UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 601-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

WELSH AFFAIRS COMMITTEE

Ports in Wales

Tuesday 2 June 2009

DR ANTHONY BERESFORD and MR CALLUM COUPER

Evidence heard in Public Questions 1 - 47

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 2 June 2009

Members present

Dr Hywel Francis, in the Chair

Mrs Siân C James

Mr David Jones

Alun Michael

Albert Owen

Mark Pritchard

Hywel Williams

Mark Williams

________________

Memoranda submitted by Dr Beresford and Wales Freight Group

Examination of Witnesses

Witnesses: Dr Anthony Beresford, Senior Lecturer, Logistics and Operations Management, Cardiff Business School, and Mr Callum Couper, Chair, Wales Freight Group, gave evidence.

Q1 Chairman: Good morning and welcome to the Welsh Affairs Committee and this inquiry on Ports in Wales. For the record could you introduce yourselves, please?

Dr Beresford: Dr Anthony Beresford, Cardiff Business School, Senior Lecturer in Transport and Logistics.

Mr Couper: Callum Couper, I am the Port Manager at Cardiff and Barry and Chair of the Wales Freight Group.

Q2 Chairman: I say this to all witnesses in this room: the acoustics are not brilliant so please do not be afraid to raise your voices. Could I begin by asking you a very straightforward question: what are the key strengths and weaknesses of Welsh ports?

Mr Couper: One of the strengths is that there is a bit of diversity in Wales in terms of the function of the ports and particularly the trade to Ireland, both UK trade and the land route trade from Europe; of course Milford in isolation is an energy port, Port Talbot is one of only three facilities in the UK that can take deep-laden capesize vessels, it is quite a unique port facility and there is the range of general cargo ports in industrial South Wales that can reach into the Midlands and the M4 corridor. All this gives a bit of spread that can take the ups and downs in economic activity but the strengths and weaknesses will vary over time. The time we are in at the moment means that there is great potential for Welsh ports in general to expand the range of activities that they undertake and their functions and to take advantage of a time of change with further internationalisation of trade and also the shift in the energy markets, decarbonisation and those imperatives as well. So we have some limitations and weaknesses, particularly in South Wales, in that it is a very tidal estuary, as you are aware, so these ports are not as accessible as some of the open harbours. Also, of course, we are on the West coast and although that, cyclically, is coming back into a more favourable environment -because mostly trade has been East-facing towards Europe with the accession to the EU and also the shift in our trading relationships - the West coast has suffered, but it is on the way up again. You see it with ports like Liverpool having been in the ascendancy for the past decade and the other West coast ports are also on their way up as well.

Dr Beresford: If I could add to those points, the interesting trends that were clear in the 1960s and 1970s of West coast ports by and large declining have dissolved in the 1980s and 1990s and the pattern of port performance has actually been much more mixed. We have seen in the last 15 years perhaps as much as 20 years a resurgence if you like of the niche ports, smaller ports, West-facing ports and the disadvantage of not facing Europe has diminished. We do see, therefore, new arrivals in the Mostyn, North Wales opportunistic movement of Airbus wings, we see in South Wales the LNG and the trend is no longer visible, possibly at all, but it certainly was visible for 20 or so years, a decline in the West, a rise in the East.

Q3 Chairman: What would you consider to be the key decisions that need to be made in order to ensure the future prosperity of our ports and who are the key decision-makers here?

Mr Couper: There are some clear areas, in particular with globalisation of trade and with looking at Wales' gateway ports for international trade, and whilst we are not and are unlikely to be in a position with the existing spread of ports, although there is one exception, containerisation, the retail trade has not been a big feature of South Wales, but we can have feeder services from European hubs, from these ports that will take these super post-panamax container ships that only call at a few ports for the fact that (a) only a few ports can handle them physically and (b) they want to make as few calls as possible. That trend is one that we should be looking to develop and add value within the region and add facilities and the logistics jobs that are not currently there. There is also the energy sector with the import of biofuels and biomass, also the generation of energy on or near port estates and the processing of fuels on or near port estates. There has been an inversion or there is an inversion going on from the concentration of energy generation around the old coalfields and the Rivers Trent and Ouse in the centre of the country; much of this going to have to occur at import centres and the ports are well equipped to do that. That will involve perhaps grid reinforcement so that where there is generation on or near the port estates the power can be put into the areas of consumption and also good surface links, particularly with rail, to be able to get solid fuels into existing generation areas. Those are two quite tangible areas that need some further work, particularly linking with the regional planning, the economic planning and the LDPs. The ports themselves have plenty of spare capacity because of historically where they come from and the trade they are doing now, and a lot of this capacity can be taken up. With the changes in geography, trade and consumption, local authorities or LDP makers need to start thinking about linking the port as part of the offering, both to enhance inward investment and to reinforce what is going on there. The employment sites within the vicinity of ports should be linked strategically with the ports themselves, I believe. There are, therefore, a number of areas that need to be thought through a little more to enhance the value of ports because they are very, very tangible economic drivers for regions and indeed nationally.

Dr Beresford: May I add a few points? The reliance on road is well known in the UK - rail does an excellent job for certain commodities on certain routes but the reliance on road obviously generates the congestion problem that we are all aware of. One additional burden that Wales has to bear of course is the unidirectional toll across the Severn Crossing - for trucks I guess it will not be long before it is £20. The fact is that you are very distance-sensitive if you are on the edge of a market. Wales is somewhat to the west of the centre, which is clearly the south-east of England, the Midlands and of course onwards to central parts of Europe, so every mile that is covered is a cost. If you are in a peripheral location you do need very efficient logistics to keep those per mile costs and indeed per hour costs - because a lot of your costs are obviously time costs also - to an absolute minimum. The ability of South East England, the Low Countries and industrial parts of Germany to absorb transport costs which are rather high is fairly great, but our ability in Wales, particularly West Wales and North Wales, to absorb high transport costs is less. We need to have as low as possible transport logistics costs.

Chairman: Mr David Jones, did you wish to ask a supplementary?

Q4 Mr Jones: Yes, briefly on that point, Dr Beresford, as you know the Local Transport Act gives the Welsh Assembly Government powers to impose trunk road charges in Wales. It seems to me from what you have just said that if the Assembly Government were to impose such a charge the impact upon Welsh ports would be pretty severe.

Dr Beresford: Yes, potentially; of course it all depends on the level of the charge. My belief is that a charge should have a purpose and if the charge, if it were implemented, is to reduce congestion then it should be targeted at reducing congestion which is largely dependent on car use. If we look at freight, if a charge is levied on trucks - typically per mile, but it would not have to be, it could be a point to point charge or a threshold charge - then my belief is that that sort of charge should be looked at very carefully, possibly with a view to setting it at zero.

Chairman: Mr Mark Pritchard and then Mr Mark Williams.

Q5 Mark Pritchard: Thank you Chairman. Good morning, gentlemen, and if I may I would like to lead you back to strengths and weaknesses. Terrorists plotting their terror I hope will miss Wales; nevertheless, many ports in Wales, Haverfordwest for example, might be seen as a high profile but perhaps soft target. I just wondered whether you think there is enough security around the key major ports in Wales and, even if there is, what you might like to see put in place to improve it given the heightened times we live in.

Mr Couper: My interest is predominantly freight, but clearly some ports are ropax, dealing with freight and passengers. We have recently got the ISPS code, the International Shipping and Port Security code, which has really created a baseline across the UK for security at ports and the ships they interface with, and there is also European legislation which the UK will absorb and implement which really looks at the port as a whole, not just the ship-shore interface. As far as the cargo ports are concerned there has been a marked tightening of the security arrangements and supervision in that respect. At passenger ports there is a hierarchy of security measures and passengers, chemicals, roll-on-roll-off and containers are at the upper end, and the bulk ports and general cargo ports are slightly down on the facilities and you can have designsated security areas, restricted zones, within ports of various sorts, so there has been a general improvement in security. I cannot speak directly for the transit of people and when you look at Fishguard and Holyhead, they are two examples in particular where private individuals and cars rather than just freight are transiting. The ISPS code has created a baseline for security arrangements at ports.

Q6 Mark Williams: Can I return to some of the opportunities for new business that you talked of earlier? You outline in particular the energy market and we have heard about obviously LNG and Airbus and the use they make of Mostyn and Pembrokeshire, but how will ports themselves attract that new business? You talk about the need for an integrated approach with the LDP but is that integrated approach being realised at the current time and, secondly, who is going to make the necessary investment to promote that integrated approach? Is it going to be the public or the private sector and are the returns ultimately - I suspect you will not know the answer to this - going to warrant the kind of investment that is required to promote that approach?

Mr Couper: The business model for the private ports and, for example, the Associated British Ports Authority, is that we look for medium to long term investments with customers. They want to achieve a certain flow to their process and they need the port to do that, so we intend to invest in facilities on their behalf, particularly when they are storage facilities or land or servicing that we can do back to back with a contract with these people. Thus we are looking to secure as far as we can our investment and have a payback over a period of five, ten, 15 or 20 years depending on the scale of investment. I think if you layer it up further the responsibility falls wider. The privatised model for ports management in the UK has been successful over the past 15 years and there has been a tremendous amount of investment in logistics facilities at ports which has benefited ports, employment and the economy, particularly the regional economy, and the country as a whole. There is a great deal of capacity around the UK and so people can seek out the most efficient way of getting their goods to and from the marketplace. However, that reaches a point where surface transport in particular and the availability of road and rail needs to match the volume and the scale of activity at the port. The port is not in a position to fund entirely the A to B as if it has some exclusive claim over it, and I think that is where there is inevitably a tension of investment.

Q7 Mark Williams: Given the hopes that you aspired to earlier on - both of you commented about an integrated approach - how big a problem is that tension? Is that an understatement or is that an accurate thing? The perception is that you have an Assembly approach which is more proactive, at least in its vision, and a light touch approach at the UK level whereas we need a fully integrated approach, particularly in terms of transport infrastructure in the vicinity of ports. Are your hopes going to be realised?

Mr Couper: We are in an environment now where perhaps we can be looking a bit more strategically at how the decision-makers in the ports and also the customers for the ports can sit alongside the regional planning, and where there is road and rail capacity there is a lead time and that is programmed in to accommodate some of the things that may happen in the future. For example, Port Talbot is a very significant facility in the UK; it is largely focused on the steel-making business at the moment, the drive-on cargos, but it has got potential in the future for a range of cargos and it will need those surface links to move those cargos into the hinterland. That is something beyond the ports and whether they are private or a trust or whatever, that involves a much higher level of things and developing into the forward movement of the regional plans, the transport plans and the economic plans. It is a joint thing.

Q8 Mr Jones: We have already touched on the fact that West coast ports have enjoyed something of a resurgence over the last ten to twenty years, but to what extent would you say that Welsh ports are competing with English ports for business and to what extent would you say they are doing so successfully?

Dr Beresford: Maybe I should make the first comment. There is competition, clearly; Bristol is not far away from Callum's port, there is competition in the North, there was competition to engage in the Airbus project and so on, so there is England-Wales competition without a doubt. On the other hand I prefer to see it as a system where the capability of English ports is across the range. There are clusters of large ones, there are several very small ones; similarly, the Welsh ports do certain jobs: the land bridge to Ireland comes to mind and so on. I do see competition, there is no doubt, for cargos and I am sure Callum can allude to specific examples where he has had to as it were secure business against English competitors, but also I think there is a mutual dependence as well. A case in point would be Irish passenger traffic clearly bridging across Wales and across England into the continent, and that flow is quite a significant and substantial one - the vehicular flow of passengers primarily but also, obviously, trucks. There is an interdependence therefore as well as competition and if you were to say to me or ask me which ports compete it is quite an interesting progression of the discussion and Callum and I would possibly not entirely agree on the pairings.

Q9 Mr Jones: That is something that we are interested in.

Dr Beresford: Clearly in the short sea we have competition - several South Wales ports competing with Bristol potentially, we have got the South Wales ports competing with the direct Ireland to continental Europe route, which could be done differently, we have competition in North Wales between Liverpool and obviously Holyhead for the ro-ro traffic, but there are other examples as well, and so there are England-Wales competitors. I do not think the Welsh ports come out of it badly; they know what the business is and a lot of the shakeout has taken place. That is not to say that the industry is standing still, there are still, clearly, very large changes that could take place, not least the loss of bulk traffic in South Wales - Port Talbot's role with the steel for example. There are examples, therefore, where ports may well have to face dramatic change and the mix of who is competing with whom could well change along with that.

Q10 Mr Jones: You mentioned Holyhead and Liverpool; I actually used to live in a house that overlooked Liverpool Bay and I used to find it extraordinary really that you would see these cargo ships sailing past Holyhead all the way to Liverpool when it seemed to me that they could have saved themselves a lot of turnaround time if they had actually docked in Holyhead. What could Holyhead do, for example, to compete more effectively with Liverpool?

Dr Beresford: Clearly there is a segmentation of the market. If we deal with passengers, ro-ro passenger traffic for a moment, passengers tend to like to sea-minimise and land-maximise, so they tend to seek out the shortest sea routes - not necessarily for the same reasons. Some might be seeking the lowest cost, some do not like seasickness or whatever. As regards freight it is invariably to do with either the logistics chain - where the freight is starting and finishing - or it is straight cost and the haulage cost routing through Holyhead would be, let us suppose, driver-accompanied something in the order of £1.50 a mile and the alternative routing through Liverpool would stack up against that calculated total cost. The two situations are slightly different, the freight against the passenger, clearly. If the freight is cheaper through Liverpool, sea-maximising somewhere into Ireland, maybe close to the coast, it will tend to be that solution that is taken. But passengers, my research and my experience tell me, do tend to like the shorter crossings, though not exclusively obviously.

Q11 Mr Jones: You have mentioned the interdependence between ports; which ports would you say are those upon which Welsh ports are mostly interdependent? I would have thought they are probably on the other side of the country.

Dr Beresford: Yes. Clearly there are cases - and the recent bulk importation from the Middle East is a case in point - where the UK relies largely now on that gateway to Milford Haven, so there is that dependence. As regards the other way round, the ro-ro ports and the container ports of the big gateways of the East Coast - Southampton, Felixstowe, Tilbury, Thamesport and so on - clearly Wales is dependent on those for deep sea ports because they are the deep sea ports. I do prefer to have an image if you like, a vision, of mutual support as opposed to competition with the England-Wales combination.

Q12 Mr Jones: The key to maximising the benefits of that interdependence would be, I would have thought, good road and rail links.

Dr Beresford: There is no doubt about that. Again, Callum will have views on the rail links and so on to the South Wales ports, but I can remember in the case of Felixstowe when the volumes were growing, roughly speaking, at 10% per annum and, somewhat belatedly, it was recognised that additional road capability around Ipswich and so on was necessary, not to mention the A14. The road links just about caught up with the volumes going through Felixstowe and the rail enhancement, with additional terminals at Felixstowe itself and the gauge capability for high cube nine foot six containers followed in due course. There are still several bottlenecks though, 20 or so significant bottlenecks in the rail network at the moment as we speak, but the role of the road improvements and the rail improvements would be major, difficult to quantify precisely but absolutely vital to UK Plc to have good access to those main ports. Felixstowe is merely an example.

Q13 Mr Jones: In terms of maximising the benefits of that interdependence it seems to me that most of the road improvements would be required in England rather than in Wales.

Dr Beresford: There are bottlenecks nonetheless, and again Callum would be able to detail some of these, but I have carried out some unpublished research on road freight rates and it is quite interesting how those actually mirror more or less the congestion pattern of the UK, running at, say, £1.30 a mile in uncongested areas and running at up to £2.00 to £2.20 a mile in and around the M25 area with higher rates also in the West Midlands and so on. There is, therefore, an immediate impact of persistent congestion. Translating that to Wales there are pinch points and perhaps it would be appropriate to hand over to Callum to pick those up.

Mr Couper: Just to refocus the question, road transport is the most expensive and environmentally it has the greatest impact; sea transport is the most benign from an environmental point of view and it is also the lowest cost form of transport. The imperative really, therefore, is to use the ship and to get the ship as close as possible to the origin or destination of the cargo and that is where the ports of Wales can play a part, with the use of coastline shipping to replace one form of road transport and also with the development of container transit, by feeding in from deep sea hub ports, getting containers into the UK for the first time via Welsh ports. Not only does it reduce the amount of road miles that currently are used, it also provides opportunities for new investment in logistics and distribution in the Welsh ports as opposed to this being done at places like Felixstowe. The single most immediate benefit is environmental but there are benefits also to retail goods and raw materials coming into Wales and also to manufacturers in Wales of steel and chemicals that are going to Europe and globally, allowing them to have direct access and good connectivity to deep sea container services. Those are things that really should be done in Welsh ports and then you take out that long run across to Felixstowe, up the M4 and the A14, which environmentally is not good and economically and reliability-wise does not give the Welsh shippers and receivers as fair a crack of the whip as those closer to where all the action is.

Chairman: I am conscious of time; we have only dealt with one part of our inquiry so far and I would urge everyone to speed things up a little. Mr Jones.

Q14 Mr Jones: On the issue of government policy it seems to me that the Department for Transport has adopted a non-interventionist stance, almost laissez-faire. To what extent has the Welsh Assembly Government got a developed policy with regard to ports - presumably it would be port infrastructure rather than ports themselves - and to what extent are they liaising and integrating their policy with the DfT?

Dr Beresford: I will take a general point if I may on that. My first involvement in government policy on ports was around about the year 2000 when things were becoming sharper with the Dibden public inquiry at Southampton, and the comments that were coming in my direction, general informal comments, were that it was very much a hands-off policy and the feeling was that the ports were by and large very capable of looking after themselves. I am not sure that was entirely correct or productive looking forward; maybe there is a need for a firm hand to appreciate that, particularly now that we have data availability on what goes where in precise terms and the technology to support that. There maybe could be a case for a more persuasive policy to identify, for example, some ports in Wales which could benefit from the support of particular terminals or, possibly, transport access, particularly rail access I would suggest, but on specific cases again, Callum, could you pick up?

Mr Couper: I would lean slightly more to the existing model of the ports being allowed to have their own creative use of the assets, underpinned by the infrastructure being available, which comes from spatial planning and transport planning and having the capability to get the goods in and out of these facilities. Having said that, from an environmental point of view we have got a tranche of grant in place for freight facilities - capital grants and also water grants for revenue support and there is also the EU with the TEN-T programme such as Marco Polo, motorways of the sea, but they do not lend themselves easily to the sort of support that Welsh ports would need to plug into some of the trade flows that are not happening now which could have much broader benefits both for Wales and the UK and environmentally.

Q15 Mr Jones: Reverting to the question though is there any or any sufficient integration between policy at a national level and at a Welsh Assembly level?

Mr Couper: The Transport Wales Act created for the surface links, for road and rail, a clear conduit for Welsh policy but obviously that does not exist for ports, although it is interesting that the Welsh Assembly Government recognised during the passage of that legislation that they would form a Wales Freight Group and construct and publish a Wales Freight Strategy. That very much includes the ports in trying to integrate those modes of transport, so clearly their desire appears to be including the ports within their overall transport plans.

Q16 Mr Jones: Having said that, we had evidence a few weeks ago from the Welsh Transport Minister and, frankly, I was not persuaded that there was any great integration at all between the DfT and the Welsh Assembly Government in terms of a freight transport strategy; is that a fair comment?

Mr Couper: It is probably something which is still evolving, but if you are going to get the best out of a national government and a regional government one would have thought the stronger the links and the freer the reserved powers and jurisdiction the more effective the decisions that are going to be (a) identified and (b) implemented. That is what the freight community wants.

Chairman: Could we move on now to infrastructure? Mr Alun Michael.

Q17 Alun Michael: I do not want to ask the question whether a Severn Barrage would be a good thing or a bad thing, but if it were to be built on what appears still to be the most likely line, what impact would that have on the ports in South and West Wales particularly?

Mr Couper: Associated British Ports has got three ports very close to the line if one of the five options under evaluation at the moment became government policy and were to progress; Cardiff and Newport would be within the line of a barrage and, yes, it would have a significant impact on the ability of those ports to trade in their existing format because it is likely that there would be a reduction of about one metre in high water, which would reduce the amount of draught and thus the amount of cargo that ships could carry.

Q18 Alun Michael: Would Newport and Cardiff still have a future in those circumstances?

Mr Couper: Yes, I think they would, but Associated British Ports is going through a process at the moment to try and identify the benefits and disbenefits of this because it may be that a barrage would alter the dynamics so that there would be more tugs required, more pilots, more handling of the ship, a longer time transiting locks - all these things then add to the ship owner increasing the amount of freight that they charge the shipper and the receiver, which then alters the competitive position of where the ports are. We are going to have to ask these questions and we are making our concerns known, and while I cannot say that there would be a wholly negative impact there are some very fundamental issues there for the ports. That is the process that we are going through at the moment.

Q19 Alun Michael: What is the timescale of that process?

Mr Couper: I believe it is now in phase two of a two-year evaluation and presumably by this time next year the government will have enough information to make a decision.

Q20 Alun Michael: I meant ABP's evaluation of the impact.

Mr Couper: We are asking for certain clarification on how locks would be managed, there would clearly be a new authority set up, whether there would be charges, how we would address where loss of water had diminished the tidal window through which the deep draught ships would go.

Q21 Alun Michael: It is at the stage of communications rather than conclusions then.

Mr Couper: It is at the moment, yes.

Q22 Alun Michael: Against that background - I do not want you to repeat yourselves because we have had some discussion about the interconnectivity with the transport infrastructure and where there are weaknesses - is there anything that has not already been covered in terms of the limits on the role of ports as economic drivers, or what we can do about it, that you would like to add?

Mr Couper: Again, it is getting on the radar now the limitations that may impact in the future. If, for example, ports were going to be feeding containers, for example, into the Midlands, they would need sufficient loading gauge by rail to get them into the Midlands, with sustainable transport. We have not really got that from South Wales anyway into the Midlands corridor - we have not got the width through tunnels and platforms for high cube containers which make up half the world's population of containers. That is a particular question.

Q23 Alun Michael: Can I also ask what has been done to ensure the ports in Wales are considered an integral part of the Welsh and UK transport infrastructure? You both referred to the fact that the ports in Wales are integrated into the approach that is being adopted to freight in Wales, but the wider one - are there any initiatives, either from the industry side or from government that are relevant to having that broad approach, which is very much what you have both argued is needed?

Dr Beresford: We are trying to draw to attention the joined-up approach that we believe is necessary, that the bulk of port activity freight-wise is involved in logistics chains, so a greater and more detailed understanding of those chains as individual chains for the movement of not necessarily containers but particular consignments of whatever they may be, is part of the greater understanding of why ports are there and how we should handle our ports. There is the related issue of the profile of trust, municipal and private ports, which actually is rather a different mix in Wales vis-à-vis the mix in England, and there are some interesting examples where a port is owned in a way that you would not necessarily expect. There are funding issues of course with the municipals, the trust ports do what they have to do and the private ports are the ones that all the international shipping lines tend to understand - they forget that we have a huge number of non-privatised ports. There is a political dimension to the mix of ownership: are our ports owned in the right way in Wales and should they be different from England? That is a dimension that is somewhat neglected, we have not really looked at it - we as academics have not looked at it in any particular depth, but we would be happy to do so.

Q24 Albert Owen: You have talked about Wales and the rest of the UK but of course lots of ports in particularly the Republic of Ireland have benefited from European funds, as have many Welsh ports. Do you think there is a proper European strategy for transport - does the TEN still exist, for instance, the Trans European Network, and is there really enough investment in it, is the UK doing enough to draw down the money to maximise the potential for Welsh ports?

Mr Couper: It is a good question; it is lacking and it is something which really should be addressed at this time whilst there are changes going on in response to restructuring the economy and the globalisation of trade. It is now that we need to capture this, and this is where intervention, if we can call it that, is necessary through supporting things that the market wants to do but will not quite happen on their own because economically it does not work at the present time. As I mentioned earlier, some of the European grants just do not lend themselves to many small schemes which could support and make environmental improvements and also bring less congestion via the south east of the country where containers come through now, to spread that activity further round the country and to allow Wales to actually participate and punch above its weight in terms of its port facilities. I had to look the other week at joining up a flow of cargo linking Le Havre, Cardiff and an Irish port - for example Waterford - and looking to see what revenue support could be factored in. There are UK domestic grants that might work, but they did not pass muster in that particular instance where you have two EU states, they lend themselves more to TEN-type funding but the hurdles for TEN-type funding are just impossibly high for us to reach in terms of lorry miles and environmental benefits. They fit well for putting cargo from Oporto to Genoa, over that distance, using the Mediterranean as opposed to moving it on land; you can hit those targets, but you cannot really do it for smaller schemes. I think there should be more imagination, both at the regional level and the UK level to start achieving some of that because it is this little window that we have got where all this is going on and where things change. We need to capitalise on that. The ports in a way are bringing sustainable development and employment investment into parts of Wales that need it.

Q25 Mrs James: We have spoken about freight quite a bit and what I have learnt from your evidence so far is that freight is really the way forward when we look at port development, because we have strayed several times into that area but I would like to home in on that a little bit at the moment. We know that we have got capacity and good facilities in Wales for the development of freight and you have touched upon this but bear with me, what do you both see as the key opportunities and barriers for Welsh ports with regard to freight transport?

Dr Beresford: Opportunities. Obviously over the last six months or however long you describe the difficult times with freight volumes dropping, it has been something of an anomaly and the long-range forecast book of numbers would be unit loads going up, the Irish traffic has been in recent months less reliable but certainly long term has picked up very, very rapidly. There are clearly opportunities for more trading with Ireland and I agree with Callum from Wales' point of view we do wonder and both independently in our reports suggested cruising - that is people, I apologise, you wanted freight, but the opportunities are there on certain identified routes which would have to be taken case by case. I am wondering about Swansea; Swansea has somehow been bypassed by the lines. Callum, have you got a comment on Swansea for the Irish freight link?

Mr Couper: There is a lot of work being done to try and re-establish the Swansea-Cork ferry and hopefully that will happen within the next 12 months or so, but that was an important freight and passenger route and there will be a role for it in the future. There are various reasons why it disappeared and trends will bring it back into play, but if we are looking at a ten, 15, 20-year horizon then we really need to be looking at distribution facilities on or close to the port estates and the connectivity with the deep sea ports in Europe in particular. I have mentioned energy and some of the opportunities that are coming through there. There are shifts in the way that goods are distributed and with linkages with the LDPs and spatial planning processes we could be in a position to take advantage of that. Some of it will require more imaginative grant support to get it going as the economics change, as the environment moves towards new flows of cargo. We need the surface transport links from the ports, both rail and road, and the searchlight is very much on decarbonising and it should be recognised that ports have a big role to play in that because the ship, as I said, is the most benign, has the least impact on the environment.

Q26 Mrs James: Do you think there is enough being done? We have touched on transport grants et cetera and we have talked about spatial planning, but it appears to me and maybe some other people that we are not quite linked up yet, are we? We have this window of opportunity now; are you confident that we are doing enough in Wales, enough in the UK to actually link everybody up and get some real money into this spatial planning now, the preparation. You have mentioned Swansea and I see that the pressures between what is happening in SA1 for example, it is the last industrial area of Swansea where we have an opportunity to develop but there are competing concerns. People want it as a leisure facility, a housing facility; do you think we are doing enough?

Mr Couper: The short answer is no but Wales Freight Group and things like this Committee's inquiry do put the searchlight on it. The bullet line message, as the Eddington Report clearly showed, is that connectivity is the key to economic growth. We want economic growth; we require economic growth that is sustainable and the ports are the facilitators to achieve that. ABP has carried out research in the past couple or three years - and it has been revalidated quite recently - which shows the economic effect of the ports on employment investment in the region, and it is very strong, it is a very tangible thing. If you look at a port like Le Havre on Google Earth you will see that it is on its own, in green fields. It has a terrible road gong up to Rouen and then on to Paris, it has a couple of rail lines, but there is a massive amount of investment there because it is what goes in and out of the port that has facilitated development and it is the shortest possible transit to where the cargo is being processed when it comes back out again. Ports are very tangible devices for economic growth in a sustainable way, therefore, and that understanding needs to get into regional government, where the LDPs are made and at these sorts of levels because it is very important that that starts being integrated. I still see LDPs with no mention of the port at all and I am astonished by it because it is just not perceived in the way it should be. There are very visible places like Holyhead and you know what that economy would be without that three and half million tonnes of freight going in and out, but in other urban areas it is still almost invisible and that needs to be ramped up. In terms of the understanding of what ports and shipping can do, environmentally and economically, that is the message: that we need to raise the game.

Q27 Mrs James: You have mentioned that we have capacity and we have good facilities, we have identified the market and we want this freight business so why has it not all happened yet?

Dr Beresford: Some of it is inch by inch. If I can just focus on waste management as an interesting new business - it is not that new, but the volume is going up, we are having to recycle, we are having to distinguish between recyclable materials and non-recyclable. Increasingly they are designed in from day one in manufacture but it seems to me that one opportunity for Wales is to lock into the logistics of waste management. A lot has moved on in London and obviously there is a huge amount of waste of various types here, but with the legislation ramping up and as it were complicating waste in terms of its definition, it seems to me that there is the possibility for flows through Welsh ports in handling waste.

Mr Couper: That has already happened in some cases and there has been a big investment at Newport for recycling metals, ferrous items and electrical components. Cardiff Container Line has started a UK-Ireland, door-to-door container service - that has been running since August last year and we are building that business up. It is the only unit load container lift-on-lift-off service in Wales and it is competing with the ro-ro trade. There is the recent planning consent at Port Talbot for 300-megawatt wood-burning power generation, so some of these things are happening but they are discontinuous patchy things, we have not yet got the mainstream linkages. If you are Dow Corning or Corus or if your markets are international and you cannot always put it in a big ship in bulk you want to put it in containers and get it to smaller customers, you need that connectivity in Wales and we have not got there yet. That is something that needs a lot of focus and that is where Swansea, Cardiff, potentially Mostyn and other ports can play a part.

Dr Beresford: If I can add to that, once you have unitised something it is suddenly more mobile so you can compete; you can grab stuff from Birmingham and from East Midlands and the port becomes the point of focus for actually a much wider market, reaching into England comfortably, as well as dealing with the local flows which are relatively easy to find. We are saying the same thing here but the unitisation concept of fresh cargos is a possible area.

Mrs James: Thank you.

Q28 Hywel Williams: I have just a couple of questions about the potential for Welsh ports. Mr Couper mentioned a couple of times this morning the effects of the economic downturn and the potential opportunities for Wales, but is there a downside to that for Welsh ports? I am just thinking how Welsh ports are marketed to businesses and other European countries; are they aware of the opportunities that are available in Wales? How are they made aware of those opportunities?

Mr Couper: Answering your first point, there are short term down sides to what is happening with the economy at the moment and we see that in construction materials, the reduction in trade to Ireland, in steel imports for manufacturing in particular, timber for construction, there is a general reduction in the amount of traffic going through the ports at the present time but the overall trend has been positive if we take a longer period of time. As far as the marketing of the ports is concerned perhaps there is more that could be done with linkages with Europe, and part of the Wales Freight Strategy identified an understanding of what the market is doing, particularly in terms of materials moving in and out of Wales and also materials moving potentially through Wales, that could go to the Midlands, along the M4 corridor and the South West. A greater understanding of that, of market intelligence and also some promotion of the Welsh ports in certain areas, particularly where they are aligned to taking flows off the road in Europe and putting them on sea transport as opposed to hauling them through Europe on trucks. We probably need to raise the visibility in that way and that is something that was identified through the process with the Wales Freight Strategy.

Q29 Hywel Williams: You might have answered this question obliquely already but thinking of the timescales for large scale infrastructure developments at Welsh ports, it takes many, many years and you referred earlier on, Dr Beresford, to the decline in western ports of the United Kingdom in the 1970s and 1980s and their resurgence in the 1980s and 1990s. It is a long term business and possibly the recession will be gone - depending upon whom you believe - by the end of this year. Is there the capacity to respond in the short term if we have spare capacity should we need it, or are we going to be dependent on long term developments which might come about or not?

Mr Couper: The answer is that in terms of capacity for existing traffic it can fluctuate through quite a wide band before you need to step up to add in more resources, either built or human resources, but it will be the longer term developments which carry the greatest benefit for the ports and their regions. That is the new trade and the new slices of trade in bringing containers and energy in particular; that is where the benefits will arise for Wales and for the region, developing those longer term businesses. Hopefully one of the by-products of this recession will be that people can start looking at different ways of doing things and, of course, driving that strongly in terms of economics is the carbon imperative and having to reduce the amount of fossil fuels we use.

Q30 Albert Owen: Is it not the case though that with the economic downturn we are more reliant on the Irish economy as Welsh ports than the UK economy because that has contracted the quickest, and is not another factor fuel? Do you see the rise in fuel costs as being short term or does it have to be factored in for the longer term in terms of fuel for vessels as opposed to the lorries as well?

Mr Couper: Fuel costs are clearly a very significant feature of all transport but shipping lines do tend to have a mechanism to pass them on if they can, but it is highly competitive and they are not always successful in doing that. We certainly sensed perhaps six to ten months before the UK hit the beginning of this that the Irish economy was heading south, construction was easing up and consumption was starting to show a different patterns, but hopefully they are sufficiently ahead of us that we will see them coming out of recession before Wales does so that the ports that are in that trade will see benefits sooner rather than later. However, that is more of the same and it is trying to identify the new trades and the shift in distribution patterns that lock in new activities, new flows and will bring benefits that are not currently enjoyed by the Welsh ports.

Q31 Albert Owen: Waste management being one of them and a new market. All Ireland's waste goes out of Ireland, or the vast majority of it.

Mr Couper: Yes.

Q32 Albert Owen: Do you think there is potential there for Welsh ports in terms of new markets?

Dr Beresford: Yes, why not? One very marginal example that I came across a couple of years ago was Irish exports of ATMs, which are flown to China. There is no real reason why they could not be land-routed to Heathrow and then flown. I did a quick, not to say reasonably thorough, cost calculation on this and worked out that it was about £500 more expensive to fly-fly as opposed to road-sea-road-fly. That road-sea-road would be business for Welsh ports and Irish ports, so there is an interesting intermodal margin example there of what is going on with things like ATMs going over to China for recalibration and so on.

Q33 Mr Jones: Dr Beresford, in your submission to the Committee you have referred to the potential for the ports to offer value added services and you referred specifically to the ABP Connect initiative which they have established in four British ports, including Cardiff, where you say that they have emphasised "cold chain logistics management". Can you explain what that term means?

Dr Beresford: Yes, temperature-controlled cargos that have to be kept in good condition throughout the chain, the classic being food for retail. I would like to add, if I may take this opportunity, that ABP Connect has reduced its profile, we are on a downward slope as it were at the moment rather than an upward slope, but I wanted to include it in the report. The fact of the matter is that it had been a new initiative in recent years, but it is probably fair to say that it is not the highest profile part of ABP's business at the moment. Nonetheless the principles are correct in the report.

Q34 Mr Jones: My next question was going to be how successful has that initiative been in Cardiff, and it sounds as if it has not been terribly successful.

Dr Beresford: Short term reasonably successful, long term a question mark.

Q35 Mr Jones: What opportunities exist for ports in Wales to provide other types of value added services?

Dr Beresford: That is a very interesting question. There is a very, very wide range of cargos and I would have to say that the cargo streams and types are the starting point. A lot of cargo you simply cannot do anything with at all and people do, as it were, misuse the phrase "value added" in my view. Value addition in its pure sense and its most useful sense if you like is where the cargo changes its form, something is done with it - for example, radios are put into cars or there is some pre-delivery inspection process or whatever. At the other end, at the very simple end, a value addition is simply moving, where something obviously is worth more because it is closer to the customer, so depending on the cargo there are the two types. If we are talking of repositioning cargo and getting it closer to a point of sale or point of use, then its value has gone up, but not by much, it is kind of transport cost plus, but if there are cargos that we can identify that go through Cardiff or whichever South Wales port, or Holyhead, wherever it may be, which you can do something with and actually change the state and form of the cargo, then that is potentially of interest. I agree with Callum on retail, such a wide range of goods goes through the chains in retail - obviously not food, people tend to think of retail straightaway as food, but we have got B&Q, we have got toys, computer games, you name it - there are opportunities for value addition but it depends on where that happens in the supply chain and I think an understanding of particular supply chains for cargos which are appropriate to Welsh ports is at the core of it. Callum.

Mr Couper: For example, if you look at the existing model where there are deep sea containers, the sort of commodities that Anthony has referred to, they come into Felixstowe, they get road-hauled up to somewhere in the Midlands, the containers then get stripped, they get put onto pallets or into boxes, cartons, whatever, they go up into racking warehouses, distribution warehouses, and then it goes onto road and gets delivered, maybe all the way into Wales. That really could be done through a Welsh port and the distribution facilities built on the port estate; therefore the traditional value added bits actually are done within the port estate giving new investment and employment in the port estate because it was not there before, it was carried out somewhere else, and the removal of one or two legs of the distribution chain potentially - certainly from the deep sea port to the distribution centre in the first place. These are port-centric logistics so we need an environmental eye on the benefits of doing that. There are many other value added potentials with steel coils, splitting steel coils or perhaps blending fertilisers or bagging materials. There is a whole host of things that could be done as close to the ship as possible so that you are reducing that onward distribution leg, you are getting as close to the finished product as possible.

Dr Beresford: Timber products are another example.

Mr Couper: Yes, we have had a recent investment at the port in Cardiff where there is a timber company who are on the port estate and they are importing timber in their own right now and it is going right alongside the quayside; they are processing it and that then gets sent to their customers.

Q36 Mr Jones: I understand that there is quite a new recycling facility in Newport.

Mr Couper: Yes.

Q37 Mr Jones: Which I suppose takes up Mr Owen's point.

Mr Couper: Yes, that is the WEEE facility which is for the reprocessing of end-of-life electrical goods, that is a recent investment there which is just going live.

Mr Jones: Thank you.

Q38 Mrs James: Turning to security and policing now you have already mentioned security but could you expand on what are the main security threats to the operations of Welsh ports?

Mr Couper: Again I would suggest that I am more involved in terms of freight than passengers in my particular sphere, but clearly each port has a security committee involving the local police, the special branch of the local constabulary, immigration authorities and the various community interests to ensure that where ships are coming into the ports there is accountability in terms of the cargo, the crew and potentially passengers. That has been enhanced by the ISPS code, as I mentioned earlier. At the ferry ports there is a higher level of supervision of security, but I am not really able to comment on particular weaknesses or strengths really, it is outside of my field.

Dr Beresford: I would just add that I detect - and I think this is informal and anecdotal - a convergence between passenger port attitudes and approaches to the terrorism threat and those we see at airports. I have seen ferry terminals which, frankly, if you are in them you would think you were in an airport. There is that tendency to move towards the airport - multi-layer security so to speak. I tend to be rather similar to Callum here, I am more of a freight specialist and the specific measures taken to ensure that freight is safe and is not available as it were to bombings, terrorism, drugs, people trafficking and so on are for a specialist in that area and I would find it very difficult to give a professional answer.

Q39 Mrs James: My understanding is that there are two distinct areas to this, there is security in terms of threats of terrorism et cetera which obviously ports have to be prepared for, but if that did happen are you confident that there are robust systems in place, that there is a plan?

Mr Couper: Each port has a port security plan that is approved by TRANSEC who are used by MCA and come and audit and approve the port security plan. At its basic level it involves establishing restricted zones where there is activity, for example, with chemicals, fuels, dangerous cargos, passengers or roll-on-roll-off facilities. They are fenced areas and you can only get in and out of them with a security pass with your photograph and so on and so forth. There are checks at the gangway and, likewise, the ship has got its own mirror responsibilities in that they will have somebody at the head of the gangway who is checking anybody that is going on and off the ship if they are not part of the crew. There has been an increase in the quality of security at ports, certainly the cargo ports and specialist facility ports.

Mrs James: Thank you.

Q40 Albert Owen: I appreciate that you are not experts in security but we have the Borders, Citizenship and Immigration Bill going through the House of Commons today and obviously a part of that is the common travel area. The fears in the central corridor particularly that I represent, the port of Holyhead, are that a lot of traffic will be going to the north of Ireland and from Irish ports to Scottish ports as opposed to Welsh ports. We saw in the 1970s and 1980s with heightened security over the IRA threats that those ports were actually very tight on security and people would come south of the border and use the central corridors. Do you see the reverse happening possibly if there is a tightening up of security at the central corridors that will be to the detriment of Welsh ports and possibly allow cargo operators and freight operators to use Scottish ports?

Mr Couper: Because they are going within the UK across and use the border crossings?

Q41 Albert Owen: Yes.

Mr Couper: I suppose there must be some potential for that.

Q42 Albert Owen: You have a short sea crossing.

Mr Couper: The sensitivity is the cost. For freight they will be looking to use the most cost-efficient means depending where the origin of the cargo is, but going up to a Scottish port or north of the Mersey corridor, north of Fleetwood, Stranraer and further north would add substantially to the road leg which might alter the dynamic for drivers' hours and also the cost of road miles being more expensive than the sea miles. I suppose there is a possibility of that disadvantage that these people would be prepared to risk.

Q43 Albert Owen: The port owners and port operators are worried about the additional costs that they would have to put forward if the common travel area disappears, and they actually then would have to pass that on to the customer so it would become less competitive.

Mr Couper: There would be additional costs and a penalty on the overall cost of getting from A to B which would narrow the margin of advantage of one port over another.

Q44 Albert Owen: Is this something the Wales Freight Group has discussed?

Mr Couper: It is not, but I have seen it referred to a couple of times and it is something we could put on the agenda. I would add that as far as the Wales Freight Group is concerned there is a meeting tomorrow in fact in Cardiff of the Wales Ports Group, which is a sub-group of the Wales Freight Group, and we will then bring into that the likes of Stena and Milford and they will have useful things to input on that because they are more passenger-focused than some of the other ports that are already members. We will look out for that.

Q45 Mark Williams: Just to prolong this a little bit on security and policing, you have covered most areas that we had to question you on, but just following on from what Mrs James said about the robustness of the arrangements in terms of security, are you satisfied that there is sufficient co-ordination between port operators and those dealing with the security, immigration and policing? You talked about the committees in place and the security plan that each port has, but is there room for improvement nonetheless?

Mr Couper: I suppose there always is and in security, in health and safety, in financial controls, in any dimension there will always be room for improvement, but we rely greatly on our own knowledge of our customers, of the activities on the port estate, those that have got something to do with what goes on on ships, those that are nothing to do with the port at all but just happen to be there as a port tenant. Just the general management of the port estate gives us some pointers as to where we should be focusing our attention security-wise, but we also have to rely on the likes of TRANSEC and their occasional unannounced meetings where they test actual security measures in place. Cardiff Container Line, for example, is an ISPS facility in its own right with its own security plan within the Port of Cardiff and occasionally it does get tested and any shortcomings will then be very quickly brought to the attention of the port management.

Q46 Mark Williams: I am not after a list in pecking order of effective ports but I would imagine it does give a competitive advantage. There are quality assurance issues that come into play in this as well, rather than simply complying with the regulatory requirement, so there is merit in you getting it right as well is there not?

Mr Couper: Absolutely, it is in our interest as port managers to know what is happening on our port estates and where our vulnerabilities are because clearly that will impact on our business, never mind the broader economic or social effects of something going wrong.

Albert Owen: Thank you.

Q47 Chairman: Thank you very much indeed for your evidence today and also for the written evidence you supplied us with earlier which helped us a great deal in preparing for this session.

Dr Beresford: Thank you, Chairman.

Mr Couper: Thank you.