the employment implications of the united kingdom's merchant fleet's decline

Pergamon Marine Policy, Vol. 21, No. 2, pp. 267-276, 1997 © 1997 Elsevier Science Ltd. All rights reserved

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The employment implications of the United Kingdom's merchant fleet's decline

James McConvi l le and David Glen

This paper examines the employment implications of the decline in the UK's merchant fleet, particularly over the past decade. Firstly, it is established that the number of UK officers and ratings fell in direct correspondence with the volume of shipping tonnage on the UK shipping register. Secondly, the impacl of the transfer of UK owned tonnage to other flag registers is examined. It is further argued that the decline in sealarer numbers has made the task of projecting future trends more difficult, because the quality ol information concerning their numbers has become less accurate. Lack of information about age profiles means that accurate forecasting has become extremely difficult. As their numbers decline, the problem of accuracy becomes more acute. These problems appear to have been exacerbated by the deregulation process. © 1997 Elsevier Science Ltd

K e y w o r d s - - UK shipping labour, UK seafarers, decline

Professor James McConville is director of the Centre for International Transport Management. Dr David Glen is the LSFT Research Fellow at the Centre. Both are at London Guildhall University, 84 Moorgate, London EC2M 6SQ, UK.

Introduction

The United Kingdom's (UK) shipping industry has lost its absolute supremacy comparatively recently. With it went the illusion of stability and continuity, as well as a labour structure constructed on the basis of an old technology. The continuing decline in the UK fleet is well documented. What is less well known are the implications of this decline for the present and future employment prospects of UK seafarers. This paper reviews the trends in the number and size of the UK owned fleet and then considers the employment implications which have arisen as a consequence. On the way, highlighting one of the side effects of past-government deregulation; the decline in the quality and reliability of employment data in the UK maritime sector.

The decline of the UK fleet

The process of industrial restructuring involves a readjustment of the combinations of inputs used to provide shipping services. Existing relationships between capital and the use of both skilled and non-skilled labour are significantly altered during such times of change. The UK maritime industry is currently in the throes of such a dynamic change. Capital, in this case, and the mobile and productive asset, the ship, is being technologically modified. At the same time there is a transfer out of the UK shipping register to other non-national registers, switching, that is, from the national flag to another in a process known as "flagging-out." A ship registers in a port of a specific country and has the right to fly that country's flag. The UK register refers to vessels registered at a port in Great Britain or Northern Ireland and flying a UK flag, usually the Red Ensign. The term "flagging-out" is used

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Implications o f UK's merchant fleet's decline: J McConville and D Glen

where the flag of a country in which the vessel is registered does not indicate the nationality of the vessel's owners. Another significant trend is the increased internationalisation of the seafaring labour force. This has had serious repercussions for the manpower of not only the UK, but what could be termed the "traditional maritime fleets," with the increased employment of labour from the Far East.

"Flagging out" is not unusual in the international shipping industry; shipowners in the United States started this trend during the inter-war period, registering their vessels in Panama and, latterly, Liberia. What is unusual is the scale and speed with which the UK shipowners have adapted the same strategy. Leaving the U K register was, until a decade or so ago, regarded by the U K ship-owning fraternity as a radical or even unpatriotic step by those who could see no alternative course of action open to them to survive in a very competitive environment. It has now developed into an option open to calculated consideration by virtually all UK shipowners. This change has come about because of the competitive pressure placed on the UK ship-owner during the past decade, combined with a loss of financial incentives for shipping investment. Up until 1984, 100% depreciation allowances against profits could be made if a shipowner invested in new ships and related equipment. This tax relief was abolished in the 1984 budget. 1984 was also the year in which the Isle of Man Register was first established. The trends observed over the past decade clearly reveal that owners have had to adjust to the new commercial realities which they now face by adopting such policies. The ensuing analysis is based on the trends of the UK owned fleet and the employment opportunities which arise therefrom, whether the vessel is registered under the UK flag or is "flagged out".

In the decade 1985 to 1995 the U K owned fleet not only declined but due to "flagging out" underwent a major reorganisation. As Table 1 indicates, the total number of vessels and tonnage contracted by approximately one-third. This contraction was concentrated totally within the UK register where the number of vessels decreased by 56% and the tonnage by 77%, whereas in the non-UK register, that is the flagged-out fleet, there were substantial increases. What is evident is that from 77% of vessels being UK registered, it is now 56% . In tonnage, the change is more dramat ic-- f rom 76% to a mere 26%. Hence, just under half (44%) of vessels owned by U K companies are flagged out and some three-quarters (73%) of dead weight tonnage (DWT). Obviously the larger vessels are in the flagged out fleet.

This restructuring of the fleet lies at the centre of much of the confusion in the minds of both the general public and politicians. There are now three definitions or levels of fleet. The UK registered fleet, sometimes referred to as the mainland fleet, with 365 vessels and 2.9

Table 1. UK owned fleet by percentage of number of vessels and dead weight tonnage 1985-1995 (GRT 100+)

Year (31/12) UK registry Non-UK registry Totals (100%) No. (%) DWT (%) No. (%) DWT (%) No. DWT

1985 77 76 23 23 1 028 20 172 1990 61 26 39 74 785 15 338 1995 56 26 44 73 678 13 362 % change 1985 -27 -77 25 107 34 -34

Source: UK Chamber of Shipping--Fleet Manpower Inquiry.

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Implications of UK's merchant fleet's decline: J McConville and D Glen

million DWT. Its world ranking in tonnage terms is 30th. The second level is the UK and Crown Dependencies, mainly the Isle of Man register with now some 416 vessels and 5.2 million DWT, ranking 23rd in the world. Finally, there is the total UK owned trading fleet constituting some 664 vessels and 12.5 million DWT, standing 7th, in terms of tonnage, in the world ranking. (To add to the confusion, there is also what is termed the British registered countries. This is constituted by the UK, Crown Dependencies and other British dependencies including Hong Kong comprising 474 vessels and 9 138 million DWT.) [1].

A simple model of theflagging-out process

It may be useful to highlight the predictions that Yannopolous [2] derived from a simple general equilibrium model of the flagging-out process. In that model the "international registered flags" are assumed to enjoy lower real labour costs whilst facing the same costs of capital as "established" or "tradit ional" flagged companies. Even allowing for lower levels of efficiency in the international flagged registered companies, Yannopolous demonstrates that the expected response of established flag shipowners to an increase in the international pool of labour, when coupled with a reduction in the supply of capital, is an unambiguous shift of resources to the international registry flags. The logic of this model suggests that all tonnage will eventually flag-out to what can be crudely termed "Flags of Convenience" fleets. Kindleberger disagreed, stating

flags of convenience may be viewed as a transitional step from a highly national regulation of shipping to the adoption of international standards. Moreover, like tax havens, Swiss-bank accounts or the emigration of refugees to escape from persecution at home, they are highly salutary as an escape for the few from intolerable exaction or regulation, but they are dysfunctional from a global point of view when used by large numbers... Like many transitional devices, however, flags of convenience may endure for a protracted period [3].

This procedure, however protracted, is precisely the one which appears to have driven recent changes in the employment of U K seafarers as is outlined below.

The problem of measuring maritime employment

We turn now to the task of relating the decline of the U K fleet and its change in pattern of registration to the change in employment patterns in this sector. Unfortunately, there are some serious problems arising from the deficit in the data collection methods currently employed. These difficulties are well documented. Various House of Commons Committees have all expressed concern over the difficulties in obtaining accurate information covering numbers, age profile, gender and qualifications of UK seafarers. They include the Transport Select Committee's [4] examination of the economic value of the UK Maritime Industry in the late 1980s; the 1992-93 House of Commons Employment Committee Inquiry [5] into maritime skills and employment, and the Defence Select Committee's [6] review of the use of civil transport assets and personnel. The Defence Committee's 1995 report states that "Our proceeding committee repeatedly expressed concern at the decline, commenting in 1991--"it is, in our view, essential that the manpower strength of the U K merchant fleet is

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monitored and we urge the M O D to examine ways of obtaining statistics on this crucial national resource . . . . [6].

The task of obtaining complete and accurate statistics on the employment of U K seafarers remains a difficult one. There are three main sources of information to draw upon. Firstly, the Organisation of Economic Cooperation for Development (OECD) [7] in their annual report on maritime transport devotes a small section to the member countries seafaring personnel, including the UK. Secondly, there is the data from the Department of Transport who no longer provide consistent or regular data, but instead carry out occasional surveys. Finally, there is the U K Chamber of Shipping fleet and manpower annual "Inquiries". This is in fact the principal source of OECD information and is also used by the Department of Transport in many of its reports. It is clear that the key sources of U K data at present are these Chamber of Shipping Inquiries. However, there are a number of shortcomings in the use of Chamber data to measure the employment of seafarers. The first difficulty is that the Chamber only surveys those shipping companies who are members of the Chamber itself. It excludes employment on vessels owned by other companies, in what is termed for historical reasons the "Non- federated sector". A substantial number of U K seafarers also work onboard vessels owned by foreign shipping companies and operating under their flag these are not included by the Chamber 's Inquiries.

The Second difficulty is that the membership of the Chamber is not stable. There is a steady flow of new entries and exits to the Chamber. Changes in the reports on employment could therefore be affected by the change in the type and size of the companies which are at present members of the Chamber itself. A final difficulty is that not all members make returns, or do so consistently year on year. For example, the 1992 Inquiry by the Chamber ~ found that 98.5% of the total of 619 vessels were covered and in 1993, 90% of 586 were included. In the 1995 Inquiry the following comment was made: " In order to estimate the key figure of total U K seafarers - - [an] exercise estimated that the 1994 Chamber Inquiry covered only around half the total - - it would be necessary to know the world population of vessels on which U K seafarers serve.""

1Chamber of Shipping Manpower Inquiry, 31 December 1995, London. 2Chamber of Shipping Manpower Inquiry, 31 December 1992, London 3op cit.

Analysis of employment trends

Despite these limitations, the Chamber Inquiries are the most authoritative available. The picture which they reveal is that of a significant decline in the employment of U K seamen in the past decade and a half. In 1980 the total number of U K seafarers was 57923 of which 28 158 were officers. By late 1995 this had contracted to 16445 active seafarers, of which 7 724 were officers. It would seem appropriate to assume that the employment opportunities in both the U K owned and the U K registered fleet would be better for U K officers than in foreign registers or foreign owned fleets. It does not follow, however, that the opportunities are of the same magnitude within the U K owned but non-UK registered fleet.

Concentrating on the period 1988 to December 1995, coinciding with the Chamber of Shipping Inquiries, we find that there has been a major shift in employment opportunities for seafarers between the UK register (flag) and the non-UK registered fleet. In January 1988, some 83% of those surveyed were employed in vessels operating under the U K flag.

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Implications of UK's merchant fleet's decline." J McConville and D Glen

By December 1995 this had contracted to 53% of a considerably smaller total, hence, throughout the period, between 20 and 45% of UK seafarers were employed in non-UK registered vessels.

Employment of officers

The employment of UK resident officers in non-UK registered vessels is of increasing importance, making up as it does 40% of job opportunities for UK officers in 1995. These trends are highlighted in the Chamber of Shipping Inquiry Data in Table 2.

As can be seen from section A, during the 8-year period covered by the table, there has been a contraction in the number of vessels of 12% and a decline of 36% in UK officers employed, but despite this contraction, the position of UK officers on such ships is still dominant, declining only from 99% in 1988 to 96% in 1995. Whether or not this dominance will continue remains an open question.

Section B shows data on the non-UK registered fleet. Here the number of vessels and the employment opportunity have increased and there has been a 30% increase in the number of UK officer employed (from 2 357 to 3 065). But this increase in absolute number is more than offset by the sharp decline in the proportion of UK officers employed in such vessels; their employment share falling from 80% to 66% by the end of 1995. The share of UK officers in all registers has declined from 93% to 50% over the same period with absolute fall in the number of 2000 or 20%.

The above analysis includes officers in the category that is termed "back-up." These are officers in addition to those who are actually at sea. They are on leave, undergoing education and training, temporarily unfit or transitionally unemployed. The level of "back- up" will be dependent not only on the number of officers required in the fleet, but will also be related to the terms and conditions agreed in their employment contract. An examination of the multiplicity of back-up agreements within the industry would serve only as a digression from the present analysis. What is being argued here is that if the back-up numbers are removed from the calculations, an improved estimate of the actual number of employment positions or opportunities can be made. Table 3 reveals the major differences between employment of UK and non-UK officers over the period 1988-1995. It can be seen that U K officers fared less well. In the U K registered fleet, UK officers including back-up declined by 36%. With non-UK officers there was an increase of 120% . With the removal of back-up U K officers declined by 38% against an increase of 37% for non-UK officers. Despite these changes non-UK officers

Table 2. UK owned UK- and non-UK register (flag) fleet

(A) UK owned UK register (flag) fleet

No. of ships No. of UK officers employed % of UK officers of all officers employed

(B) UK owned non-UK register (flag) Ileel No. of ships No. of UK officers employed % of UK officers of all officers employed

111/1988 3111211995 %Change

424 372 12 7 294 4 659 36

98.7 95.7 - -

289 303 6 2357 3065 30

80.2 66 - -

Source: UK Chamber of Shipping--Fleet Manpower Inquiry.

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Table 3. Percentage change in number of officers on UK and non-OK registered vessels 1988-1995 (1988 = 100)

Register (flag) UK Non-OK Totals Total Officer UK Non-OK UK Non-OK UK Non-UK

With back-up 36 127 30 173 20 166 -10 No back-up - 38 37 - 30 87 35 80 - 25

Source: UK Chamber of Shipping~Fleet Manpower Inquiry,

remain a small percentage given that 96% of all officers in such vessels in 1995 were U K residents.

It is in the non-UK Registered (flagged) fleet that different trends are highlighted. Here, with back-up, both groups have increased their level of participation: the UK officers by 35% with no back-up and by 20% with back-up, whereas non-UK officers experienced a percentage increase of 160% with back-up and 80% with non back-up. Despite the data deficiencies as argued above, it is clear that there is a sharp decline in the number of U K officers employed.

Profile of UK officers

Against this general background, two closely interrelated trends in the structure of the U K officers labour force is evident: The rapid ageing of the work-force and the extremely low level of cadet recruitment. This is highlighted by the officers' age profile. What is remarkable is that the age profile from 1945 until the mid-1980s was consistent. A significant proportion of officers were aged between 21 and 32. Seafaring is traditionally a young-persons occupation. Hill [8] and McConville [9] both provide evidence to support this. In the mid-1980s, a radical change in age profile began. By 1991, 50% of all U K officers were 41 years old or more. The Chambers Inquiry for 1993, 1994 and 1995 all record the average age of officers being approximately 40 years. In other words, the stock of U K officers, the skilled group of the industry, is ageing because of the lack of new entries and the decline of employment opportunities as documented earlier.

Two main factors affecting recruitment are firstly the long-term managerial decisions of employers, and secondly, the way in which employment opportunities and career prospects are perceived by the new entrants. A measure of the decline of cadet numbers and its importance in relation to the stock of officers is given by the ratio of total cadet numbers to total officer numbers [10]. The behaviour of this ratio is shown in Figure 1.

The figure reveals a rapid decline in the ratio which implies given the decline in officer numbers an even greater fall in cadet recruitment. The data measures the ratio of cadet officers per 100 officers. The rapid fall between 1980 and 1985 is clearly revealed with a small recovery from a much smaller base of absolute numbers taking place from 1985 to 1993. Since then there has been a further decline. Hence, in recent years, the ratio stood at approximately 8 cadets per 100 officers, from 18 per 100 at the beginning of the period. It is worth noting that the figures cover only UK resident cadets, both in college and at sea. Approximately 20% of cadets employed at sea or in college under UK and non-UK registered flags are non-UK residents. They come mainly from the traditional source of the Indian sub-continent, and in the last few years increasingly from the Philippines.

272

Figure 1. Ratio of cadets officers 1976-1995.

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Implications of UK's merchant fleet's decline." J McConville and D Glen 20 -

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Trends in the number o f seafarers

Much of the analysis thus far has concentrated solely on U K resident officers using the Chamber of Shipping Inquiry as a source. Trends in total manpower are revealed in Table 4 which is largely taken from the statistical evidence presented by the Depar tment of Transport House of Commons Committee on Transport , 1987 to which has been added additional information relating to the years 1987 and 1992.

The data exposes the sharp decline in the numbers of seafarers working on U K owned vessels. In 1975, approximately 100000 seafarers of all nationalities were employed, falling to a low of 34 000 in 1987 before recovering slightly to 38 400 in 1992. A similar decline was experienced by U K seafarers; their numbers fell f rom 100000 in 1975 (there being no foreign seafarer employment at that time) to 26700 in 1992. Note that both U K officer and rating numbers suffered similar contractions in employment over this period. The final U K element in the table is the data for employment in the "non-federated sector." This peaked in 1973 (not included in the table) at some 13000. For much of the early 1980s it was presumably stable. Post-1985 it contracted to 9000 and in the other two years surveyed, estimates were put at 6800 for 1987 and 7500 for 1992. The other element in the table is foreign seamen employed in U K owned vessels. Historically, these have been ratings, in the main f rom

Table 4. Number of seafarers: selecfed years 1975-1992(000s)

Year 1975 1980 1983 1985 1987 1992

UK officers 34.8 28.2 17.3 14.6 9.6 8.6 Ratings 50.9 a 22.8 19.3 18.3 12.8 10.6 Non-federated sector 13.1 10.4 10.4 9.0 6.8 7.5 Total 98.8 61.4 47.0 41.9 29.2 26.7

Foreign officers . . . . 0.7 1.7 Ratings na 13.5 5.8 3.0 4.2 10.0 Total seafarers b 98.8 74.9 52.8 44.9 34.1 38.4

Source: UK Chamber of Shipping--Fleet Manpower Inquiry and The Decline in UK Registered Merchant Fleets, House of Commons Transport Committee, 1986/87. "Includes foreigners.

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Implications of UK's merchant .)qeet's decline: J McConville and D Glen

the Indian sub-continent. These declined rapidly in the early 1980s to approximately 3 000. Since then there has been a substantial recovery until they equalled the number of U K ratings, (recently they have overtaken them). The other important feature has been the appearance of an increasing number of foreign officers. This is a new phenomenon and at the end of the period they numbered 1 700, hence, in 1992, some 30% of total seafarers and 17% of officers were foreign nationals.

What follows is an at tempt to calculate additional seafarers not included in the Chamber ' s figures. It does not include employment of U K seafarers in non -UK owned, non -UK registered vessels; that is, employment under completely foreign flags.

Table 5 is an at tempt to estimate the actual number of seafarers in the United Kingdom at the end of 1995. The lower half of the table shows elements already discussed derived from the Chamber of Shipping Inquiry (1995). Here U K officers and ratings make up 37% of the total, and foreign officers and ratings a further 32% of the total. The non- federated sector is based on recent estimates and may be a little conservative at 14% of the total. The final estimate is drawn up by the officers union, N U M A S T (1995). They estimate U K officer numbers on non -UK owned vessels at 7 510. This figure is arrived at by assuming membership of the U K union minus the U K Chamber of Shipping figures which provide an estimate of the number of U K officers of 17% sailing under foreign flags. The accuracy of this figure depends on the reliability of N U M A S T membership numbers hence the estimate is of a total number of U K seafarers of 43 146, not including cadets. As one moves up the table the data becomes increasingly an educated guess or heroic estimate rather than an accurate count based on reliable data sources.

Impact on labour

The decline in the U K fleet and the increased use of non-UK flags by U K shipowners has led to a substantial restructuring of the labour force. Under the old system, a large number of experienced semiskilled workers, i.e. the ratings, were under the control of a comparatively small complement of skilled officers. The new system demands a contraction in the number of ratings and a concentration on an increasingly skilled officer group.

In terms of the Yannopolous model outlined earlier, employment opportunit ies have been diminished by the twin processes of a fall in the stock of U K owned vessels on the U K register, and an increase in use of the process of flagging out. The first factor had led to a

Table 5. Estimates of total seafarers in UK and non-UK owned vessels 1995

Non-UK owned vessels 10/2/1995 a Non-federated sector (estimate)

Chamber of Shipping Inquiry 31/12/1995

Not including 795 cadets. aSource: NUMAST.

No. % Seafarers

7510 17 UK officers 3400 8 UK ratings 2 800 6 UK officers

12 363 28 Non-UK ratings 1 789 4 Non-UK officers 8721 20 UK ratings 7 724 17 UK officers

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permanent reduction in the number of posts available for U K officers and ratings in UK owned ships. The second change has reinforced this trend by allowing owners to make increased use of the international pool of labour for both officers and crews to operate their non-UK registered vessels. In the language of economics, the first factor is an output or scale effect brought about by changes in the design volume of output and the second is the effect of a substitution process reducing dependency on what is seen as a relatively expensive factor input and replacing it with a cheaper alternative.

Conclusion

This paper has highlighted the recent trends in employment patterns of UK seafarers, particularly officers, over the past decade. It has been shown that there is a very strong correlation between the decline, in absolute numbers, of UK-owned vessels and the employment level of U K seafarers, as would be expected. In addition, U K shipowners have begun to accept that an increasingly competitive shipping environment implies a need to reduce the direct operating costs of their vessels. This has led many UK shipowners to "flag- ou t" their vessels and take advantage of the greater flexibility of employment that this gives them. We have highlighted the significant increase in employment of non-UK personnel. This has brought about a precedent which has emphasised the decline in the job opportunities for UK seafarers.

The rapid decline of employment in the 1980s has led to a corresponding fall in the number of officer cadets, and a significant upward shift in the age profile of U K officers. This increase in the average age is of concern because of the fact that accurate information about the total stock of UK officers does not currently exist. If the "missing officers" have significantly lower average age than those reported in the Chamber Inquiries, the number of officers available to the industry may be sufficient to meet likely demand levels. But if the age profile of the "missing officers" is similar to those already surveyed, then in a few years time there will be a sharp reduction in the number of qualified UK officers with an inadequate replacement coming through from cadets.

If this possibility materialises there will be more pressure on U K shipowners either to raise the proport ion of flags registered under non-UK registers (flags), or for owners to put pressure on the government perhaps to relax employment conditions for U K flag operators. Neither of these is an encouraging prospect. What emerges very clearly from this paper, is perhaps an unexpected consequence of deregulation, a lesson which goes much wider than the case of shipping. It is clear that the deregulation process has made the U K government 's and indeed the shipping-industry's lives harder in respect of providing a consistent planning framework for the retention and training of personnel. Deregulation has led to a degradation in the accuracy and quality of information about staffing and employment in the shipping sector, and without a better picture of the present number of officers and cadets actively employed in UK-owned vessels, it is difficult to assess whether there will be a shortfall in supply of qualified seafarers in the near future.

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Implications of UK's merchant fleet's decline. J McConville and D Glen

References

1. Chamber of Shipping, Economic and Statistical Review, 1st Quarter, 1996. Chamber of Shipping, London, 1996.

2. Yannopolous, G. N. N., The economics of flagging out. Journal of Transport Economics and Policy, 1988, 22(2), 197-208.

3. Kindleberger, C. P., Multinational ownership of shipping activities. The World Economy, 1985, 8, 250- 251.

4. House of Commons Select Committee on Transport 1986-87, Session Decline in the UK Registered

Merchant Fleet: 1987. HMSO, London, 1987.

5. House of Commons, 3rd Report from the Employment Committee, The Future of Maritime Skills and Employment in the United Kingdom, Session 1992/93, HC 924 Evidence. HMSO, London, 1993, pp. 111-112.

6. House of Commons, 6th Report from the Defence Committee, 1995 Defence Use of Civil Transport Assets and Personnel Session 1994/95, HC 86. HMSO, London, 1995.

7. OECD, Maritime Transport. HMSO, London, annual.

8. Hill, J. M., The Seafaring Career. Centre for Applied Social Research, Tavistick Institute, London, 1972.

9. McConville, J., The Shipping Industry in the United Kingdom. Research series report no. 26., International Institute for Labour Studies, Geneva, 1977.

10. McConville, J., United Kingdom Seafarers: Their Employment Potential. The Marine Society, London, 1995.

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the employment implications of the united kingdom's merchant fleet's decline

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