Ports Policy Review - Summary of the London Event

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Ports Policy Review: London Seminar
Crowne Plaza Hotel, London, 25 May 2006

This was the first of a series of 'roadshow' events intended to stimulate debate and help inform responses to the discussion document Ports Policy - Your Views Invited. The closing date for responses is 1 September 2006.

This note briefly summarizes main points raised during the proceedings. It is not a verbatim or comprehensive transcript. The speakers' views do not necessarily reflect those of the Department for Transport.

Welcome & introduction

Phil Carey, Head of Ports Division, opened the seminar. Welcoming those attending, he briefly summarized the background to the Ports Policy Review. Though only six years had elapsed since Modern Ports, there had been important subsequent developments in the industry, within Government and in the structure of regional and local planning.

The port operator experience

Paul Davey (Hutchison Ports UK) gave the perspective of a major container-port operator. Generally 'light touch' regulation had allowed UK ports to become among the most efficient in Europe. He stressed the importance of a stable policy framework in a sector characterized by long term investment strategies and substantial front-loaded planning system costs.

Transhipment to third countries, as a proportion of traffic through UK terminals, had decreased precipitously since 1999. This was a consequence both of capacity pressures and, to some extent relatedly, of strategic decisions by large shipping lines. To recover market share, UK ports would need to provide 'critical mass' to make frequent services viable.

Rail share could be promoted by a successor scheme to company-neutral revenue support (CNRS). There should be transparent state-aid criteria for support to ports themselves and inland access schemes, aimed at avoiding competitive distortion and inconsistency of developer funding requirements.

Ports, Mr Davey concluded, did not favour a central Government policy dictating specific locations for future development - 'picking winners'.

Discussion

The speakers were joined on the panel by David Asprey (Chamber of Shipping) and Simon Ratcliffe (Director of Import Logistics, Marks & Spencer) and comments from the floor were invited. Points made and views expressed included:

  • rapid growth in direct procurement from exporters over recent years;
  • increasing use of cheaper stockholding in the source country, leading to ...
  • ... the increasing importance of supply-chain reliability in most retail product sectors; and
  • shippers' requirement for flexibility and choice of route;
  • need for planning rules and procedures to allow faster decision-making;
  • case for encouraging coastal transhipment, with environmental and decongestion benefits;
  • perceived need for greater coherence across Government in handling planning applications;
  • port development should not be limited, by overly stringent demands for developer funding; to multinational companies with the deepest pockets;
  • shipowners favour continuation of a free ports market, including trust and municipal as well as company ports.

MDS forecasting study

Mike Garratt and Chris Rowland (MDS Transmodal) summarized the forecasting study they had compiled at DfT's commission. The forecasts were UK-wide, and ran to 2030 - the increasing uncertainty of any forecasts over such a period being readily admitted by both MDS and DfT.

The forecasts were essentially of unconstrained demand, and although regional and territorial breakdowns were provided, these deliberately avoided making assumptions about the success or otherwise of specific ports in attracting traffic from their competitors.

Unit-load (lo-lo containers and ro-ro) had been subject to a distinct modelling methodology, based on individual project groups and analyzed for each trading partner, and should be considered alongside the transhipment study's findings (see below). For bulk and other traffics, various market drivers had been considered qualitatively.

Unitized traffic was projected to grow strongly (average rates, central case: ro-ro 2.9%/a, lo-lo (teu) 3.8%/a). Bulk traffics were expected to grow slowly (and in some cases decline) with regional variances and fluctuations, and exceptionally a large percentage increase in liquefied natural gas (LNG) imports.

The consultants had also undertaken inland access modelling using the GB Freight Model. Lo-lo container traffic was projected to more than double by 2030 and ro-ro, nearly so. Port flows are set to increase as a proportion of all HGVs. Rail could maintain its market share of containers, if sufficient network capacity is provided.

A comparison with some recent forecasts for unit loads by MDS and by other consultants showed broad general consistency.

MDS transhipment study

Gail Bradford presented a summary of the transhipment study's findings, as set out in the report and summarized in the DfT discussion document. She explained the backdrop of recent decline in through-UK transhipment, and forecasts of sustained growth in the deepsea container trades.

The scenarios tested for the greater South East (GSE) and non-SE had had to be developed before decisions were reached on the Bathside Bay and Felixstowe South proposed developments - that for London Gateway still being outstanding. They remained valid as stylized conjunctures which helped to clarify the decision drivers, costs and benefits.

The study's headline findings were: that if new deepsea berths were not developed, there would be a large demand for new feeder berths around the coastline (and substantial need for such berths in all scenarios); that user costs tended to be minimized by developing deepsea ports in the GSE; that this would produce some net environmental disbenefit, but that this would be less in sensitive lorry miles (SLM) terms than the economic benefit; and that GB ports could gain if development of Continental ports were to be choked off, though with consequent increases in cost passing through shipping lines to end-users.

All these findings had to be qualified: the analysis was not a comprehensive NATA-type appraisal, and it was for the Review to weigh the study alongside other considerations and representations from consultees.

Discussion

Points and views expressed in discussion included:

  • the modelling approach in permitting traffic to switch across ports in close geographical competition;
  • the need to take a long view in comparing forecasts with outturns;
  • MDS forecasts for RSPB had proven fairly close to outturn, but MDS now expected unitized growth to follow a straight-line rather than exponential path;
  • energy-sector forecasts had been based on existing DTI policies and sectoral projections: they did not try to pre-empt Energy Review findings;
  • arguments of need for national, port-specific and inland infrastructure capacity to be geared towards maximum, not central forecasts for volume, ship and vehicle size;
  • a ports sector view was that essentially similar infrastructure planning policy issues arose for non-unitized as for unit load traffics;
  • current trend towards a proportionately greater growth in teu terms than in tonnage or boxes, with increased uptake of 40ft containers, projected to reach plateau by around 2015;
  • some apparent discrepancies in box figures explained by inclusion or exclusion of transhipment;
  • the proposition that the decision whether to tranship was primarily conditioned by ship congestion at ports, with choice of direct-call or feeder port then subsequently determined by rates in the market (whereas the MDS work had been based on underlying trade costs, not arguably-transient capacity issues);
  • the lower rail shares for containers generally attainable at feeder ports, due to typically smaller consolidated loads and often shorter hauls to the first inland destination also;
  • the rapid diminution of rail share between 2020 and 2030 in scenario 2a seemed surprising to some: this was explained by the assignment, with GSE deepsea ports effectively full, of flows onto feeder services relatively close to their final destinations, no longer cost-effective to convey by rail;
  • MDS did not expect large-scale switching from lo-lo to ro-ro via ports of Channel Tunnel in response to constraint at Continental deepsea ports. Switching to UK direct call and transhipment was typically more economically favourable at the margin;
  • migratory shifts in UK population had not been assumed, in the modelling, to affect SLM rates.

Ports' role in the national and local economy

Brian Wadsworth (DfT, Director - Maritime and Logistics) introduced the afternoon session.

Phil Carey reminded delegates of the importance of the ports industry to the UK economy. He invited participants to focus on the core Review questions relating to inter-port competition, capacity and resilience, and to whether and when public subsidy might be justified in a competitive market.

He drew out points of similarity and difference between sea-ports and airports, and touched on environmental aspects (which would be dealt with more fully at later events.

Ports and regional development from a national perspective

Heather Crocker (Advantage West Midlands RDA) outlined the regional development agencies' (RDAs') approach to the PPR, and AWM's role in coördinating an agreed RDA response.

The RDAs were agreed on a need for lead-times, in provision of national strategic road and rail connections - particularly those to ports and airports - to be shortened.

Ports in particular could provide a focus for inward investment, and directly- and indirectly-related support activities: cargo-forwarding, logistics and manufacturing. This was not limited to major ports: Heather cited Falmouth as a focal point for local regeneration and a large direct and indirect employer in West Cornwall.

Summarizing, the RDA response was likely to concentrate upon: investment in inland access; greater certainty and speed in the planning process; and identifying the proper role of the public sector in supporting ports within an essentially market-driven sector.

Port development and the planning process

Martin Tugwell (SEERA) said that his and other Regional Planning Bodies (RPBs) welcomed the Review, but disputed the DfT view that current policy had supported success in the ports sector. He stressed the potential importance for any port of seeking to secure a 'presumption in favour' of desired port expansion in the statutory Development Plan Documents and reminded that the RPBs were themselves statutory consultees for individual cases, and that their input was often critical for facilitating inland transport infrastructure enhancement too.

He considered the planning system, as reformed under the 2004 Act, as essentially fit for purpose and counselled in favour of working within it, rather than seeking any major structural or procedural change. He saw the Dover Masterplan as an example of working effectively within the system, and supported the masterplanning approach for other ports.

Martin cautioned against policy 'directing the traffic', without clear justification, away from the South East against the grain of the market, and indeed noted the need for supporting infrastructure in other regions to support traffic routeing through the SE.

Discussion

The following points were among those discussed:

  • Sir Rod Eddington's advice to the Chancellor and to the Transport Secretary on transport and national productivity would be given during the Review and would contribute to it;
  • the Department's aim was to conclude the Review within a year or so;
  • Regional Economic, Spatial and Transport Strategies were already well advanced. Inevitably, therefore, the outcome of the PPR would need to feed into these largely from their first revisions - but ports meanwhile should engage with the plan development processes;
  • fishing and leisure harbours could contribute much to local economies and their importance should not be overlooked;
  • Masterplans could not guarantee a fair wind for development, but could alert RPBs and stakeholders to the port's priorities. Dover was an atypical port, though there may be valid precedents for others. There were risks that Masterplans might become instruments for competitive bidding (and so be mutually inconsistent) but they would be welcomed if they could contribute to a stable, consistent planning framework.

Highways access to ports

Richard Eastman (Highways Agency) summarized the national strategic road network and its general traffic forecasts. The Agency was attributing increased emphasis to reliability (both for private motorists/public transport and for freight), manifested in a journey reliability target concentrating effort on the slowest 10% of journeys, and in greater use of real-time traffic management.

The Targeted Programme of Improvements (TPI), a £2.1bn three-year investment effort, included some core trade routes and routes specifically benefiting port-users. Regional priorities included schemes at Grimsby & Immingham, Liverpool, Hull and the A3 serving Portsmouth; decisions on priorities would be announced later this year.

Developer funding contributions under s.278 were sought from ports on essentially the same basis as from other developers whose projects would otherwise cause detriment to the highway network. In some cases need for infrastructure expansion could be abated through workplace travel plans and other demand management measures.

Ports and railways

Paul Stanford (Network Rail) described NR's efforts to make contracts with freight users for infrastructure schemes clearer and more equitable. 'Route enhancement teams' had been created to improve customer-orientation.

Network punctuality and reliability had also improved, exceeding ORR targets and in part reaping the benefits of a resurgence in track renewals.

Route Utilization Strategies (RUS) were NR's prime responsibility under the 2005 Act. Both route-specific RUSs and the Freight RUS were potentially relevant to ports; the latter seeking to evolve an industry-wide view of projected freight requirements over ten years. Capacity and loading-gauge 'gaps' would be identified and the viability of resolving them investigated. Industry consultation would take place in August 2006.

Discussion

The speakers were joined by Dr Andrew Traill (Freight Transport Association). In discussion the following points were raised:

  • need to identify and prioritize critical road and rail bottlenecks at national level;
  • skills/labour shortages of long-distance drivers both on rail and road, with the constraints set by drivers' hours legislation an additional factor;
  • coastal shipping (the FTA agreed) should be vigorously promoted on environmental and decongestion grounds;
  • environmental benefits as well as disbenefits of ports should be taken into account;
  • respondents are encouraged to focus on the tensions between private and public sector funding: does investment in inland infrastructure rely primarily on commercial confidence by private sector promoters, or on public sector pump-priming?;
  • how should ports' contributions to expensive gauge clearance projects be set, and 'gold plating' be avoided? - Mr Stanford said that NR's emphasis was now heavily on avoiding over-specification, and doing only 'what the customer wants';
  • developer funding was sought from small as well as large developers, and the HA's firm line on s.278 requirements had, they said, been consistently applied;
  • the problem of 'free-riding' by other users of new infrastructure was acknowledged, but it was felt that there was now greater acceptance than previously - at least by railfreight operators - of the 'swings and roundabouts' sharing of benefits system-wide;
  • Andrew Traill said that the question 'who pays?' was fundamental to the Review, and queried whether major container ports' growth would have been prevented had they been unable to fund road and rail improvements. Brian Wadsworth noted, however, that public funding constraints implied an inevitable and real need for ports to unblock investment by contributing;
  • in the longer term, road pricing - depending how implemented, and how far it was designed to cover costs imposed by each type of traffic - could abate or even remove the need for up-front developer funding. But the Review must focus primarily on present arrangements;
  • a strategic road and rail network, it was argued, should respond to all the types of traffic that present, even if 'capacity-hungry' - e.g. 9'6" hi-cube containers. Design standards could play a part over time - for example, bridges over railways were now generally rebuilt, when necessary, to W12 clearance.

Making better use of diverse ports

Mike Davies (DfT) described the municipal ports review (MPR), Opportunities for Ports in Local Authority Ownership, which had built on lessons learned in preparing Modernising Trust Ports. He reprised the theme that even the smaller ports can be a force for local economic regeneration. To do that, they needed a clear sense of direction. At many municipal ports, this had been lacking, with the port being treated as an esoteric council service, or in some cases as a modest cash-cow. The result could be under-investment and lack of strategic steer.

The MPR advocated clearer lines of delegation and control, and the formation of harbour management committees, along trust-port lines, with 50% of appointees selected by Nolan procedures, in appropriate cases. Municipal ports should consult their neighbours and users regularly. They should prepare business plans, and consider making use of Assured Accounts and Prudential Funding.

Whitstable and Workington had successfully implemented some of these recommendations already.

Turning to small ports (whether under municipal, trust or private ownership), Mike noted the prevalence of these around our coastlines: typically small businesses themselves, and serviced by other small enterprises. A 'small ports questionnaire' had been issued alongside the MPR, in association with the British Ports Association (BPA). This was aimed, in part, at identifying more clearly what were perceived as the main impediments to the success of small ports, and whether Government could contribute to their removal without undue interference in the market.

Governance and accountability in the ports sector

Stephen Bracewell (Harwich Haven) considered the PPR timely, while hoping that the consequent policy would not run until 2030: much could change in world trade during that time, and Government should be ready to adapt and review at intervals shorter than 25 years.

Harwich Haven Authority had broadly accepted and applied the recommendations of Modernising Trust Ports and, as a conservancy trust, had worked in partnership with HPH as major project promoter while continuing to work closely with leisure, fishing and minor commercial estuary users.

Trust ports were sometimes criticised for lack of accountability, but it was also open to debate how far private port operators were in practice accountable, on the specifics of port operation, to their shareholders and other stakeholders. Formal requirements, beyond accounting and Companies Acts stipulations, were limited. Commercial pressures constituted a partial discipline, but they did so for trust and municipal ports too. Ports of all types should consult their stakeholders regularly.

Citing the example of public support for Wilhelmshaven's investment of some $1.25bn, SB contrasted the approach to public funding of ports on the Continent with that in the UK. It was clear that the proverbial playing-field was not level in this respect; the Review should consider the competitive effects of this.

SB regretted the delay in the MPR's publication but welcomed its appearance now. And he urged port customers to respond to the Review, highlighting what they viewed as good as well as not-so-good aspects of Government policy and its implementation.

Discussion

Points mentioned in discussion included:

  • trust ports were not required to pay dividends: would not a requirement for them to do so create a fairer basis of competition with private ports? A counter-argument was to ask what Government (as prospective recipient) had done to earn such a dividend; and in some cases the lease rentals taken by local authority landlords could be viewed as analogous;
  • and, trust ports did earn profits, and recycled them into the business;
  • DfT was inviting views openly on the question of whether and how to rectify closure powers for moribund ports: the Department had as yet no settled view as to the best solution.

Summary and closing remarks

Closing the proceedings, Phil Carey thanked speakers and all who had attended, as well as the hotel's facility support staff. The day's purpose had not been to answer the questions in the discussion document, but to stimulate consideration of germane issues; and in that it had, he thought, succeeded well.

In general though it seemed already possible to distil some consensus:

  • that the ports sector should remain essentially market-led;
  • that regulation should continue to aim for a 'light touch';
  • that there seemed rather little appetite for regional policy intervention on port development locations (though other regional events may yet show a different emphasis);
  • that there was a strong desire for stability and clarity in the policy framework.

All were encouraged to respond to the discussion document by 1 September. The Department's task in analyzing the responses would be eased if respondents could answer the specific questions put, which were roughly divided into broad conceptual questions and more specific or technical ones.

But it was open to respondents also to make observations on matters which were not the subject of specific questions.

DfT/Ports

June 2006