The impact of Brexit on the maritime industry
As we take stock of our successful attendance at Posidonia 2016 in Athens, another key event comes to the fore which may have a profound impact on the maritime industry both now and for years to come.
On June 23rd millions of voters across the UK will go to the polls to determine whether or not the UK should remain a part of the European Union. The topic has been divisive and has split people’s opinions on what is the right option from the moment the referendum was announced. In this article we look to provide a context of the shipping industry in both the UK and EU, before discussing what sort of impact a vote leave would have on the maritime industry.
According to maritime London, a promotional body for UK based shipping companies, shipping employs 469,000 people in the UK directly and indirectly. Although the UK has long lost its status as the world’s top ship-owning nation, the maritime industry contributes an annual figure of 10 billion pounds to the economy with over 80% of business coming from overseas.
Britain ranked in the top 10 of global ship-owning companies as of January 2015, according to the latest report by U.N. trade and economic think tank UNCTAD. The UK accounted for nearly 3 percent of the world total or just over 48 million dead weight tonnes, versus over 16 percent or 279 million dwt held by Greece, the No.1 ship-owning nation, the UNCTAD report showed.
Despite its reduced status in the industry, London is home to Lloyd’s Market Association, the world’s biggest grouping of shipping-insurance agents, which handled a combined $38 billion of premiums last year. It is also the base for some of the industry’s biggest shipping financiers, such as Royal Bank of Scotland PLC; brokers, including Clarksons PLC; and leading shipping legal firms, among them Norton Rose Fulbright LLP.
A large number of ship-owners do much of their business in the City of London financial district, highlighting the longstanding relationships with the area’s close proximity of shipping services. This is highlighted by Mike Sapountzoglou, director of Athens and Geneva based maritime advisory firm Flagship Navigation Ltd. Mr. Sapountzoglou states “An owner can get a shipping loan, insure his vessel and find a charter in a very short time within London’s square mile and that’s what makes the city attractive to owners”.
But Peter Ahlås, chairman of legal and claims consulting firm C Solutions, said a U.K. withdrawal from the EU could be “devastating” for local maritime services as business will likely be lost to other shipping centers, such as Singapore.
Britain’s Transport Minister Robert Goodwill told Reuters in an interview that the shipping industry benefited for the EU’s single market, which allowed fairer competition between shipping firms and cut costs for freight shippers and removed customs for UK shippers trading within the bloc. This view was echoed by the City of London Corporation, which runs the only global financial centre to rival New York and last month formally backed Britain staying in the EU.
Shipping powers such as Greece, Germany, UK, France and Denmark have the strongest say within the EU on maritime matters. Mr. Ahlås added however that if the UK leaves the EU, it will also lose its ability to influence EU legislation on maritime labor laws, regulation and environmental issues.
However an analysis by Capital Economics concluded that the UK pulling out of the EU “would not be a disaster”. The report said trade would be “relatively unaffected” by a withdrawal, with likely higher costs coming from tariffs, quotas and customs proving to be “an inconvenience rather than a major barrier to trade”. Furthermore, a report by several business leaders including Jon Moynihan, former executive chairman at PA Consulting, stated that Britain “has nothing to fear” from pulling out of the EU, and that large international banks and financial institutions would remain in the city, with potentially even benefiting from lighter regulation.
It will be interesting to see how the referendum progresses. With a clear divide among the general public there is sure to be much more debate before the polls open and long after they close, regardless of the outcome.
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