Characteristics

International competitiveness of the UK maritime sector

Shipping
A country’s trade patterns appear to be important in shaping its shipping fleet. At the same time,
a strong shipping and maritime business services cluster attracts workers. It also facilitates ship
operators’ interactions with the many services they need, as well as their access to market
information and industry expertise. Similarly, the appeal of a particular location to a ship owner
includes stability in the fiscal regime and in the government’s policy strategy, the availability of
premises in the cluster area, and the cost of doing business. Fiscal incentives could help to create
a level playing field with rival nations as locations for ship management, rather than providing
the sole means for attracting ownership and management activities. The introduction of the
tonnage tax regime in 2000 in the UK seems to have played a role in reversing the decrease in
British-owned vessel tonnage. That decline has resumed in more recent years, driven by greater
international competition, changes in the location of physical trade activity, and the wider
adoption of the tonnage tax internationally. Ship owners also appear to appreciate stability in the
fiscal regime and in the government’s policy strategy. Business regulations can impose
significant compliance costs but may not have a clear impact on competitiveness if they are
derived from international agreements to which other nations with significant ship management
and registration sectors are signatories. The number of sea passengers in the UK is likely to be a
major driver of the performance of the UK passenger market. The scope for international
competition is likely to be small for passenger travel, since there is generally a single operator
per ferry route and limited substitutability between routes and modes in the UK. A key driver of
demand is income, with the majority of international sea travel starting or ending in the UK
being for leisure purposes.

Ports
UK ports could offer an alternative to ports in mainland Europe when serving UK-bound traffic.
However, the UK’s island status represents a major barrier to it serving as a container
transhipment hub for Europe because of the additional costs of onward transport. Some 16% of
UK container imports originate from the Hamburg–Le Havre region of Northern Europe. Further
work would be required to establish whether this represents a potential market for additional
direct calls to UK ports. The need for port capacity is directly driven by UK trade in goods,
which is outside the control of the UK government and maritime industry. However, the
planning system is critical to creating conditions for the development or expansion of ports.
Oxera is not aware of any evidence comparing ports’ planning processes across countries.
However, the UK National Policy Statement for Ports provides both a transparent framework for
assessing development applications and a streamlined process for obtaining development
consents. In terms of the efficiency of port services, UK ports compare well against key
competitor countries, based on the financial and time costs of landing cargos. The proposed EU
ports services regulations could increase the level of competition among providers at ports,
reducing prices to port users, but the regulations are unlikely to affect the UK’s competitiveness
relative to other EU countries.
Maritime business services
The UK’s maritime business services cluster has historically been linked to physical ports and
shipping activity, but this is now less important as the cluster has become more knowledge-
based. Physical activity is cited as the motivator of the Singapore, Hong Kong and Shanghai
business services clusters that are now posing a threat to London’s dominant position. The
general costs of doing business are a very important driver of competitiveness in this sector. On
taxes, the UK is ranked 16th out of the 189 countries considered by PwC’s Paying Taxes metrics,
comparing favourably with many of the major maritime nations, although rival maritime clusters,
Hong Kong and Singapore, both score higher than the UK. Intermediary services such as legal
services and ship broking benefit from the co-location of customers and other suppliers (known
as ‘agglomeration’). We estimate that the productivity of labour in these sub-sectors would be
around 5.6% lower if the cluster were halved in size (as measured by density of employment).
The agglomeration effect tends to be self-reinforcing and, in London’s case, is augmented by the
presence of key regulatory and industry bodies in the City. Maritime legal services benefit from
the widespread use of English law and the promotion of London by the UK government as a
centre for international dispute resolution, with an emphasis on the enforceability of settlements,
a strong regulatory regime for legal services, and the availability of commercial legal expertise.
In the insurance and financing sectors, the proximity of the financial services centre in London is
helpful for the development of key specialisms in maritime services. EU rules on prudential
regulation could have an impact on UK competitiveness relative to countries outside the EU,
although Lloyd’s has suggested that non-EU countries are likely to move in the same direction as
the EU. The relative competitiveness of the UK depends on how EU Directives are transposed
into domestic law. The availability of staff with specialist maritime expertise is crucial for
offshore as well as onshore maritime activities. Stakeholders have reported particular difficulties
in obtaining work visas for onshore personnel.

Maritime education
The support offered by the UK government for training makes a maritime career an attractive
financial proposition in the context of rising university tuition fees outside the sector. The
maritime sector also pays well relative to roles with similar skill requirements. The average
salary for a master mariner was £54,000–£60,000 in 2011 (although this would vary significantly
with vessel size). This compares with median annual pay of around £42,000– £46,000 for those
with engineering or medicine degrees and around £21,000– £36,000 for other degrees. Perhaps
the most challenging demand-side issue is the perception of the maritime sector as a long-term
career option involving extended periods at sea. The flow of trainees through the maritime
education system affects both on-and offshore sub-sectors, all of which need suitably trained and
experienced labour. This includes the supply of ex-seafarers needed to act as experienced
instructors. There is some scope to lessen the link between maritime education institutions and
ports, for example by increasing distance learning and the use of simulators. However, the
competitiveness of the ports, shipping and maritime education sectors can be seen as mutually
dependent.s

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