British Shipping Industry

Part of the debate – in the House of Commons at 4:31 pm on 17th December 1984.

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Photo of Mr Paul Bryan Mr Paul Bryan , Booth Ferry 4:31 pm, 17th December 1984

I declare my interest as deputy chairman of Furness Withy and Company Ltd. I start by congratulating my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) on his choice of subject, which is not only important but under-debated.

I shall not recite again the figures that tell the sad story of our merchant fleet since 1975. The reason we Members of Parliament are debating shipping today is that each one of us is deeply concerned that the fleet has fallen in size, is still falling steeply and is expected to fall still further. Britain is now losing merchant ships at a greater speed than at the height of the second world war. They are victims not of torpedoes but of ever-rising costs, far eastern competition, and subsidised shipbuilding which makes ships too cheap to buy and thus leads to a surplus that in turn means uneconomic rates and cut-throat competition.

That general situation was exacerbated by the oil crisis, which led to a recession and to countries drawing their oil supplies from fields nearer home, thus making large tankers redundant. No one has escaped the biggest shipping slump for 50 years. Even the spectacularly successful Hong-Kong shipowners, Y.K. Pao, C. Y. Tung and Frank Chao have reduced their ship numbers and diversified into property, container terminals, support vessels for oilfields and so on. The great BP and Shell tanker fleets are a fraction of their former size In those worldwide conditions the British fleet, with its high costs, was bound to suffer more than most. Many famous shipping names have disappeared. Others such as British and Commonwealth and Furness Withy have been selling off ships during the past five years at an almost hectic speed, and have diversified into other areas. P and O has had to write off £77 million in its balance sheet in respect of gas carriers.

However, there is a brighter side to the picture. For example, 20 per cent. of the merchant fleet—150 ships in all—is servicing North sea oil and other more distant oilfields with some of the most sophisticated ships in the world such as the Orelia, which was fitted out on Humberside and is now in the Persian gulf. We lead the world in luxury cruising. The commissioning of the Royal Princess took one back to the launching of the Queens, except that, regrettably, the Royal Princess was not built on Clydebank. The Atlantic Conveyor, a third generation combined container roll-on roll-off ship is about to join the Cunard fleet. As my hon. Friend the Member for Romsey and Waterside has said, the ferries are also prospering.

Nevertheless, the ugly truth is that new tonnage on order for the United Kingdom fleet is running at an annual rate of about 200,000 tonnes—in other words, at less than the tonnage of just one very large crude carrier. With dropping ship prices and plenty of modern ships on the market, there is no temptation to build anything but specialist ships.

So much for the past and present. What of the future? The bulk carrier and tanker trades are still depressed, but over the past few months, after a vicious struggle in the north Atlantic, the liner trade has been moving into profit in most parts of the world. But just as the horizon begins to brighten storm clouds loom up in the shape of 14 huge new container ships almost twice the size of what is at present considered large, which are owned by United States lines, and of an even bigger fleet of new container ships of slightly smaller size from the Evergreen line of Taiwan.

Both of those lines are starting round-the-world services, increasing world container capacity by about 40 per cent. Whether or not those huge ventures prosper, they must have a devastating effect on rates and hence on the profits of the main world container lines, such as OCL of Britain, which are preparing in various ways to meet this challenge.

We are moving into a world of huge investment in which only the strongest will survive. It is against that background that the Government have to make their Budget decisions and industry must make its business decisions. The main firms in the industry—Cunard, P and 0, British and Commonwealth, Ocean and Furness Withy—are not heading for bankruptcy. They are firms with access to capital and they have to decide how to invest it. In recent years that investment has inevitably been in the direction of diversifying away from shipping.

The Government, in turn, will have to decide whether shipping really is to be a special case, with no guarantee that fiscal measures will stop the rot. My hon. Friend the Member for Romsey and Waterside has described the fleet's tremendous commercial value, which goes well outside the industry itself. But another obvious justification for Government action might be defence, and an inquiry is already promised. This is surely unnecessary. The General Council of British Shipping is already deeply involved with Government in contingency planning for defence purposes, both in respect of NATO and nationally. There are also two Standing Committees dealing with this issue, and three statistical studies are now in progress.

We shall duly be told that the Merchant Navy is adequate for a Falklands-type operation. But we know that the whole British defence set-up is ideal for such an operation. We probably have the most efficient forces in the world, but they are small and—owing to lack of conscription, recent wars and, in the case of the Navy, a waning merchant marine — we lack reserves. In the Falklands, casualties were light and reserves were uncalled for. We had to use only our crack troops, and the mix of our Merchant Navy, with its accent on cruise ships, ferries and RO/RO ships was particularly suitable. It is in a more protracted campaign, in concert with our allies, that our reducing merchant fleet with its corresponding reducing core of trained personnel will be found wanting.

None of that was taken into account at the last Budget, when, for the first time, shipping lost its status as an exceptional case. By Committee or Report stage of the Finance Bill, even the Treasury was slightly frightened at what it had done and some small concessions were made. However, by then confidence in the industry was badly shaken.

At that time the Chancellor's no-distortion rule was new and shining bright. Since then student grants, pensions and the like have shown that nothing in this political life can remain rigid and survive. Every other country of any consequence is supporting its shipping in one way or another. When Britain did that foreigners invested in our fleets as a flag of convenience. Now the opposite is true. Our shipping is actually discriminated against since it cannot enjoy regional grants, enterprise zones and the other titbits offered to land-based industries.

The GCBS has made its proposals and my hon. Friend listed some of them. In my eyes the most important of these is a ship allowance. To enable companies to write off their ships more quickly, in addition to the 25 per cent. writing-down allowance, there should be a 50 per cent. ship allowance for new and second-hand ships.

The underlying argument is that the continued existence of a substantial British merchant fleet is of sufficient national importance to warrant special assistance. The Chancellor may find help given discreetly through the tax system repugnant. He knows that if the new tax rules are bent even slightly for shipping, he will be besieged with special cases.

If the Chancellor can be persuaded that assistance is required, it may be better if the arguments are discussed openly and any resulting subsidy is explicit. A shipping allowance would come exactly into that category. It would show that the Government were convinced, without doubt, of the importance of shipping. It would do something to restore confidence in the industry.