9. Few transport industries are so burdened by a past legacy as ports. It is not even clear exactly how many ports there are within the UK. Some sources claim there are some 600 ports or harbours within Great Britain that have statutory powers, but the vast majority of these provide facilities for fishing, leisure and tourist industries. The most often quoted sources suggest there are over 300 commercial facilities. If the definition is confined to regular use in the handling of cargo and or to catering for passengers there are approximately 100 ports in regular commercial activity.

10. The Department for Transport is concerned with a smaller number: "We ourselves have defined the major ports in our document as being those ports which handle over 2 million tonnes of cargo each year which gives you a total of 35 or 36 in the UK."[8] They added "The Maritime Statistics Directive had a definition of one million tonnes of cargo" and detailed information had now been collected on that basis; "that would give us about 52 major ports in the UK and account for about 97 percent of cargo."[9] This report is concerned with the needs of the larger ports, rather than with those used predominantly for fishing or leisure purposes.

Port Ownership

11. The privatisation of several United Kingdom ports in the last two decades of the 20th century changed the structure of the industry. Broadly speaking, port authorities in the United Kingdom are owned and operated by three kinds of authority.

12. Historically, private ports (including the company owned ports) were generally developed to serve a particular commercial activity, such as the oil trade, although Felixstowe was founded as a general facility. But between 1992 and 1997 seven former trust ports were privatised.[10] Generally private companies established under the 1948 Company Act run these ports on commercial lines.

13. At present approximately 70 percent of the port capacity in the United Kingdom is privately owned, and companies now operate fourteen of the largest 20 ports by tonnage.[11] The private sector is in charge of a port's land, infrastructure, facilities, and handles virtually all port service and regulatory functions including pilotage, navigational aids, safety and security. The United Kingdom is unusual in international terms in having such a preponderance of private ports, and in giving the private sector such complete control of port activities. In many other countries the port itself is publicly owned, and even where there is some private ownership, many regulatory functions remain in public hands.

14. A large number of ports are not privately owned, even now. Many are public trusts or trust ports set up by an individual Act of Parliament, controlled and administered by a self-governing independent statutory body. These bodies are often known as Conservancy Boards or Harbour Commissions. Their remit is typically to provide a service for import and export of goods by sea, or for the fishing industry; to provide navigational conservancy and make the best use of their assets. They are ad hoc public bodies established for the purpose of managing harbours and have no share capital. Many trust ports are small, and at present there are only some 20 trust ports which have an annual turnover in excess of £1 million, such as Dover, Milford Haven and Lerwick.

15. Other ports are controlled by a municipal authority. In a similar way to port trusts, the local authority may act as a landlord with private terminal operators acting as tenants. Such ports are usually small and commercially insignificant, but there are exceptions such as Sullom Voe and Portsmouth.

Future Prospects

16. As Figure 1 demonstrates, there has been a fairly consistent rise in total port tonnage, that is inward and outward movements of cargo, since 1990, although there was a slight fall in 2002.[12] From 1994 onwards the Department for Transport statistics are divided into all ports and major ports, which were defined as those which handled over 1 million tonnes per year (also see Appendix 1). A comparatively small number of major ports move the vast majority of tonnage, and their share of the market is increasing. In 2000, this percentage reached 97 per cent and the trend appears to be continuing. The breakdown of cargo by port is shown in Appendix 2.Figure 1: Tonnage through major UK ports

Source: Department for Transport

17. These ports handle a variety of cargo; liquid bulk (oil); dry bulk (which includes coal, iron ore, grain, bauxite and phosphates); containerised cargo, and roll on roll off, which includes both leisure traffic, and lorry movements.

18. Figure 2 shows major port traffic by cargo for UK ports in 2001. Liquid bulk is by far the largest sector, followed by dry bulk. However, although container and roll on roll off traffic currently account for a relatively small proportion of cargo, they are a growth area. Containers and container vessels are measured in 'Twenty foot equivalent units' (TEUs). Over the last 30 years the UK container trade has increased threefold from approximately 1.5 million units (TEUs) to 4.5 million units. Much of this increase has occurred in the last decade, with a growth of 50 per cent (Figure 3). Figure 2: Major Port Traffic by Cargo 2001

Data Source Department for Transport

Data source: Department for Transport

19. All estimates indicate that growth in container traffic will continue as a result of globalisation, and of industry and technological development. Over the last quarter century or more, economic, commercial and technological change has brought fundamental changes to the industry both nationally and internationally. The increase in the size of bulk carriers and the rapid development of unit loads, particularly in the form of containers and roll on roll off tonnage have created pressures to move ports to deep water, downstream to estuary head sites where there is the necessary draft. Such sites often also provide low value land that can be used to service the port. Good road and rail connections can make such sites viable.

20. Before container traffic became widespread, ports handled goods from multipurpose or break bulk vessels. The lack of intermodal transport meant that in most cases ports served, and were of commercial importance in, relatively small areas. Since land transport was costly, a carrier's choice of port to a large extent reflected the desire to keep such costs down. A large number of small ports could flourish, each serving a different geographical area.

21. The standardisation of cargo units or containers created a revolution in long-distance transport. The substantial fall in maritime transport freight rates and the ability to transfer units or containers internationally by many different transport modes brought a reduction in total transport costs. The consequence of this was that port hinterlands were much less protected than under the previous conventional shipping system. Market proximity is no longer a guarantee of stable or permanent traffic. Ports now compete with one another for containerised traffic, and United Kingdom ports face competitors in third countries, since goods can be transshipped from large container vessels.[13]

22. Not only are goods transported over greater distances, ships are also becoming larger.[14] Until recently the size of vessels was determined by the 'Panamax', the largest size of vessel which could go through the Panama Canal. Now ships are being built which exceed this size, and may be more than 6500 TEUs. This will fundamentally affect the shape of the industry in future. Since such massive vessels require deep water, they are handled in transshipment hubs, which have associated feeder ports. Efficient hub ports require cranes able to be used with such large ships, a substantial amount of land for activities associated with the port, and high-quality intermodal connections. They also need a labour force capable of operating and maintaining expensive and highly technical equipment.

23. These changes mean that the nature of ports' growth has changed. In the past ports grew incrementally, a comparatively simple process of capacity increase, achieved by adding to the number of berths. Liverpool is a prime example of this. More recently, ports have expanded in new deepwater sites and by making berth capacity improvements, increasing the throughput of the berth. Such improvement requires substantial capital investment. For example, a single berth container terminal could cost between £80m and £140m.[15]

Conclusion

24. Substantial, often erratic changes in trade flow and the increasing competitive strategy adopted by ship owners impinge strongly on the way ports and terminal owners have adapted their operations. There is constant pressure to lower costs and provide services for modern fleets of increasingly large vessels.[16] This has caused a vast increase in the requirement for port investment. Most European countries are increasing their capacity.[17] The expansion is driven by a number of pressures, but the greatest is the massive year-on-year increase in international sea borne trade, both in bulk commodities and in container movements. The United Kingdom needs deep water facilities able to deal with modern fleets. The alternative is that goods will be transhipped from continental ports with the necessary facilities, not only increasing costs to business, but threatening the competitiveness of UK exports.[18]

25. Government policy on ports, as it is on airports, is that the private sector is best placed to identify and implement new development opportunities. State provision risks inefficiency, and may not be properly responsive to the market. Although there was widespread acceptance among our witnesses that port development was usefully made by the private sector, the problem remains that operators of hub ports need to make large investments, but are vulnerable to the changing policies and fortunes of large shipping companies and alliances. If private sector investment is to continue to sustain our ports, United Kingdom ports policy must ensure that those ports remain attractive to international business. This may mean providing appropriate ancillary support for their activities, such as good road and rail links. But there are other interests which must also be protected; we need a regulatory framework which both ensures that ports are operated in a safe and environmentally responsible manner and does not put unnecessary barriers in the way of business.

9   Ibid, Q 8 Back

10   Clyde Port, Dundee, Forth, Ipswich, Sheerness, Thamesport and Tilbury. Back

11   Modern Ports: A UK Policy, p. 32. Back

12   Maritime Statistics 2002. Back

13   POR 1A Back

14   HC (2000-01) 244 i-iv, p. 223, p. 233 Back

15   HC (2000-01) 422 i-iv, Q 177 Back

16   Ibid, Q 414 Back

17   Q 28, 24 April 2002  Back

18   POR 14 Back