Home: March 2007 › Cover Story › A buoyant future
A buoyant future
31/03/2007 | Channel: Shipping, Logistics / Packaging
WITH 95 PER CENT OF IMPORTS AND EXPORTS ARRIVING AND DEPARTING BY SEA, PORTS PLAY A VITAL ROLE IN THE UK’S ECONOMY
The globalisation of the supply base, increasing road congestion and rising awareness of environmental sustainability - just some of the factors that are making ports more important now than ever before.
This is particularly true in the UK, which by virtue of its long coastline and maritime history, boasts the largest ports industry in Europe.With around 600 million tonnes of freight going through the country's ports every year, more than two-thirds (and maybe as much as three-quarters) of the £440 billion worth of imports and exports coming into and leaving the UK are handled by the ports sector. In volume terms this equates to around 95 per cent of all imports and exports.
The UK port sector is focused heavily on container and ro-ro traffic, though passenger travel and the petroleum industry play a substantial part too. Almost 95 million tonnes of oil products and liquefied natural gas moved through UK ports in 2004, while dry bulk cargoes have grown by around 40 per cent since 1990, due principally to an increase in the amount of imported coal. Whilst the quantity of crude oil being moved around Britain has reduced, there has been a 12 per cent increase in the volume of petroleum products transported since 1990.
Whilst, in basic terms, the majority of port and shipping activity is concentrated in the South East of England, a significant amount takes place elsewhere. The oil industry is particularly dependent on Scottish and Welsh ports both for transporting cargoes and providing support services.
Strength and vitality
The port sector in the UK has changed substantially over the last 20 years. Privatisation and the end of the National Dock Labour Scheme changed the face of the industry. The majority of ports in Britain now fall into one of three categories of governance. They may be under private ownership,municipal control, or be run by a trust. All three are open to market forces, and are run independently as stand-alone, self-financing enterprises, free from Government support or subsidy.
These changes in the sector have all made major contributions to the industry's
strength and vitality, and as a direct result the UK's ports are today are among the most efficient and competitive in the world.
Competitive industry
Explaining the reasons for this in more detail, David Whitehead, director of the British Ports Association, comments: “The strength of the UK sector largely lies in its
financial and strategic independence to an extent not enjoyed by continental ports. This allows the ports to take market based decisions without having to fit into national preconceptions of how the industry should develop. UK ports are unique in these respects.
“In addition to this independence the industry has a flexible and deregulated labour regime. Services such as pilotage are provided by individual ports without national involvement or central price setting. Again, this has allowed UK ports to be highly sensitive to market demands and to competition - all good for port users.”
Although these factors have made for a highly competitive UK ports industry, there are also some disadvantages of operating in this way, as David explains: “Because
continental ports are more closely linked to government, they probably benefit more in terms of road and rail infrastructure connections.
“We're now in the situation in the UK where because we have a private sector industry, the government is starting to say 'you can pay for road and rail links as well,' and that can hold up developments significantly. So there is a price for operating within private sector, but no-one wants to make any significant changes to the system that we have.” provided by individual ports without national involvement or central price setting. Again, this has allowed UK ports to be highly sensitive to market demands and to competition - all good for port users.”
Although these factors have made for a highly competitive UK ports industry, there are also some disadvantages of operating in this way, as David explains: “Because continental ports are more closely linked to government, they probably benefit more in terms of road and rail infrastructure connections.
“We're now in the situation in the UK where because we have a private sector industry, the government is starting to say 'you can pay for road and rail links as well,' and that can hold up developments significantly. So there is a price for operating within private sector, but no-one wants to make any significant changes to the system that we have.”
Lengthening supply chain
Moving on, David feels that globalisation of the UK's supply base in recent years has also had a profound effect on the ports sector. “The UK economy has changed in that there is now a high dependency on imports of finished goods whereas exports, although still fundamentally part of our economic viability, have declined,” he says.
“Ports are part of an ever lengthening supply chain and logistics sector and their increasing importance reflects the growth of traded goods and the ability to choose
manufacturing locations throughout the world. The industry is dependent on
unitised trade - container trade and ferry port trade - and these are the areas which have shown the most significant growth over the past ten years.”
Greater investment
To cope with these larger volumes of goods coming into the UK, there has been a need for significant investment into our ports' capacities. In fact, almost £3 billion has been invested in UK ports over the last decade as the 'old' business rationale of high fixed and unchangeable costs and focus upon volume business has been replaced by the 'new' dynamic added-value supply-chain investment model.
David comments: “I would say that more investment is going into the industry than ever before, because not only is the equipment required becoming more expensive, but we're also dealing with more environmentally sensitive areas where you have to produce compensation and mitigation packages.Very often this involves buying land to create new protected sites, so it's far more complicated and expensive than it used to be.”
Although these investments over recent years have dramatically improved the UK port industry's ability to deal with large volumes of goods, David feels there are still a wide range of challenges ahead for the sector. “The overriding issue is the extent to which government should be involved in the future development of the industry and how much responsibility it should take for ensuring that there is sufficient capacity,” he says.
Connecting infrastructure
“This brings in the efficiency of the planning regime and, equally importantly, the issue of who pays for connecting infrastructure. This has been partly addressed by the setting up of Regional Development Agencies (RDAs), which are becoming more aware of the economic importance of ports, but the government now regards i as legitimate to expect financial contributions from ports for road and rail developments.”
Continuing, David believes that the views of the EU Commission on ports policy represent another important strand. “The main issue is to what extent the Commission should intervene in liberalising markets and whether the increasingly private sector principles adopted by continental ports are sufficient to protect user interests; the Commission is also concerned about restrictive labour practices and whether the port service market is sufficiently open to alternative providers - although the UK is liberalised in all these respects, there is a concern that Commission solutions have an overly bureaucratic impact on the pragmatic solutions found in the UK.”
A bright future
Despite these challenging times ahead, David remains excited about the future for the UK's ports. “There is definitely a bright future ahead for the industry with unitised traffic increasing at four or five per cent a year. In addition, we've got developments like the new LNG and energy imports coming in and there's also great potential around short sea shipping going forward. Generally, the UK has always been very dependent on ports and there's clearly no sign of that dependence disappearing,” he concludes.
This is particularly true in the UK, which by virtue of its long coastline and maritime history, boasts the largest ports industry in Europe.With around 600 million tonnes of freight going through the country's ports every year, more than two-thirds (and maybe as much as three-quarters) of the £440 billion worth of imports and exports coming into and leaving the UK are handled by the ports sector. In volume terms this equates to around 95 per cent of all imports and exports.
The UK port sector is focused heavily on container and ro-ro traffic, though passenger travel and the petroleum industry play a substantial part too. Almost 95 million tonnes of oil products and liquefied natural gas moved through UK ports in 2004, while dry bulk cargoes have grown by around 40 per cent since 1990, due principally to an increase in the amount of imported coal. Whilst the quantity of crude oil being moved around Britain has reduced, there has been a 12 per cent increase in the volume of petroleum products transported since 1990.
Whilst, in basic terms, the majority of port and shipping activity is concentrated in the South East of England, a significant amount takes place elsewhere. The oil industry is particularly dependent on Scottish and Welsh ports both for transporting cargoes and providing support services.
Strength and vitality
The port sector in the UK has changed substantially over the last 20 years. Privatisation and the end of the National Dock Labour Scheme changed the face of the industry. The majority of ports in Britain now fall into one of three categories of governance. They may be under private ownership,municipal control, or be run by a trust. All three are open to market forces, and are run independently as stand-alone, self-financing enterprises, free from Government support or subsidy.
These changes in the sector have all made major contributions to the industry's
strength and vitality, and as a direct result the UK's ports are today are among the most efficient and competitive in the world.
Competitive industry
Explaining the reasons for this in more detail, David Whitehead, director of the British Ports Association, comments: “The strength of the UK sector largely lies in its
financial and strategic independence to an extent not enjoyed by continental ports. This allows the ports to take market based decisions without having to fit into national preconceptions of how the industry should develop. UK ports are unique in these respects.
“In addition to this independence the industry has a flexible and deregulated labour regime. Services such as pilotage are provided by individual ports without national involvement or central price setting. Again, this has allowed UK ports to be highly sensitive to market demands and to competition - all good for port users.”
Although these factors have made for a highly competitive UK ports industry, there are also some disadvantages of operating in this way, as David explains: “Because
continental ports are more closely linked to government, they probably benefit more in terms of road and rail infrastructure connections.
“We're now in the situation in the UK where because we have a private sector industry, the government is starting to say 'you can pay for road and rail links as well,' and that can hold up developments significantly. So there is a price for operating within private sector, but no-one wants to make any significant changes to the system that we have.” provided by individual ports without national involvement or central price setting. Again, this has allowed UK ports to be highly sensitive to market demands and to competition - all good for port users.”
Although these factors have made for a highly competitive UK ports industry, there are also some disadvantages of operating in this way, as David explains: “Because continental ports are more closely linked to government, they probably benefit more in terms of road and rail infrastructure connections.
“We're now in the situation in the UK where because we have a private sector industry, the government is starting to say 'you can pay for road and rail links as well,' and that can hold up developments significantly. So there is a price for operating within private sector, but no-one wants to make any significant changes to the system that we have.”
Lengthening supply chain
Moving on, David feels that globalisation of the UK's supply base in recent years has also had a profound effect on the ports sector. “The UK economy has changed in that there is now a high dependency on imports of finished goods whereas exports, although still fundamentally part of our economic viability, have declined,” he says.
“Ports are part of an ever lengthening supply chain and logistics sector and their increasing importance reflects the growth of traded goods and the ability to choose
manufacturing locations throughout the world. The industry is dependent on
unitised trade - container trade and ferry port trade - and these are the areas which have shown the most significant growth over the past ten years.”
Greater investment
To cope with these larger volumes of goods coming into the UK, there has been a need for significant investment into our ports' capacities. In fact, almost £3 billion has been invested in UK ports over the last decade as the 'old' business rationale of high fixed and unchangeable costs and focus upon volume business has been replaced by the 'new' dynamic added-value supply-chain investment model.
David comments: “I would say that more investment is going into the industry than ever before, because not only is the equipment required becoming more expensive, but we're also dealing with more environmentally sensitive areas where you have to produce compensation and mitigation packages.Very often this involves buying land to create new protected sites, so it's far more complicated and expensive than it used to be.”
Although these investments over recent years have dramatically improved the UK port industry's ability to deal with large volumes of goods, David feels there are still a wide range of challenges ahead for the sector. “The overriding issue is the extent to which government should be involved in the future development of the industry and how much responsibility it should take for ensuring that there is sufficient capacity,” he says.
Connecting infrastructure
“This brings in the efficiency of the planning regime and, equally importantly, the issue of who pays for connecting infrastructure. This has been partly addressed by the setting up of Regional Development Agencies (RDAs), which are becoming more aware of the economic importance of ports, but the government now regards i as legitimate to expect financial contributions from ports for road and rail developments.”
Continuing, David believes that the views of the EU Commission on ports policy represent another important strand. “The main issue is to what extent the Commission should intervene in liberalising markets and whether the increasingly private sector principles adopted by continental ports are sufficient to protect user interests; the Commission is also concerned about restrictive labour practices and whether the port service market is sufficiently open to alternative providers - although the UK is liberalised in all these respects, there is a concern that Commission solutions have an overly bureaucratic impact on the pragmatic solutions found in the UK.”
A bright future
Despite these challenging times ahead, David remains excited about the future for the UK's ports. “There is definitely a bright future ahead for the industry with unitised traffic increasing at four or five per cent a year. In addition, we've got developments like the new LNG and energy imports coming in and there's also great potential around short sea shipping going forward. Generally, the UK has always been very dependent on ports and there's clearly no sign of that dependence disappearing,” he concludes.