4 March 2016

The EU is about to crucify the UK’s thriving ports


The UK’s ports industry – which is the second largest in Europe and supports over 300,000 jobs – is a major success story for the UK economy. The sector’s efficiency compares very favourably to international competitors and investment in the industry remains robust at £400 million a year. While many industries struggle with productivity problems, the UK’s ports sector is 30% more productive than the UK economic average.

Regrettably, this industry is set to be subject to damaging European Commission proposals. The EU Parliament will be voting on the Ports Services Regulation next Tuesday, which poses a major threat to the UK’s thriving port industry. Although the regulation’s primary purpose is to improve competitiveness, its imposition is likely to be damaging to the UK.

To understand why, it is important to highlight the difference between UK and European port operating models.

The UK’s port industry is mostly privatised and under a self-regulatory system. 75% of the UK’s largest ports are under private ownership. This is in stark contrast to continental Europe, where around 80% of ports are operated by state or local authorities. These comparatively inefficient ports require vast subsidies – expansions at Rotterdam and Hamburg ports, for example, were constructed with subsidy assistance of 1.1 billion Euros and 788 million euros respectively. However, their counterparts in the UK – ports such as Felixstowe and Southampton – have expanded without a penny of taxpayer subsidy.

The Commission’s proposals are primarily aimed at tackling mainland Europe’s inefficient State run ports. However, the UK’s independent, market-driven ports system risks getting caught in the crossfire of these proposed regulations.

The UK’s ports are currently at liberty to determine all aspects of port services. The Commission’s proposals would change this. A new regulator would be imposed on the UK’s ports industry, which will be able to put controls on things such as price proportionality. This is likely to damage investor confidence – something the UK’s Port Association has been warning about for a long time – and could also pave the way for “regulatory creep.” Further involvement from the European Commission and adjudication from the European Court of Justice are now very real prospects.

The regulations may also include exemptions from state aid rules for some EU ports, which would be grossly unfair on UK ports. Some MEPs in the European Parliament are pushing for generous state aid exemptions to be applied for their local ports.

This case will raise uncomfortable questions about David Cameron’s supposed EU renegotiation. The Prime Minister claimed that his new settlement had “proposed a new mechanism to finally enforce the principle of subsidiarity.” The implementation of these European Commission proposals would drive a coach and horses through this commitment. National oversight of the UK’s ports industry would have been effectively removed against the will of the UK Government.

The UK must now insist that these new regulations do not apply to the UK’s thriving ports industry. At the very least, an amendment must be introduced to unambiguously remove privately financed ports from these potentially damaging proposals.

If the Government fails to achieve this, one of the most successful parts of our economy will suffer.

Daniel Mahoney’s interview on Share Radio on the Ports Services Regulation can be found here.

Daniel Mahoney is Head of Economic Research at the Centre for Policy Studies.