Memorandum by Hutchison Ports (UK) Limited
INQUIRY INTO UK PORTS
1.1 Hutchison Ports (UK) Limited ("HPUK")
is a member of the Hutchison Port Holdings Group ("HPH"),
an independent port investor, developer and operator with interests
in Asia, Europe and the Americas. HPH is a subsidiary company
of Hutchison Whampoa Limited a multi-national conglomerate based
in Hong Kong. The HPUK group is the largest employer in the UK
port industry and owns three ports in the United Kingdomthe
Port of Felixstowe, Harwich International Port and Thamesport.
The Port of Felixstowe is the largest
container port in the United Kingdom and the fourth largest in
Europe. It handles 41 per cent of the country's total container
throughput, and is also the country's second largest port for
roll-on/roll-off (Ro/Ro) freight ferry traffic. In 1999, the Port
of Felixstowe handled 2.7 million Twenty-foot Equivalent Units
(TEU) and nearly half a million Ro/Ro units. Over 2,600 people
are directly employed by the Port with many more employed in related
Harwich International Port is a multi-purpose
port, handling passenger and freight ferry services, cruise liners,
containers, general and project cargo, dry bulk traffic, trade
cars and hydrocarbons. Rail access via an electrified route to
London, and a cross-country link as well as road access via the
A120 makes this an intermodal hub. HPUK has purchased a site known
as Bathside Bay, adjacent to Harwich International Port, to develop
into a major container terminal.
Thamesport is the UK's newest and
most technically advanced container port. It was acquired by Hutchison
Ports in 1998 and has capacity to handle 660,000 TEU per annum.
There is the potential to increase this capacity by 1.5 million
TEU in future years. It is located near the mouth of the Thames
Estuary on the Isle of Grain in Kent and a dredging programme
to improve access for the largest vessels is due to be completed
by the end of February 2001.
1.2 HPUK's three ports are each predominately
involved in unitised trades, containers and/or Ro/Ro, and the
evidence submitted relates primarily but not exclusively to these
1.3 HPUK is an active member of the United
Kingdom Major Ports Group (UKMPG) and, through the UKMPG, of the
European Sea Ports Organisation (ESPO) and the Federation of European
Private Terminal Operators (FEPORT). The HPUK Chief Executive
is currently Chairman of UKMPG and HPUK also provides an alternate
member of ESPO's General Assembly.
1.4 HPUK welcomes the decision by the Transport
Sub-Committee of the Select Committee on Environment, Transport
and the Regions to hold an Inquiry into UK ports policy. It should,
however, be recognised that the UK now has some of the most efficient
ports in the world. This is a direct result of private sector
investment and policies of deregulation and non-intervention that
have been followed by successive recent governments.
1.5 Investment by the private sector, encouraged
by the port privatisation process, has created a highly competitive
industry. Most port customers now have a number of alternative
ports they can use. This competition has also resulted in a more
commercial approach being adopted by the remaining Trust and Municipal
ports to the benefit of all port users.
1.6 HPUK accepts that a certain level of
regulation is necessary in all industries but believes that the
continued success of the industry depends to a significant extent
upon a continuation of existing policies. To this extent we welcome
the fact that the recently published policy paper does not advocate
a major change in this principle.
1.7 We would however have liked to have
seen firm actions in the Paper to address the distortion to competition
that arise at a European level as a result of subsidies received
by some European ports and additional costs imposed upon UK ports
and port users such as Light Dues and the proposed Aggregates
1.8 The greatest potential threat to the
well being of the UK port industry comes from the proposed European
Directive on Access to Port Services. Although well meaning the
Directive could be disastrous for a number of major UK ports and
port operators. We are disappointed that Modern Ports did not
contain a firm commitment to protect UK port interests.
2.1 The UK remains one of the world's major
trading nations and ports play an essential role in facilitating
trade. The December 1997 European Commission Green Paper on Seaports
and Maritime Infrastructure stated that "Europe's export
competitiveness in a global economy increasingly depends on efficient
and cost effective . . . port systems."
2.2 Over 95 per cent of the UK's trade (by
volume) passes through its ports. HPUK believes that the trend
towards increased trade liberalisation and globalisation of the
world economy will continue and that the volume of international
trade will continue to rise accordingly.
2.3 UK importers and exporters have benefited
from increased efficiency and competition arising as a result
of the port privatisation process and, more importantly, the abolition
of the National Dock Labour Scheme. For example, average stevedoring
rates at the Port of Felixstowe today are 19 per cent lower in
real terms that they were five years ago and are probably lower
than in any comparable market.
2.4 As a result of the intense competition
between ports the cost to shipping lines of handling a container
in a UK port is circa $100 (£68). This compares with an average
of approximately $134 (£91) in North Europe, $200 (£135)
on the East Coast of North America, $260 (£176) on the West
Coast of North America, and $360 (£243) in Japan.
2.5 As well as facilitating trade, ports
act as significant economic generators in their own right. The
HPUK group is the UK port industry's largest employer with 3,500
direct employees and an annual wage bill of nearly £90 million.
2.6 In addition to direct employment ports
generate a large number of additional jobs in associated industries.
For example, a report by the SATIS (Shipping and Transport in
Suffolk) group estimated that 19,000 people were employed in the
transport industry in Suffolk based around the Port of Felixstowe.
2.7 HPUK is the largest employer in each
of the towns in which its ports are located. As well as providing
the major source of local economic activity HPUK believes this
imposes with it certain other responsibilities. As such HPUK seeks
to make a positive contribution to local communities. These include
participation in a number of public/private partnerships and significant
donations to local schools, disabled groups and in local amenities.
2.8 The changing economics of sea transport
in recent years has resulted in a change in the pattern of port
calls in Europe, especially for container traffic. Increasing
ship sizes and vessel operating costs have forced ship operators
to reduce the number of direct ports of call. It is now common
for traffic from the peripheral parts of Europe to be transhipped
at the major ports which, for the main part, are grouped within
the North Sea region.
2.9 From the time when significant volumes
of UK containers were also transhipped via continental ports the
balance has changed so that now all the major shipping services
make direct calls in the UK. This contrasts with the situation
in, for example, Scandinavia where virtually no major deep-sea
container service makes a direct call. Container traffic between
Scandinavia and deep sea markets tends to be carried on "feeder"
vessels (smaller container ships) to hub ports where it is transhipped
onto deep-sea vessels. Enforced changes to the economics of port
operation could easily turn the clock back in the UK.
2.10 There is great competition between
European ports to act as transhipment hubs. The major North European
transhipment ports are Rotterdam, Hamburg and Felixstowe. The
volume of transhipments handled at Felixstowe has grown from 95,000
TEU (Twenty-foot Equivalent Unitthe standard measurement
of volume in the container industry) in 1989 to 906,000 TEU in
2.11 Transhipments now account for approximately
31 per cent of all containers handled at Felixstowe. The vast
majority of these containers are not destined for the UK (although
a small proportion do travel on coastal services) but provide
a useful contribution to the UK balance of payments.
3. PROBLEMS AND
European subsidies/State aid
3.1 UK ports in general, and Felixstowe
in particular, have enjoyed comparative success in not only attracting
calls by the largest container ships but also in securing transhipment
traffic in competition with ports in North Europe. This is despite
the major ports of North Europe receiving what is generally acknowledged
to be significant levels of state aid.
3.2 The European Commission has acknowledged
that there is a need for greater transparency in port accounts
as a prerequisite for establishing a level playing field. However,
progress towards eliminating port subsidies has to date been extremely
limited and there is little prospect of this situation changing
in the immediate future.
3.3 In general the competitive advantage
enjoyed by continental ports as a result of subsidies has been
offset by more flexible and efficient labour practices in UK ports.
As there is apparently little enthusiasm (or political will) in
Europe to tackle the state aids issue it is essential for the
future competitiveness of UK ports that the benefits of flexible
working practices are not eroded.
3.4 Any increase in the cost and burden
of social legislation risks undermining the competitive position
of UK ports. If UK ports become too expensive there is a risk
that the major shipping lines will drop direct calls and UK traffic
will be fed over European ports. If this happens it could prove
to be irreversible because, as ships get larger, there will be
no incentive for UK port operators to invest large sums in creating
suitable capacity for them. The result could be that the UK will
not be able to accommodate future generations of container vessels.
As referred to in paragraph 2.9, just such a phenomenon has already
occurred in other peripheral parts of Europe.
Access to Port Services Directive
3.5 Although increasing social legislation
represents a threat to the future competitiveness of UK ports
an equally serious, and more immediate, threat is represented
by the proposed European Directive on Access to Port Services.
The draft Directive is expected to be published early in 2001
but certain elements of the proposal have emerged from discussions
held with the Commission.
3.6 It is claimed that the Directive is
necessary to implement articles 49 and 43 of the Treaty of Rome
enshrining the Community's basic rules on freedom to provide services
and the right of establishment. This however fails to take account
of the structure and competitive nature of the UK port industry.
3.7 The Directive is expected to state that
there should be at least two providers of pilotage, towage, mooring
and cargo handling in each significant port. HPUK fully supports
fair and open competition but believes that the proposed Directive,
particularly as it relates to cargo handling, is ill conceived
and will do considerably more harm than good to the UK port industry
and those that rely upon it. The extension of the Directive to
include cargo handling (it was originally intended to include
only the technical-nautical services of pilotage, towage and mooring)
was made after only a very perfunctory consultation and without,
it would appear, a clear appreciation of either the industry or
3.8 There may well be problems in certain
member states but we are not aware of any complaints relating
to UK ports. If the Commission believe that a Directive is necessary
they should be obliged to justify this decision before a Directive
is published. If they are unable to provide an acceptable statement
of need, and to date they have unable or unwilling to do so, then
the subsidiarity principle should apply.
3.9 The UK, because of its long coastline,
has more ports that any other European country and none of our
ports, on their own, constitute a "market" to which
access is being denied. Taking container ports as one example
the market is, at the very least, the whole of the UK. There are
no restrictions on the access to this market as the recent agreement
on Shellhaven, which was open to all interested parties, illustrates.
3.10 UK ports are much smaller than the
major continental ports. These ports are typically organised on
the "landlord" basis whereby the port authority (usually
publicly owned) provides the infrastructure (dredging, breakwaters
etc.) but cargo handling is provided by independent operators
who enjoy leases or concessions from the port authority.
3.11 The pattern in the UK is very uneven,
but a number of ports, including those of HPUK but also others
such as Bristol and the Forth have deliberately chosen to offer
an integrated service, with some or all port services under their
direct control, because in their local circumstances this is the
best way to offer customers an efficient service.
3.12 The competitive nature of the industry
is illustrated by the low handling charges in the UK referred
to in paragraph 2.4. Such charges are not consistent with a market
to which access is denied. To the extent that there is any concern
regarding competition within the industry then the European Treaty
already contains provisions designed to deal with anti-competitive
practices or abuse of dominant position.
3.13 The essential difference between the
UK and continental northern Europe is that whilst Continental
ports are characterised by competition within a few very large
ports, the UK industry is characterised by competition between
many, generally smaller ports. This appears not to have been understood,
or not taken into account, in the framing of the Commission's
3.14 If the Directive eventually becomes
law in a format similar to that in which it is expected to be
published, there will be a number of very serious consequences
for the UK port industry to no obvious benefit:
(i) If services such as cargo handling were
required to be offered to competitive tender this would tend to
encourage greater use of poorly trained or casual staff and a
consequential reduction in safety standards.
(ii) UK port operators have made huge investment
in the facilities at their ports: if they were to be deprived
of the use of these facilities they would look to the Government/Commission
for substantial compensation.
(iii) Uncertainty arising from the Proposal
could jeopardise investment in much needed new facilities in the
UK. Depending on conditions attached (by the Directive) future
investment could be unattractive.
(iv) It would impose an unnecessary and onerous
administrative burden upon an efficient industry.
3.15 It is recognised in Modern Ports: A
UK Policy that the pressure for expansion at UK ports is greatest
at those handling containers and Ro/Ro traffic. Modern Ports also
acknowledges that measuring port capacity is not easy. HPUK believes
that the need for expansion is most acute at deep-sea container
3.16 Without the creation of new facilities
we believe that the UK could begin to run out of capacity as early
as 2002. The lead time to develop new container terminals is such
that there is already a real risk that capacity constraints will
bite before facilities can be brought on-line.
3.17 HPUK is seeking the necessary permissions
to expand facilities at Felixstowe and Bathside Bay. The development
at Felixstowe foresees the completion of the Port's Trinity Container
Terminal with the extension of the existing quay by 270 metres.
With associated back-up land and equipment this will boost the
Port's capacity by 500,000 TEU per annum. Construction of the
expended facility will commence as soon as permission is received
and it is expected to be operational in 2003.
3.18 Although the development will boost
UK capacity it will not provide a long term solution to capacity
shortages. The primary need for the development is to provide
sufficient deep-water facilities to allow two of the largest container
ships to berth simultaneously. The number of ultra large container
ships in service is growing rapidly and this berthing requirement
is essential to retain direct UK calls by these very large ships.
3.19 To provide a short-to-medium term solution
to capacity constraints HPUK is to develop a new container terminal
at Bathside Bay which will provide 1,400 metres of deep-water
quay with an annual capacity of 1.7 million TEU. Bathside Bay
is expected to become operational in 2004.
3.20 Bathside Bay is ideal for development
as a container port for a number of reasons; it shares the same
marine approaches as Felixstowe so no dredging is required to
the main navigation channel, it is situated in an area of North
Essex in need of economic regeneration, Harwich is an ex-British
Rail port so the basic intermodal infrastructure is already in
place, it is strategically located on the east coast allowing
shipping lines flexibility in their North European port scheduling,
specialist expertise is available through its proximity to the
UK's largest container port, and, as a result of the permissions
granted in the Harwich & Parkeston Quay Act 1988, it is in
the unique position of being the only major port project that
could be delivered in time to prevent capacity constraints.
3.21 In the long term capacity at Thamesport
can be expanded to handle an additional 1.5 million TEU through
a reconfiguration of the existing terminal and expansion onto
an adjacent site which is one of the largest undeveloped brownfield
sites in the South East of England.
3.22 UK Ports are not only disadvantaged
vis-a-vis their European competitors through the availability
of state aids on the continent but also through additional statutory
charges applied in the UK. Ships calling at UK ports already have
to bear the burden of light dues, a charge not levied in competing
countries and now ports are faced with the prospect of an additional
tax on development and operation through the proposed Aggregates
3.23 Port developments by definition occur
at the land/sea interface and therefore by implication have an
environmental component. This is recognised by the industry and
HPUK takes seriously its environmental responsibilities. In recent
years millions have been spent on a range of environmental measures
at Felixstowe alone including the creation of 16.5 hectares of
new salt-water inter-tidal mud flats along the River Orwell, the
development and on-going funding of the Trimley Marsh Nature Reserve,
planting 250,000 trees to shield the port from the local community,
and using sand and gravel recovered from dredging Harwich Harbour
to improve sea defences, protect the local coast from erosion
and to create new underwater habitats for lobsters and oysters.
3.24 The needs of the environment must however
be balanced by the needs of the economy and although this is widely
accepted, the process by which it is achieved is cumbersome and
inefficient. In particular, the need for multiple consents from
a variety of agencies causes confusion, cost and delay without
commensurate environmental gain. There is an imperative need for
the process to be simplified.
3.25 Government policy states that ports
should seek to make best use of existing facilities before considering
expansion. This makes economic sense for port operators as well
as minimising any impact upon the environment. HPUK has, for example,
gone to great lengths to ensure that its current facilities are
utilised to the maximum possible extent before embarking upon
its current expansion programme. Table 1 illustrates the utilisation
of facilities at the major container ports of North Europe on
the basis of the volume (TEU) handled per metre of quay and per
hectare of container storage yard. It can be seen that on both
counts Felixstowe makes better use of its existing facilities
than any other European container port and Thamesport is only
bettered by Felixstowe in its use of container yard and Felixstowe
and Rotterdam for quay utilisation.
PRODUCTIVITY AT MAJOR NORTH EUROPEAN CONTAINER
|Port||Quay length (m)
||Terminal area (Ha)
|TEU per m|
|Source: Institute of Shipping Logistics, Bremen/Port Development International
3.27 Ports are however increasingly specialised operations
and spare capacity at one can only be used to satisfy excess demand
at another when both are equipped to handle the same type of traffic
and serve the same hinterland.
3.28 Ports can be dangerous places to work. There are
however steps that can be taken to minimise risk and HPUK gives
Safety the highest priority. For example, the Port of Felixstowe
Safety Department has seven full time employees whose sole responsibility
is to ensure all Health and Safety standards are met or exceeded.
3.29 The Safety Department is backed up by an Emergency
Services section consisting of 13 fully trained firemen and ambulance
technicians/paramedics equipped with two fire engines, two ambulances
and a chemical response vehicle. The Port also has an Occupational
Health Centre staffed by Doctors, nurses and physiotherapists
to ensure the best treatment is available to all employees.
3.30 Comprehensive training is a prerequisite for a safe
working environment and at any one time Felixstowe has 12 full
time training professionals and 30 accredited instructors seconded
as and when required to carry out this function. As the UK market
leader in container handling HPUK has more in-house knowledge
of the safe operation of container terminals than anyone and spends
a total of £1.27 million per annum on Safety and Training.
3.31 It is possible that not all ports operate to the
same standards and that where this is the case there may be the
need for government action. We would support the introduction
of minimum standards but these should not attempt to be overly
prescriptive and must recognise that the expertise available in
major ports often means that the port is in the best position
to develop standards suitable to its particular environment.
3.32 HPUK ports are all active members of the Port Safety
Organisation and cooperate fully with their UK and European counterparts
on matters relating to Safety. We believe that the industry has
a generally good safety record but recognise that there is always
room for improvement and no compromise should be made with regards
4. MODERN PORTS:
A UK POLICY
4.1 Modern Ports sets out three areas for promotion;
UK and regional competitiveness, high nationally agreed safety
standards, and; best environmental practice. Whilst it contains
various actions to achieve better safety standards and environmental
practice it is disappointing that there is little to support competitiveness
of UK ports in the European market place.
4.2 We welcome the undertaking to rationalise and, where
possible, simplify the consent and inquiry procedures for port
developments and the commitment to look at the scope streamlining
the activities of the various government departments dealing with
ports. We also welcome the acknowledgement of the importance of
quality road and rail links to ports but regret that no specific
action is proposed to secure these where they are lacking.
4.3 We would however have liked to have seen firm actions
to address the distortion to competition arising from subsidies
received by European ports and additional costs imposed upon UK
ports and port users such as Light Dues and the proposed Aggregates
4.4 Potentially the greatest threat to the UK port industry
comes from the proposed directive on Access to Port Services.
Although well meaning the Directive could be disastrous for a
number of major UK ports and port operators. We are very disappointed
that Modern Ports did not contain a firm commitment to protect
UK port interests.
5. OTHER POLICIES
5.1 The policy areas that require more action from government
are outlined in paragraphs 4.14.4 above. If we had to single
out the one area that is of greatest concern it would be the proposed
Directive on Access to Port Services. This has all the signs of
being a very poorly thought out piece of legislation, but one
to which elements within the European Commission are committed,
with potentially very serious consequences for UK ports. It is
important that the government mounts a robust defence of UK port
interests and that they are not traded off against other European
5.2 We would be pleased to supply the Committee with
any further information which they may require in connection with
Source: Federation of European Private Port Operators (Feport)/Ocean
Shipping Consultants. Back