Keep Calm and Carry On – looking for the positives in the marine sector arising out of Brexit
“It’s an ill wind that blows nobody any good”
In the storm of economic uncertainty and political infighting that has followed the outcome of the referendum of the 23rd June, it is now perhaps time to take a step back and look at the potential impact of Brexit upon the marine sector. Economists have been falling over themselves to predict a range of grim scenarios for the impact on UK GDP of the vote, with negative impacts of between 2 and 8% forecasted depending on what trade deal may end up being negotiated with the EU and, crucially, what level of access to the single market is agreed. However in a spirit of tempered optimism (attracting the positive with the positive in the Taoist mode), we thought it we should concentrate in this article on potential developments that may boost the UK marine sector.
Broadly the positives would seem to come in two forms, a) lightening the burden of regulation to free the spirit of enterprise and b) the enhanced ability of the UK government to support the industry financially and fiscally.
In respect of a) above a number of areas could be mentioned, environmental regulation (especially around vessel emissions and ship recycling), health and safety, seafarer’s rights, ports services regulation and the Solvency 11 Directive as it applies to marine insurance. Much has been said about the habit of the UK to gold-plate already stringent EU regulations and the burdens this imposes on businesses. The problem however with this brave new world of a bonfire of red tape is that much of the regulation in the marine sector arises due to international conventions not the EU, e.g. SOLAS, MLC, UNFCCC etc. In addition the UK positions itself as being a progressive, trustworthy and high quality jurisdiction so any race to the bottom in terms of the regulatory environment could be counterproductive, as well as politically very difficult. This is not to say that regulation cannot be simplified and certain areas which have limited applicability to the UK situation pared back (e.g. the port services regulation which was written with EU jurisdictions in mind which have a far greater level of public sector port ownership than the UK).
We believe that there is more potential in b) above. Allied with the fall in Sterling there is much that the government could do to support the sector (and interestingly the new UK cabinet has already made noises about resurrecting some kind of “industrial policy”). Examples might be:-
Enhancing the benefits of the UK tonnage tax regime and including a specific UK flag link – this would both attract more shipmanagement businesses to the UK and increase the tonnage on the UK register (the register itself would need to be re-organised and resourced to deal with the greater workload – so as to be able to compete with the efficient administrations in e.g. Cyprus, IoM or Malta);
Supporting UK shipyards with government backed affordable working capital facilities and refund guarantee programmes – while one does not suppose that it will ever make sense again to build large commercial ocean-going vessels in the UK, the cruise and ferry sector may be a worthwhile target or specialised offshore vessels. The yacht construction sector, one area where the UK retains a critical mass, could benefit highly from a modicum of targeted state support allied with the advantages of a weaker pound; and
Financial services to the shipping sector – over the last few years we have seen the number of UK based financial institutions willing to lend to shipping dwindle and dwindle. This is particularly frustrating when one bears in mind the large taxpayer stakes in certain banks. As was suggested during the previous coalition government, why not use those quasi-public sector institutions to support SMEs in the UK, including in the marine sector? Ironically perhaps Brexit may make such “dirigisme” more feasible.
It is very much early days in the whole debate about how the UK economy will have to re-position itself after Brexit and certainly the marine industries must put themselves forward as key participants in the debate. That debate must be conducted with our greatest national asset, pragmatism, rather than in accordance with the rather tired old ideologies of the political left and right in the UK. We, at WQW, look forward to the challenge of advising our clients over the next few years of structural change as it impacts on maritime law and regulation.
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