in 2050 looks very different from that of 2030. It will be several years before the dust will settle on Britain’s post-Brexit economy. One thing is for certain: when/if the UK withdraws from the EU, the focus on trade with its erstwhile largest partner will slowly diminish, to be replaced by increasing trade with partners across the Atlantic or in south or east Asia.

Regardless of Brexit, ports are increasingly seen as potential economic hubs in their own right, encouraging investment, jobs and trade. A shift from a concentration in the South East to a more even spread across the UK will require significant input from the country’s many ports. To achieve this effectively, ports will need to be regarded as part of the government’s overall transport strategy.

A key driver for a reassessment of the role ports play in the national economy, and for their importance as gateways to trade, could well be protests sparked by climate change. More efficient and ‘smart’ ports should be advocated as a solution to a global crisis.