Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence

Memorandum by Hutchison Ports (UK) Limited (P 09)



  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 Kingdom—the 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 activities.

    —  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 trades.

  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 Levy.

  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.[9]


  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 Unit—the standard measurement of volume in the container industry) in 1989 to 906,000 TEU in 1999.

  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.


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.

Social Legislation

  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 the consequences.

  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 proposals.

  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.

Port Development

  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 ports.

  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 Levy.


  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.

Table 1


Quay length (m)
Terminal area (Ha)
1999 throughout
TEU per m
of quay
TEU per
Le Havre
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 to safety.


  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 Levy.

  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.


  5.1  The policy areas that require more action from government are outlined in paragraphs 4.1—4.4 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 objectives.

  5.2  We would be pleased to supply the Committee with any further information which they may require in connection with their inquiry.

9   Source: Federation of European Private Port Operators (Feport)/Ocean Shipping Consultants. Back

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