London’s shipping captains see threats and opportunities amid Brexit storms
London has been the centre of the world’s shipping industry for hundreds of years. In the time of Empire, the City and what we now call Docklands would throng with stevedores unloading ivory from Africa, tea and spices from India and rum from Jamaica.
While the ships and docks may be long gone, the financiers and brokers who keep the trade in motion remain. But for how long? Despite generations of City dominance of the lucrative business of broking, insuring, financing and drafting contracts for ships and their cargoes, the industry’s captains warn of serious trouble on the bridge.
Tough conditions for global trade, Brexit and upstart rivals including Singapore mean London’s status is under the most serious threat in recent memory. The industry’s ongoing importance to the UK economy is clear. In 2012, the maritime sector contributed £11 billion — and employed thousands of skilled workers.
Little wonder, then, that former Lord Mayor Lord Mountevans made it a key goal to bring the crisis of London shipping to the Government’s attention, urging that it should not be allowed to sink into oblivion. An independent report led by Mountevans made it clear who was to blame for the situation.
“A perceived lack of government leadership, co-ordination and interest is felt to be impacting on the UK’s status as a world-leading centre for maritime activity,” the report concluded. Considering the study was commissioned by the Government’s own Department of Transport, that was a stinging claim.
London’s position was already suffering before Brexit but the referendum result has thrust the battered and bruised industry, which still conducts 90% of the world’s trade, back into the spotlight.
A series of hijackings by Somali pirates plunged the whole industry into crisis at the start of the decade. Although the number of such incidents has since fallen dramatically, the targeting by West African pirates of ships working on offshore oil rigs is on the rise.
For those not on deck, rock-bottom freight rates, caused by crippling overcapacity, for dry bulk (transporting raw materials such as iron ore and coal) and container ships are the main concern. The weak general market led to South Korean giant Hanjin’s collapse this year and forced Danish containers behemoth Maersk into a painful restructuring in September. That was before Donald Trump threatened to rip up US trade agreements and slap steep tariffs on goods imported from China. It’s also, of course, before Britain leaves the European Union.
#David Balston, director of policy at the UK Chamber of Shipping, says: “The importance of making London as competitive as possible in maritime terms is trebly important now in a post-Brexit world because clearly we need to make the UK offering on all sectors and industries as attractive as we possibly can.”
Other cities have been eyeing up the capital’s status as top dog in shipping services amid the torrid conditions in recent years. Balston says Singapore “would love to steal that crown from London”, and has reeled in business from these shores with lucrative tax breaks for shipping-services firms relocating there. There were 15 shipping groups in Singapore in 2000; that number had grown to 130 by 2014.
It is no coincidence that London’s venerable Baltic Exchange, which benchmarks global shipping rates, was this month snapped up by the Singapore Exchange in an £87 million deal. The Exchange’s departing boss Jeremy Penn explains: “Singapore are keen to develop their business in the West and use the Baltic as a platform for that — perhaps attracting financing business.”
The Department for Transport last week met the group behind the Mountevans-chaired study for the first time since Britain voted to leave the EU, putting trade ties with our closest neighbours under pressure. Transport Secretary Chris Grayling, Trade Secretary Mark Garnier and Brexit Minister Lord Bridges heard that unless the shipping industry is given more Government support after Brexit, London is at risk of losing its number one status. Mountevans, a shipbroking veteran himself, was backed at the talks by other industry experts including UK Chamber of Shipping chief executive Guy Platten and Mark Dickinson of trade union Nautilus.
The industry’s demands of how government can help are many. They include:
Ensuring maritime services are in new free trade agreements struck by Liam Fox’s newly formed Department for International Trade.
More Government help in promoting the industry around the world.
A bigger push globally of British engineering and manufacturing to help exports by sea.
A commercially oriented shipping register, which would promote British shipping worldwide.
Ensuring that quitting the EU means the UK is more free to offer tax breaks to shipping firms.
Helping attract more investment into UK ports and talent into the sector.
If such assistance is made available, all is not lost for London’s industry, say its practitioners.
An insider at last week’s talks says it was “a very positive meeting”, adding: “We were impressed by how ambitious the Government is for the future, and they were genuinely listening and learning and we are quietly optimistic.”
James Kidwell, chief executive of shipbroker Braemar argues that London has other “soft” advantages such as the time zone and “the fact it’s generally a very liveable city”.
Kidwell adds: “You have to take your hat off to Singapore in the way they’ve created a lot in the last 20 years, but I don’t think London’s in any danger of being leapfrogged imminently.”
Most in the maritime industry are sanguine about Brexit although, as the Baltic Exchange’s Penn points out: “You don’t work in shipping unless you’re an optimist. Shipping is all about trade and if you think Brexit enhances trade and pushes Britain to trade more widely, then that’s going to be good news for shipping.”
Another potential positive of leaving the EU is the potential to cut red tape. Shipping leaders argue that the British tonnage tax regime, which offers shipping firms a lower tax environment, has been constrained by EU state aid rules.
The UK Chamber of Shipping says that once this stranglehold ends, the number of cargo ships in Britain will start to grow again.
The question now is whether the Government can negotiate the deals that the shipping industry needs so desperately.