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Young professionals say London shipping must continue to adapt

London must continue to adapt if it is to maintain its competitive edge and remain a relevant global maritime centre, particularly in view of Brexit

 

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A new survey by The Shipping Professional Network in London (SPNL) has found that London must continue to adapt if it is to maintain its competitive edge and remain a relevant global maritime centre, particularly in view of Brexit. Respondents to the survey also identified freedom of movement as the most important issue in negotiations for the UK’s exit from the European Union.

The survey, organised in conjunction with international accountant and shipping adviser BDO, canvassed the opinions of young professionals working primarily in the shipowning, ship-broking, ship-management, chartering, banking and ship finance, advisory and associated industries in London. Respondents were asked for their views of the current state of the market, and how they believed it would perform over the next 12 months. They were also asked to identify the key challenges facing London as a maritime centre, and which aspects of the Brexit negotiations they considered to be most important for the preservation and continued development of London as a centre of global maritime commerce.

Respondents recorded an overall confidence level of 6.2, out of a maximum score of 10.0, in the markets in which they operate. This compares with the rating of 6.1 when the survey was run previously, in September 2017. 

On a scale of 1.0 to 10.0, respondents expressed an overall expectation of 6.0 when asked to gauge the likelihood of their business making a major investment or significant development over the next 12 months, as opposed to the 5.8 recorded in the 2017 survey. 

Competition, demand trends and the cost and availability of finance were identified by respondents as the three leading factors most likely to affect their business performance over the next 12 months. 61% of respondents expected finance costs to increase over the coming year, compared to the 55% who thought likewise in 2017.

Respondents were also asked for their opinion of likely rate movements in the tanker, dry bulk, container ship and offshore maritime markets over the course of the next year. Overall 56% thought that tanker rates were likely to increase, as opposed to 31% in the 2017 survey. In the dry bulk sector, 37% of respondents expected rates to increase, compared to the 60% recorded in 2017. Meanwhile, 32% of respondents thought that rates in the container ship market were likely to increase over the coming 12 months, as opposed to 42% last time, and 53% thought that offshore maritime rates were likely to increase, as opposed to 31% in the previous survey.

Respondents were provided with a list of key challenges facing London in order for it to remain a relevant global maritime centre, and asked to choose the three options which they considered to be most important, in order of priority. The ability to adapt to a fast-changing environment was identified by 23% of respondents – the same as the figure recorded in the previous survey. Next, at 19%, was competitiveness, down from 23% last time, followed by taxation, down from 18% to 15%. 14% of respondents (up from 8% last time) felt that there were not enough shipowners in London, while there was a one percentage-point increase, to 10%, in those citing the number of professionals in the capital as a key challenge. There was also a one percentage-point increase, to 10%, in the numbers who mentioned education as a factor, while 9% (down from 10% previously) cited the need to raise awareness of London’s importance.

On the specific question of Brexit, a quarter of all respondents (up from 18% last time) identified freedom of movement as the most important issue in negotiations for the UK’s exit from the EU. Access to the single market was down from 21% in first place in 2017 to 19% this time. Next in  importance came taxation, VAT and customs duties, up by one percentage-point to 16%, and regulatory issues, up from 10% to 15%. At a lower level, concerns over dispute resolution, competition law, political sanctions, passporting rights and the legal framework were down on the corresponding figures recorded two years ago.

Zeb Bhatty, SPNL Treasurer, says, “Two years is a long time in shipping, and the 24 months which have elapsed since the previous SPNL survey have been no exception. During that time, the market has remained a challenging place in which to operate, but shipping has once again shown its durability and staying power. The markets may never again look as they once did pre-2008, but there are reasons to be optimistic.

“The level of confidence expressed by young shipping professionals working in the London market is higher now than it was two years ago, despite geopolitical crises, overtonnaging, mounting regulation, increased exposure to cyber-attack, Brexit, the US-China trade wars, and a variety of other issues which might have brought a less resilient industry to its knees. 

“Despite everything the world can throw at it, net rate sentiment in the three main tonnage categories remains positive, and the prospect of major investment is higher than at any time in the past six years. In recent months we have seen the first shoots of a recovery. The industry will certainly face some major challenges over the next two years, but it has shown through its willingness to embrace technology and to strike a realistic balance between risk and reward, together with its ability to attract ongoing investment, that it is up for the fight.

“The question is, what is London’s place in all of this? Our respondents unsurprisingly identified the ability to adapt to a fast-changing environment as a key factor in the challenge that London faces to remain a relevant global maritime centre. The ability to compete featured in second place, but was cited by a lower percentage of respondents than two years ago – suggesting that London has improved its competitiveness over the past two years.

“Taxation featured in third place in the list of challenges facing London, with once again a lower percentage of respondents citing it as such. This is an important point, particularly given the uncertainty surrounding the Brexit negotiations. Most of the UK tax rules as they affect shipping are not dependent upon EU membership, and 99% of UK tax benefit reliefs will survive post-Brexit. The UK tonnage tax regime is almost certain to remain in its present form – and may indeed be improved – so, overall, the UK should continue to be a good place from which to conduct shipping business post-Brexit.  

“Brexit, of course, is not so much the elephant in the room as the room itself. Nobody can yet be sure what will happen, and how it will affect London as a shipping centre. But the new generation of young professionals will be central to the fortunes of the shipping sector, and will have a major say in the extent and nature of the role London will play in an industry which continues to evolve in many different ways but remains true to its traditional values.

“A number of our respondents complained that there are not enough shipowners in London. The truth is that there have never been enough shipowners in London when judged against London’s place in the overall scheme of things. That has never been a problem before, and is unlikely to become one now or in the future.”


 

About BDO

The BDO LLP (formerly Moore Stephens LLP) Shipping & Transport team has extensive experience delivering accountancy, tax and advisory services to the sector worldwide. BDO LLP operates in 17 locations across the UK, employing nearly 5,000 people offering tax, audit and assurance, and a range of advisory services.

BDO LLP has underlying revenues of £590m and is the UK member firm of the BDO international network. The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.

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