Anindependentreviewofthe economicrequirementfor trainedseafarersintheUK

FinalReporttoDfTandReviewPanel
December2011

Contents
Glossaryofkeyterms ............................................................................................................................... 4 1 2 2.1 2.2 2.3 2.4 2.5 3 3.1 3.2 3.3 3.4 3.5 3.6 4 4.1 4.2 4.3 4.4 4.5 5 5.1 5.2 5.3 5.4 5.5 6 6.1 6.2 6.3 6.4 7 7.1 7.2 7.3 7.4 7.5 7.6 8 8.1 Executivesummary ..................................................................................................................... 6 Introduction ............................................................................................................................. 18 Background.......................................................................................................................... 18 ProjectScope ....................................................................................................................... 18 Purposeofthisdocument ..................................................................................................... 18 Structureofthisdocument ................................................................................................... 19 Stakeholders ........................................................................................................................ 19 Methodology............................................................................................................................ 21 Overview ............................................................................................................................. 21 PreparatoryStage ................................................................................................................ 21 Stage1:InitialConsultationsandStudyDesign ....................................................................... 21 Stage2PrimaryDataCollection .......................................................................................... 21 Stage3:EconomicModelling................................................................................................. 22 Stage4Synthesis ............................................................................................................... 22 Reviewcontext ......................................................................................................................... 23 TheUKMaritimeSector ........................................................................................................ 23 Seafarersandexseafarers .................................................................................................... 26 Seafarertraining .................................................................................................................. 28 SupportforseafarertrainingintheUK ................................................................................... 31 Conclusion ........................................................................................................................... 35 Keythemesemergingfromtheliteraturereview ........................................................................ 37 Context ............................................................................................................................... 37 ThedeclineinthenumberofUKseafarers ............................................................................. 38 Therelativeattractivenessofonshoreworktooffshorework .................................................. 41 Thecasefortrainedseafarersfromdevelopedmarkets .......................................................... 42 Conclusion ........................................................................................................................... 42 Internationalcomparison .......................................................................................................... 44 ComparisonswithtraditionalEuropeanrivals ......................................................................... 44 Comparisonwithemergingrivals ........................................................................................... 47 Experienceofhistoricrivals ................................................................................................... 50 Conclusion ........................................................................................................................... 51 StakeholderConsultation .......................................................................................................... 52 TheUKmaritimesector ........................................................................................................ 53 Demandandsupplyofseafarersandexseafarers .................................................................. 53 ExperiencesofSMarTandothertrainingschemes .................................................................. 56 ThecaseforhavingUKseafarersandexseafarersoverothernationalities ............................... 60 AlternativestoSMarT ........................................................................................................... 61 Conclusion ........................................................................................................................... 62 Seafarerdemandandsupplyforecasts ....................................................................................... 63 Recenttrendsandthestartingpointfordemandandsupply ................................................... 63

8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 9 9.1 9.2 9.3 9.4 9.5 9.6 10 10.1 10.2 10.3 10.4

Demandintheshippingsectoroverthedecadeahead............................................................ 64 Seafarersupplyandtheshippingindustryskillsgap ............................................................. 67 ExseafarersacrossthewiderUKmaritimesector ................................................................... 67 Overviewofsupplyanddemand:centralforecast................................................................... 69 Alternativedemandandsupplyassumptions.......................................................................... 70 Thepotentialroleforforeignseafarers .................................................................................. 74 AssumingSMarTdiscontinuation ........................................................................................... 75 Conclusion ........................................................................................................................... 75 TherationaleforcontinuedsupportforseafarertrainingintheUK .............................................. 77 Theoriginalrationaleforthepolicyintervention .................................................................... 77 Wasthepolicyinterventioneffective? ................................................................................... 80 Isthereacontinuingrationaleforpolicyintervention?............................................................ 82 Comparisonfromothersectors ............................................................................................. 84 Criteriaforassessingalternatives .......................................................................................... 88 Conclusion ........................................................................................................................... 89 Recommendations .................................................................................................................... 90 Options ............................................................................................................................... 90 LonglistOptionevaluation ................................................................................................... 94 OptionsAnalysis ................................................................................................................... 98 Conclusionandnextsteps ................................................................................................... 101

AnnexeABibliography ....................................................................................................................... 103 AnnexeBDetailofthedemandandsupplyforecasts ........................................................................... 104 12.1 12.2 12.3 12.4 12.5 12.6 12.7 EstimatingUKshippingindustryemploymentintherecentpast ............................................ 104 Estimatingthestartingpointfordemandandsupplyprojections ........................................... 106 Projectingdemandoverthecomingdecade ......................................................................... 107 AddingnonUKsupplytoarriveattheshippingindustryskillsgap....................................... 113 EmploymentofexseafarersacrossthewiderUKmaritimesector ......................................... 114 Projectingdemandandsupplyforexseafarersthroughto2021 ............................................ 116 Overviewofsupplyanddemand:centralforecast................................................................. 118

Glossaryofkeyterms
Additionality Cadets CertificateofCompetecy (CoC) Theextenttowhichneweconomicactivity(measuredasjobs,incomeand production)addstoexistingeconomicactivityratherthanreplacesit. Atraineeofficer.Thisreportusesthetermcadetandtrainee interchangeably. IntheUK,thesearecertificatesissuedtoseafarersfollowingasuccessful assessmentandexamination.Therequiredstandardsofcompetencearesetout bytheInternationalConventiononStandardsofTraining,Certificationand WatchkeepingforSeafarers1978asamendedanditsassociatedcode. IntheUK,thesearecertificatesissuedbytheMCAtoseafarersofnonUK countriestoallowthemtoworkasOfficersonUKregisteredships.TheMCA checksthatapplicantsforCECsarequalifiedtothesamestandardsasholdersof UKCoCs. Asituationinwhichacountry,individual,companyorregioncanproducea goodataloweropportunitycostthanacompetitor. Ahypotheticalmeasureofwhatwouldhavehappenedintheabsenceofa policyinterventionorevent. Ameasureofhowmuchweightashipcansafelycarry.Itisthesumofthe weightsofcargo,fuel,freshwater,ballastwater,provisions,passengers,and crew.Itisexpressedinlongtonnesof2,240pounds(1,016kilograms). Therequirementbytheshippingindustryforindividualstoworkatsea.Thiscan bedisaggregatedtofocusondemandforratings,officersandUK/nonUK seafarers. Therequirementbythemaritimeclusterforindividualswithaseafaring background.ThiscanbedisaggregatedtofocusonUK/nonUKexseafarers. Thesearetheinitialandimmediateeconomicactivitiesgeneratedbyan industry,sector,projectordevelopment.Directimpactsareoftenreferredtoas firstroundimpactsastheycoincidewiththefirstroundofspendinginthe economy. Individualswhopreviouslyworkedatsea,butnowworkoutsidetheshipping sector(eitherinthemaritimeclusterorelsewhere) Registeringashipinadifferentsovereignstatefromwhichtheshipowneris based(alsoreferredtoasanOpenRegister). Internationallawrequiresthateverymerchantshipberegisteredinacountry. Thecountryinwhichashipisregisterediscalleditsflagstate.Ashipoperates underthelawsofitsflagstate. Anexampleofmarketfailure,whereanindividual,oragroupofindividuals, consumeorpaylessthantheirfairshareofthecostofacommonresource. Morecommonlyknownasthefreeriderproblemineconomics. Thesearethechangesinemployment,incomeandproductionlevelsin associatedindustriesthatsupplyinputsintotheindustrywherethefirstround spendinghasoccurred. Thesearetheeffectsofspendingbyhouseholdsintheoveralleconomyasa resultofdirectandindirecteffectsfromthegeneratedeconomyactivityinthe originalandassociatedindustries. TheUnitedNationsspecialisedagencywithresponsibilityforthesafetyand securityofshippingandthepreventionofmarinepollutionbyships. Thepartofthemaritimesectorthatisbasedonshoreandincludes,among othersectors,portservices,financialandlegalservicesrelatedtomaritime activities,trainingandresearchanddevelopment.Thisisalsoknownasthe maritimeservicessector. Theshippingsectorandmaritimeclustercombined. Wheretheoperationofafreemarketdoesnotresultintheoptimalallocation ofresources. TheUKagencyresponsibleforimplementingtheGovernment'smaritimesafety

CertificateofEquivalent Competency(CEC)

Comparativeadvantage Counterfactual DeadweightTonnage(DwT)

Demandforseafarers

Demandforexseafarers Directeffects

Exseafarer FlagofConvenience Flagstate

Freeriderissue Indirecteffects

Inducedeffects

InternationalMaritime Organisation(IMO) Maritimecluster

Maritimesector Marketfailure MaritimeandCoastguard

Agency(MCA) MerchantNavy Multipliers Officer Offshore Onshore Opportunitycost Rating Seafarer

policyandpreventingthelossoflifeonthecoastandatsea. ThenamegiventotheUKscommercialshippingsector. Therelationshipbetweenaparticulareconomicactivityandthetotaladditional economyactivityitgenerates. Membersofshipsmanagement.Theytypicallyworkintwodepartments navigation(alsoknownasdeck)andengineering. Activitiescarriedoutatsea. Activitiesrelatedtothemaritimesectorcarriedoutonland. Thecostofthenextbestalternativenotchosen(forgone). Membersofshipscrewsthatassistofficersacrossalldepartments. Individualswhopredominatelyworkatsea.Theyaretypicallyfoundinthe shipping,energyandleisureshippingsegmentsofthemaritimesector. Thepartofthemaritimesectorthatisconcernedwiththecarriageofgoodsand passengers,aswellasthecharteringofvessels. Basicqualificationstandardsformasters,officersandwatchpersonnelon merchantshipsasrequiredbytheInternationalMaritimeOrganisationthrough theSTCWConvention. AUKGovernmentschemethatgivesfinancialassistancetorecognisedtraining providers(i.e.shippingcompaniesandothersponsoringorganisations) providingmerchantnavytraining. Analternativetocorporationtax,wherebytaxisleviedonafixednotional profit,calculatedbyreferencetothenettonnageofships,insteadoftheactual profitsearnedfromshippingactivities.

Shippingsector StandardsofTraining, Certificationand Watchkeeping(STCW) SupportforMaritime Training(SMarT) TonnageTax

Executivesummary
ThemaritimesectorisamajorcontributortotheUKseconomyandofstrategic importance.Aswellasthemoreobviousatseaoroffshoreactivities(the shippingsector)inwhichseafarerswork,thesectoralsoconsistsofasizeable onshorecomponent(themaritimecluster)whichrelies,tosomeextent,ona steadysupplyofexseafarerstofunctioneffectively. Themaritimesectorisdifferent,bywayofcertaindistinctcharacteristics;chief amongsttheseisthehighlymobilenatureofbothlabourandshipping companies.Sincetheshippingsectorandmaritimeclusterarecloselylinked, changestothepolicyenvironmentinonearelikelytohaveconsequencesonthe other,andultimatelythewiderUKeconomy. Giventheimportanceofthesector,theUKGovernmentprovidesapackageof supportmechanisms.Presently,oneofthekeyshippingindustrysupport mechanismstheGovernmentprovidesisasubsidyforseafarertrainingknown asSMarT.SMarTisworth12millionin2011/12andcoversupto40percentof alltrainingcosts.Itprovidesanincentiveforshippingcompaniestotrainnew cadetsonboardshipsastheyarecompensated,inpart,forthecosts.Upon completionofthetraining,theseseafarersarefreetomovetoanothercompany whichbenefitsfromtheirskillsbuthasnotcontributedtotheirtraining. StakeholdersfromtheshippingsectorhaveindicatedastrongpreferenceforUK seafarersattheofficerlevel,andthereisalsoastrongpreferenceforUKex seafarersinthemaritimecluster.Thesepreferencesdonotnecessarilyextendto seafarersattheratinglevel,wherethereappearstobeagreaterdegreeof substitutabilitywithnonUKlabour. Projectionsmadeaspartofthisstudyshowagapbetweenthedemandfor,and supplyof,trainedUKseafarers.Theperiod2016to2019willseethisgappeak. By2021thegapisexpectedtobec.3,500inthecaseofdeckandengineofficers atsea,andover1,600inthecaseofexseafarers(mainlyexofficers)inthe maritimecluster.Thoseshortfallsareequivalentto10percentand9percent, respectively,oftotalprojecteddemandinthosesectors.Thesegapswouldbe evengreaterifSMarTwerediscontinuedwithoutaneffectivereplacement. ThedemandgapforUKseafarersisunlikelytobefilledbymarketforcesalone, perhapsforcingshippingcompaniestoadoptsecondbestsolutionsintheform ofnonUKofficersandtechnicalratings.Moreover,alackoftrainedUKseafarers willresultinareductioninUKexseafarersavailabletothemaritimecluster, reducingitscompetitivenessovertime.Logically,onthisbasis,thereappearsto beacontinuingrationaleforapolicyinterventiontosupportmaritimetraining. Basedontheevidenceavailable,SMarThashadapositiveimpactinincreasing thenumberofUKcadetswhowillbecomeofficersandgoontobenefittheUK economythroughouttheircareersatseaandelsewhere.Lastyear(2010),200 additionalcadetsenteredtheindustrythroughSMarT(abovethoseenteringasa resultofTonnageTaxrequirements).AseachadditionalUKtrainedseafarerisin demonstrabledemandfromshippingcompaniesandthewiderMaritimeCluster andtheyarelikelytogeneratemoreoutputthantheaverageworkerintheUK, thereislikelytobeapositivereturn,andthusValueforMoney,toGovernment frominvestinginSMarTnotleastinpromotinggrowththroughjobsforUK residents. Havingreviewedpotentialoptionsonanumberofcriteria,aswellasforValue forMoney,webelievetherearethreeviableoptionsneedingfurther

60SecondSummary

considerationbythepanelandtheMinister;acontinuationofSMarT;the introductionofalevyandgrantsystem;oranapprenticeshipmodel. TheseviewsrepresentDeloitteandOxfordEconomicsconclusionsonthebasis oftheavailableevidenceandwithintheremitofthestudy. [continuedoverleaf]

Background TheMinisterforShippingwishestoconductanindependentassessmentofthe economicrequirementforseafarertrainingintheUK. Thisreportpresentstheindependentfindingsfromtheresearch,tobereviewed bytheindustrypanel,beforerecommendationsforfutureactionaremadeto theMinisterforShipping. Method ForthepurposesofthisstudythedemandforseafarersreferstoUKbased shippingcompanies'needforseafarersworkingatsea.Demandforonshore seafarersor,moreprecisely,exseafarers,referstoUKbasedshipping companies'needforexseafarersanddemandinotherUKbasedorganisations whereanexseafarerisrequired.SupplyreferstothestockofUKtrained seafarers. InordertoassesstherequirementforUKseafarersandexseafarers;assessthe efficiencyandeffectivenessofasistraining;anddevelopoptionsforfuture fundingfortraining,thefollowingmethodologyhasbeendeployed: Aliteraturereviewofacademicarticles,policydocumentsandpress articles; Astakeholderconsultationconsistingofonetoonediscussionswith panelmembers,anindustryworkshopandanonlinesurvey; Developingabespokeeconomicmodeltoprovideaviewonfuture realisedandderiveddemandfortrainedseafarersandthefuturesupply ofUKtrainedseafarers;and Asynthesisoftheabovetoanswerthekeyresearchquestionsto provideanindependentviewonthewhetherthereisacontinuedneed forGovernmentinterventionand,ifso,howisthemostefficientand effectivewayforthistobedone.

Maritime:auniquesector? Analysisconfirmsthatseafarertrainingisaverycomplexissue:bothintermsof definingtheparametersoftheproblemandbecauseoftheunique characteristicsofthemaritimesector. Themaritimesectordifferstoothersectorsintheeconomyinanumberofways. Namely: Acriticalroleinfacilitatingtrade:themaritimesectortransportsover 90percentoftheUKsvisibleimportsandexports. Highlevelsoflabourmobility:thelabourmarketforseafarersis consideredglobal,meaningthatmanyseafarers(especiallyforthose fromdevelopedcountries)areabletoeasilymovebetween jurisdictions. Highmobilityofshippingcompaniesandothermaritimecompanies: especiallyforshipping,theswitchingcostsofflaggingout(bothin financialtermsandadministrativeterms)issaidtobelow,meaning theyoftenfaceincentivestoexploitarbitrageopportunitiesandre locatetothemostfavourablelocation. Maritimelegacy:theUKisrecognisedashavingaworldclass maritimeclusterderivingfromhistoricallegacyandongoing concentrationofskillsandexpertise.

Lengthandnatureoftraining:thetrainingrequiredtobecomea certificatedseafarercombineselementsofacademicandvocational study.Currently,cadetsfinishtraining/qualifyingalmostdebtfree,but similartothemedicalandlegalprofessions,itcantakeaprolonged periodoftimetoachieveseniorofficerstatus.Newlyqualifiedofficers needaminimumof18monthsseaserviceandapproximately6months atcollegetogainaChiefMateorSecondEngineerCoC.Actual promotiondependsonemploymentpotentialinthevariouscompanies.

Seafarertraining ThebasicstructureforseafaringtrainingintheUKfollowsanapprenticeship styleformat.Whileseafarersaretrainedinatertiarycapacity,shipping companiesplayasignificantroleduetooffshoretrainingrequirements. ThemodernofficertrainingprogrammeintheUKinvolvesdevelopingamastery acrossarangeofseafaringskillsincludingnavigation,seamanshipandship stability,aswellasothermoreobviouslytransferableskillssuchasIT,business andlaw,engineeringandelectrics.Therearecertainminimumacademicand physicalrequirementstobecomeanofficer,andthelengthoftimetoachieve thestatusofJuniorOfficerisnormallythreeyears. UnlikeOfficertraining,therearenominimumacademicqualificationsforRatings qualifications,althoughpotentialRatingsmustalsomeetmedicalandeyesight requirements.StudentsstudyingtobecomeRatingsmustalsoundertake compulsorytrainingandspendtimeatsea. AllcountrieswhicharesignatorytoSTCWandprovidetrainingleadingtoOfficer oftheWatchmustincorporateseaserviceintheirtraininginordertoissuea STCWCoC.TheUKdoesdifferinthewaytrainingisprovidedhowever.For example,theDanishandDutchfrontloadtheirtrainingtostudentsofamuch youngerageaspartoftheirtertiary/furthereducation.TheUKtraining programmeisregardedasmarginallysuperiortootherEuropeanschemes. Thecostofseafarertrainingislargelybornebyshippingcompanies(although thereareasmallnumberofcharitablesponsorshipsavailable),withassistance fromGovernment.Inthissense,fundingforseafarertrainingdifferstomany otherindustriesintheUKinthatemployersreceivesupportfortraining [prospective]employees.Manyotherindustriesdonotreceivethiskindof support,whilstothersinthenationalinterestonlyreceivecompletesupportat givenstages.Fromoneextremetotheother,examplesoftrainingsupport include: Theprofessionalservicesindustrywhere,onceemployed,professional qualificationsarepaidforbythefirm,andindividualsmaybepaidless toreflectthiscontribution; Theconstructionindustry,whichfundstrainingthroughalevyonfirms inproportiontosize; TheNationalHealthService,whereinsomeinstancesdayreleaseand fundingofparttimedegreesiscoveredbytheGovernment;and Militarytraining,whichiswhollyfundedbyGovernment.

CurrentMarketcharacteristics Asnotedintheacademicliterature,marketforceshavechangedthenatureof shippingandthedemandforandsupplyofseafarers.Ourconsultationsand surveysuggestedthatthatthereisnotaglobalshortageofseafarersin quantitativetermsperse,ratherashortageofqualityseafarers(andcertain specialistskills).Insomecases,nationalityisaproxyforhighquality,withUK seafarersconsideredinhighregard.

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Demand Forratings,thereisatendencytodemandandemploycheaperforeignlabour whichisingreaterabundancefromemergingmarkets.Forofficers,however, thereappearstobeapreferenceforUKseafarersduetoqualificationlevels, experience,andalsotheeaseinemployingUKresidents. Theacademicliteraturesuggeststhatcompaniesarecontinuingtotrainand recruitalargenumberofBritishseafarersintohighlyspecialisedandtechnical rolesduetotheconfidenceplacedbythesecompaniesontheUKseafarer trainingprogramme,certificationproceduresandproventrackrecordofBritish seafarers. Supply Attractingthenextgenerationofseafarersisrecognisedasachallengebythe relevantauthorities. TheEUhasidentifiedthemaritimesectorasanareaitwishestoencourageand remainstronginforacombinationofeconomic,environmentalandnational interests,andworkisalreadyunderwayfromUKstakeholderstoensurethatthe industryhasareadysupplyofpotentialentrants(fundingissues notwithstanding).EUMaritimeStateAidGuidelinesacknowledgesthisand allowsforanexceptiontothegeneralruleswhichdiscouragestateaid. Finally,whileSMarTaimstoprovidefundingtoshippingcompanieswiththeaim ofincreasingtheintakeoftraineesintotheindustry,suchapolicywillnot achieveitsfullpotentialifthereisalackofdemandfromshippingcompaniesfor UKseafarersduetocostconsiderations. Afreeriderissue Thedirectcostsoftrainingarecurrentlybornejointlybyshippingcompaniesand Government,andthereissomeevidenceofafreeriderissue. Seafarers,exseafarers,shippingcompaniesandGovernmenteachbenefitfrom thisfundingindifferentways.Itreducescostsatthepointoftrainingfor seafarers,exseafarersandshippingcompanies,andfortheGovernmentthe contributionoftheaforementionedthenconferswiderbenefitsfortheUK economy. However,exseafarerscontributesignificantlyinanonshorecapacityforthird partieswhomdonotneedtofundtrainingbutnonethelessbenefitfromthe skillsthataccruedirectlyfromSMarTandindirectlythroughtimeatsea(though thirdpartieswillstillhavetofundseparatetrainingtoreadyseafarersforon shoreroles) Recentevidencefromthecoauthorsofthisstudy,OxfordEconomics,suggests thattheonshoreelementofthemaritimeindustrycontributessignificantlyto theUKseconomywithemployerspreferringexseafarersforaround16,000 shorebasedjobs(andforhalfofthese,seafaringexperienceisdeemed essential).Thustheknockonbenefitstothirdpartiesaredeemedtobe significant. Itcanbeargued,thattheGovernmentissubsidisingtrainingtocompensate shippingcompaniesforthefreeridingofother,related,thirdparties.Thesethird partiesthencontributetotheeconomy,howeverinotherwordsthereis paybacktotheinvestmentbyGovernment.

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 Tacklingtheissue Thedrivertreebelowintroducesthequestionsposedandansweredin consideringafuturecourseofactionfortheGovernment.

HasSMarTbeeneffective? TheactualimpactofSMarTin2009isnotthesimpledifferencebetweenthe450 cadettraineesin1998and925cadettraineesin2009(beforeandafterthe introductionofSMarT).Thisisbecauseitishighlylikelythatintheabsenceof SMarT,thenumberofnewcadetsbeingtrainedwouldnothaveremainedstatic at450eachyear. Thenumberofcadetswillhavebeeninfluencedgreatlybyotherfactors includingtheintroductionofthetonnagetaxin2000whichitselfincludesan obligationthatparticipatingcompaniesmusttrainatleastoneofficertraineefor each15officerpostsinexistenceonthevesselsthatitoperates. OurconsultationsshowthattheindustryfirmlybelievesthatSMarThasbeen effectiveinincreasingthenumberofcadetsandthereforetrainedUKseafarers from2000levels. Ourbestestimateisthatin2010c.200additionalcadetswereintroducedinto theindustryasaresultofSMarTfundingbeyondthe650fundedbySMarTbut asaresultoftonnagetaxrequirements. With200additionalseafarersenteringserviceeachyearthereturnstoUKplcin termsoftheproductivitydifferentialwiththewiderUKeconomy(c.14,500per annumintodaysprices)over20yearsisoftheorderof58million.Against coststoGovernmentof12millionperannumthisrepresentsacost:benefit ratioof4.8.Whenaccountingorthe18millioncontributionofshipping companies,atotalcostof30millionperannumreducesthisbenefit:costratio to1.9. Insummary,thisreviewsuggeststhatSMarThasbeeneffective.
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IstherelikelytobedemandforUKseafarersinfuture? ForecastsmadebyOxfordEconomicssuggestthattherewillcontinuetobeagap betweenthedemandfortrainedUKseafarers/exseafarersandthesupplyof trainedUKseafarers(whereseafarersinthiscasereferstoofficers). Basedoncertainassumptions,agapisforecasttodevelopbetweendemandfor, andsupplyof,trainedUKseafarers,peakinginthe20162019period.By2021 thisgapwillhavereducedslightlytoc.3,500inthecaseofdeckandengine officersatseaandover1,600inthecaseofexseafarers(mainlyexofficers)in themaritimecluster.Thoseshortfallsareequivalentto10percentand9per cent,respectively,oftotalprojecteddemandinthosesectors Doesmarketfailurepersist? Inothermarkets,economictheorypredictsthatthegapmentionedabove would,overtime,closeashigherdemandwillleadtoincreasedwagesfor seafarersandexseafarers,whichinturnwouldincentivisemorestudentsto trainasseafarers,increasingsupply. However,thismaynotoccurinthecaseofseafaringduetothenatureoftheUK trainingprogramme.Theatseacomponentoftrainingwillmeanthatevenif thereisanincreaseinthenumberofstudentswishingtocompletecadet training,unlessshippingcompaniesarepreparedtoaccommodatethese increasednumbersthetotalsupplyoftrainedseafarerswillnotincrease. Onthisbasis,itispossibletoconclude: thewholedemandgapforUKseafarersisunlikelytobefilledbymarket forcesalone; rather,shippingcompaniesarelikelytoreacttoashortfallinsupplyof UKseafarersbyturningtosecondbestsolutionsintheformofnonUK officersandtechnicalratings;and accordingly,themarketfailurefortrainedUKseafarersisexpectedto persistandrequirescontinuedintervention.

Whatarethepolicyoptionsforintervention? Eachoftheoptionsoutlinedbelowarepredicatedonthefollowingthree assumptions,whichhavebeenmadetakingintoaccounttheevidencereceived andanalysisconducted: ShippingcompanieshaveapreferenceforUKtrainedseafarers. Companiesinthemaritimeclusterhaveanevenstrongerpreferencefor UKtrainedexseafarers. By2021,therewillbegapbetweendemandforandsupplyofUK trainedseafarersthat,ifleftunfilled,willleadtoadeclineinavailable numberofexseafarersforthemaritimeclusterreducingits competitivenessandcontributiontotheUKseconomy.

Onthebasistherewouldappeartobethreecategoriesofoptionsavailableto policymakers.Thesearesummarisedbelow.

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 Onthebasisoftheresearch,eachoftheaboveoptionshasbeenarbitrarilyscoredonthe followingmeasurestoprovideanoverallindicationofsuitability: ThecostoftheremedytoGovernment:The(broadbrush)financialcostofthe remedy. Effectiveness:Theextenttowhichremediesarelikelytobeeffectivein eliminatingthemarketfailure. Longrunsustainability: Whetherthisremedyislikelytobeviableinthelongrun (10years) Acceptability:Whobearsthefinancialcostoftheremedyandwhetheritwill commandindustrywidesupport. Easeofimplementation:Howquicklytheremedycouldbeimplementedandthe extenttowhichitdoesnotdisruptexistingschemes. Efficiency:Whetherthisremedymightrepresentthebestuseofresources. Detailedscoringfortheabovemeasurescanbeseeninthemainbodyofthedocument. Thefigurebelowsummarisesthedifferentoptionsalongthesimplifiedaxesof effectiveness(includinglongtermsustainability)anddeliverability(intermsofcost,ease ofimplementationandacceptability).

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 TheLongListSummary Thefigurebelowsummarisesthedifferentoptionsalongthesimplifiedaxesof effectiveness(includinglongtermsustainability)anddeliverability(intermsofcost,ease ofimplementationandacceptability).

Key: 1acreatingarequirementforcadetstoworkfortheshippingcompanytheyservedwithinasupernumerary capacitywith 1bgreaterrelianceonotherexistingfundingschemesfortraining 1crequiringindividualstudentstobearthefullcostoftraining 2aimposinganobligationonshippingcompaniestotrainUKseafarers 2bintroducinganindustrywidelevyandgrantsystemtofundseafarertraining 2cintroducingtaxbreaksfortraining 2dmovingtowardsanapprenticeshipbasedmodelforUKseafarertraining 2efundamentallyrevisingthestructureofUKseafarertraining 3a2010SMarT 3b2011SMarT Note:thepositioningoftheoptionbubblesisapproximateandillustrative

BasedonDeloittesandOEsunderstandingofthesector,individually,noneofthe identifiedoptionsisclearlyintheupperrightquadrantandscoreshighlyonboth effectivenessanddeliverability. Nonetheless,theclosestoptionstothisare2011SMarT(i.e.thecurrentprovision),an industrywidelevyandgrantsystem,anapprenticeshipbasedmodel,2010SMarT,and requiringstudentstofundthecostoftraining. Thesefiveoptionshavebeenshortlistedandareanalysedingreaterdepthbelow,with respecttobenefits,costsandvalueformoney. Attheoppositeendofthescale,giventhecurrentfiscalsituationandHMTreasurys positionontaxreceipts,changestothetaxregimefortrainingpurposesareunlikelytobe deliverableinpractice.

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TheShortList Theanalysisbelowconsiderseachofthefiveoptionsintermsoftotalcosts,coststo Government,benefitsandthusbenefit:costratiosasameansofcomparingeachoption. Benefitassumptions Asimplemeansofcalculatingtheeconomicbenefitofaseafarer,andalsoexseafarers, trainedthroughSMarTistoassesstheproductivitydifferentialbetweentheaverage workerinthemaritimesectorandtheUKproductivityaverageforallworkers. Bythismethod,foreachyearinworkaSMarTbeneficiarygeneratesapproximately 14,500inadditionaloutputrelativetotheoutputofaUKworkerdisplayingaverage productivity. ByisolatingtheneteffectsofSMarTintermsofnumbersofcadetstrained,itispossible tocalculatethenetbenefitstotheUKeconomyoveraworkinglife(assumingthatthis productivitydifferentialholdsandaworkinglifeinthisrespectaverages20yearsabove the810yearsspentatseabutlessthanastandardworkinglifeofover40years) TheseareusedtogiveanindicationofbenefitsarisingfromSMarTand,inconjunction withcosts,andindicationofValueforMoneyfortheindependentpanelandShipping Ministertobasesubsequentanalysisanddecisionson.Fullresultsarepresentedinthe mainbodyoftheanalysis(page102).

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 Studentbearingfullcostoftraining

Thecostsofthisoptionarelikelytobesignificant,bothintermsofwhatstudentsare requiredtopayaswellaspotentialcoststoGovernmentarisingfromnoncollectionas manyseafarersareatseaand,asresultnondomiciled,forextendedperiods,theyarenot subjecttothetaxsystemandcollectionthroughPAYEmightnotbefeasible. However,themainissuerelatingtothisfundingoptionisthemovefromapositionof zerocosttostudents(adjustmentstosubsequentwagepaymentsnotwithstanding)to fullcoststostudents.Thisislikelytomakeacareerasaseafarermuchlessenticingand assuch,relativetotheotherpolicyoptionsavailable,thebenefittocostratioislikelyto besignificantlylowerthanotheroptions.Thisapproachislikelytoexacerbatethe demandandsupplygapofUKseafarersdemonstratedinthisstudy. Levyandgrantsystem Thiswouldinvolvetheidentificationofparticipantsandcollectionofgrantcontributions thatwouldthenbepaidtoshippingcompaniesandotherorganisationsproviding seafarertraining.Ascostsaresharedmorewidelythaninthestatusquo,thebenefitto costratioforGovernmentsinitialoutlayishigh. AmodifiedSMarTandanindustrylevyarenotmutuallyexclusive.Aswellasalevyand grantsysteminisolation,itwouldbeentirelyfeasibletomodifythecomponentsof SMarTandintroduceanelementofindustryfundingalongsideGovernmentfunding. However,itshouldbenotedthatresearchsuggeststhattheintroductionofanewlevy (regardlessofsizeandpurpose)couldworktodetershippingcompaniesandother maritimecompaniesfromlocatingintheUK.Further,insomeinstancesalevycould offsetbenefitsfromthetonnagetaxandcouldnotbeintroducedinisolation. Insummary,alevywouldlikelymakeforamoreagreeabledistributionofcostsacrossthe widermaritimesectorandsolvethefreeriderissue,althoughwenoteitmaynotbea popularchoiceamongststakeholdersandidentification,monitoringandcollectioncosts couldbehigh. SMarT ThebenefitsfromcurrentSMarTprovisionhasbeenestimatedat58millionagainsta costof30million(12millionofwhichcomesfromGovernment).Accordinglythe benefit:costratioforGovernmentinputsishigherthanthetotalbenefit:costratio. Increasedprovision(perthe2010originalSMarTfunding)wouldleadtogreaterbenefits andhigherbenefit:costratios.Thisisbecausethecalculatedbenefitstoeachadditional UKtrainedseafareraregreaterthantheassociatedcosts.Withoutconsideringthefiscal environment,theoptimalpolicysolutionwouldbetrainUKseafarerstothepointwhere totaldemandforUKseafarersisfulfilledandgapsarezero. Apprenticeshipscheme Wehavenotconsideredthisoptionaspartofourstudy,butnotethatitisalsolikelyto beafeasibleoption. Discussionsoverapprenticeshipprogrammesfor(i)ratings;and(ii)cadetsareongoing betweenthesector,DfTandBIS.Progresshasbeenmadebutseveralissuesstillneedto beresolved.Atthisstage,noclarificationoverthefundsavailableforsuchprogrammes hasbeenmade. Conclusionandnextsteps TheanalysisinthisreporthasshownthatthereisademandforUKtrainedseafarersat officerlevelandforexseafarers(mainlyofficers)inonshorerolesinthewidereconomy. Theanalysisalsoshowsthat,ifcurrentconditionspersist,thatthereislikelytobe significantgapbetweenthesupplyofanddemandforUKtrainedseafarersby2021.

16

GiventhatseafarerscontributesignificantlytotheUKeconomy,andthatSMarThashad apositiveupwardeffectonthenumberoftrainedcadets(c.200perannumabove tonnagetaxinducedtraining),additionaltrainingislikelytobebeneficialtotheUK economy. Moreover,jobsthatcouldotherwisebetakenbycompetentoverseaslabouraremore likelytobetakenbyUKcitizensanimportantconsiderationintermsofgenerating employmentgrowthintheUKpercurrentpolicyimperatives. Ifthecurrentfiscalsituationwasstronger,theargumentforincreasedGovernment fundingofSMarT(orsimilar)wouldalsobestrongereachseafarertrainedislikelytobe netbeneficialtotheUKeconomy. However,giventhecurrentsituation,andtheanalysisabove,DeloitteandOxford EconomicsfeelthatthethreemainoptionsopentoGovernmentare: 1.AcontinuationofSMarTwhichcouldfeatureanincreaseinfundingbackto 2010levelsoramoretargetedprogrammetowardsofficers(given substitutabilityatratingslevel)basedon2011fundinglevelseachwouldhelp fillsomeofthegapoutlinedinthisstudy. 2.Theintroductionofalevyandgrantsystemunderwhichshippingcompanies, Governmentandthirdpartybeneficiariesallpayamoreequitableshareof trainingcosts,presumingassociatedissuescanbeovercome;and 3.Anapprenticeshipmodelifseparatediscussionsonthisbearfruit, apprenticeshipscouldbeusedtoprovidethetrainingrequiredforUK seafarers. TheseviewsrepresentDeloitteandOxfordEconomicsconclusionsonthebasisofthe availableevidenceandwithintheremitofthestudy. Werecognisethatopinionmaydifferamongststakeholdersandthepanelreviewingthis document,butunderstandthattheywillbringtheirownexperiencetobearonthe recommendationtotheMinisterofShipping.

17

2
2.1

Introduction
Background

TheMinisterforShippingwishestoconductanindependentassessmentoftheeconomic requirementforseafarertrainingintheUK. Thisassessmentmustascertaintherequirementforseafarers,UKcitizenandforeign born,bothonshipandonshore,andconsequentlytheneedfortrainingforthose seafarers. Theresearchshouldalsoconsidertheefficiencyandeffectivenessofasistrainingandthe wayitiscurrentlyfunded,beforelayingoutaseriesofoptionsforfuturefunding provisiononthebasisprojectedtrainingrequirementsandbestpracticeforother vocationaltrainingprogrammes. Finally,theresearchwillthenbescrutinisedbyanindependentpanelthatwillselecta preferredoptionfortheMinistertoconsider. DeloitteandOxfordEconomics(OE)havebeencommissionedtoundertakethe independentassessment. 2.2 ProjectScope toreviewtheUKrequirementfortrainedseafarersatseaoverthenextdecade; toreviewtheUKrequirementfortrainedseafarersashoreoverthenextdecade; toexaminetheextenttowhichtheaboverequirementshavetobemetbyUK seafarers; toreviewtheeffectivenessandefficiencyoftheexistingfundingarrangements andthefutureneedforGovernmentinterventiontoensurethesupplyoftrained seafarers; toidentifyoptionsforsupportingthetrainingofseafarersandmake recommendationswhichaddresstheissueofvalueformoneyandarereflective offutureUKrequirementsfortrainedseafarers;and toexaminewhetherprevioustrainingtargetsarereflectiveoffutureneeds.
Issuesoutsideofscope ThefocusofthisindependentreviewhasbeentheeconomicrequirementforUKseafarer UKmaritimesectorthroughmeasuressuchasthetonnagetaxandotherinvestment

DfTstermsofreferenceforthestudyare:

training.However,itshouldbenotedthattheUKGovernmentprovideswidersupporttothe incentives.Further,theEuropeanCommission(andindividualMemberStates)alsohasa numberofpolicyinitiativestopromoteEuropeanseafarertraining.Allofthesemeasures

interact,tovaryingdegrees,withseafarertrainingintheUK.

Detailedconsiderationoftheseadditionalsupportmeasuresforthemaritimesectorhave DeloitteandOEwouldrecommendthatanyfinaldecisiononseafarertrainingintheUK

beenplacedoutsidethisreviewsscope,anddonotformpartoftheanalysis.However, considerthesecontextualissuestoaccountforanyunintendedconsequencesthatcouldaffect thewidersectorthroughinterlinkagesbetweendifferentsupportmeasuresinthemaritime

sector.

2.3 Purposeofthisdocument

ThisdocumentisthefinalreportfortheaforementionedindependentreviewbyDeloitte andOEfortheDfT.Thereportsetsoutthefindingsandrecommendationsofthereview. Inparticular,thisfinalreport:

18

presentsthefindingsfromanindustrywideconsultationonseafarertrainingin theUK,includingtheresultsofaworkshop,panelmemberdiscussionsandan onlinesurvey; presentsforecastsontheexpectedsupplyanddemandforUKtrainedseafarers andexseafarers; containsanalysisofthemarketfailureandareviewofpo0tentialremedies;and containsasetofrecommendationsandproposednextsteps.

ThisfinalreportalsocontainsmaterialpreviouslysubmittedtoDfTaspartofthereviews interimreport. 2.4 Structureofthisdocument Chapter3outlinesthereviewsmethodologicalapproachandactivities undertakenbyDeloitteandOE; Chapter4placesthereviewincontextbyprovidingafactualoverviewoftheUK maritimesectorandtrainingarrangements; Chapter5drawsoutsomekeythemesfromtheliteratureonthesubjectof seafarertraining; Chapter6containsselectedinternationalcomparisonsofothercountries approachestoseafarertraining; Chapter7hasanoverviewoftheresultsofastakeholderconsultationexercise carriedoutaspartofthisreview; Chapter8presentsasummaryofthemodelledforecastsforseafarerdemand andsupply; Chapter9considerswhetherthereisanongoingrationaleforsupporting seafarertrainingintheUKandhowalternativesupportmeasuresmightbe assessed;and Chapter10setsoutthefinalindependentrecommendationsofDeloitteandOE answeringthereviewtermsofreference. Furtherdetailsoftheassumptionsusedinthemodellingexerciseandabibliographyare placedinannexes. 2.5 Stakeholders

Thisreportisstructuredasfollows:

InadditiontoDfT,thereareanumberofotherstakeholdersgroupsintheUKmaritime sector.AselectionofthesestakeholdersislistedoverleafinTable2.5.a. Table2.5.a:StakeholdersintheUKmaritimeindustry Stakeholdercategory

Governmentagencies Shippingcompaniesandship managementcompanies Industrybodies Tradeassociations

Examples
MaritimeandCoastguardAgencyandtheSkillsFunding Agency. SuchasMaersk,BPShipping,P&O,Carnival,NorthernMarine Management,StenaAB,andsoon. MerchantNavyTrainingBoardandPortSkillsandSafetyLtd. ChamberofShipping,BritishMarineFederation,BritishPorts Association,BritishTugOwnersAssociation,MaritimeLondon, UKMajorPortsGroupandSocietyofMaritimeIndustries.

19

 Stakeholdercategory
Tradeunions Professionalbodies Maritimecollegesand universities

Examples
NautilusInternational,UNITEandNationalUnionofRail, MaritimeandTransportWorkers(RMT). InstituteofMaritimeEngineering,ScienceandTechnologyand TheNauticalInstitute. InternationalAssociationofMaritimeInstitutions,Maritime SkillsAllianceandtheAssociationofMarineElectronicand RadioColleges.

Aspartofthisreview,anumberofthesestakeholderswereinvitedtothestakeholder workshop 1 and/orweresentanonlinesurveytocompleteanddistributeamongsttheir membership.

ThechoiceofstakeholderinviteeswasmadeonthesuggestionofDfT. 20

3
3.1

Methodology
Overview

AssetoutintheProjectInitiationDocument,DeloitteandOEhaveusedafivestage methodologyproposedforthisreview.ThisfinalreportmarksthecompletionofStage5. Figure3.1.a:Reviewmethodology

Thespecifictasksundertakenineachworkstageareexplainedintheremainderofthis chapter. 3.2 PreparatoryStage attendedaninceptionandprogressmeetingwithDfT; agreedaworkshopdate,location,timeandparticipantlistwithDfT;and agreedadefinitionforUKseafarerswithDfT. 3.3 Stage1:InitialConsultationsandStudyDesign researchedsecondarysourcestounderstandcurrenttrainingprovision,funding andassociatedlegislationincluding:SMarT;Stateaidmemoranda;andthe tonnagetaxcriteria; conductedaliteraturereviewonpolicypapers,academicarticles,pressarticles andrelevantlegislationandregulations; designedaworkshopforupto25industrystakeholders(identifiedbyDfT);and designedandbuiltawebbasedsurveyforstakeholdersusingDeloitteDEXa securewebbasedsurveysystem. 3.4 Stage2PrimaryDataCollection

Duringthisstage,DeloitteandOEcompletedthefollowing:

Duringstageone,DeloitteandOE

Duringstagetwo,Deloitte:
21

launchedanonlinesurveytocollatecomparabledatausingDeloitteDEXand grantedaccesstorelevantstakeholdersonthebasisofemailsentby membershiporganisationstotheirmembersapproximately115responses werereceived;and heldastakeholderworkshopattendedby16stakeholderorganisations,aswell asrepresentativesfromDfT.

3.5

Stage3:EconomicModelling

Duringstagethree,OEdevelopedabespokemodelofthedemandandsupplyforUK trainedseafarersandexseafarersto2020consistingof: aviewonthefuturerealisedandderiveddemandfortrainedseafarersandex seafarersfromthedemandformerchantshippingandthemaritimeclusterand othermacroeconomicfactors; aviewofthefuturesupplyofUKtrainedseafarersandexseafarersbasedon currentseafarerstatisticsandstock/flowmodellingofpotentialindustryinflows andoutflows; aviewoncurrentvacancylevelsandskillsgaps(intandemwithqualitative outputsfromDeloittesworkinstagetwo);and baselineprojectionsandtwoscenariosaroundthisbaselinetotakeaccountof alternativefutures(e.g.withrespecttointernationalflowsoflabour) InkeepingwiththedefinitionstobeoutlinedinChapter4,themodelconsideredthe distinctionbetween: ratingsandofficers; theshippingsectorandmaritimesector;and UKandinternationalseafarers. Theresultsoftheonlinesurvey,aswellasfurthercollectionofstatistics,wereusedto calibratethemodelandgenerateforecasts. 3.6 Stage4Synthesis assessedmarketfailurewithrespecttothetrainingofUKseafarers; assesseddemandandtraininggaps;and assessedefficiencyandeffectivenessofpotentialremedies. Theoutputsfromthisstagewereusedtoinformthefinalrecommendationsandprovide anindependentviewandreasoningonthefollowingkeyresearchquestions: isthereaneedforcontinuedGovernmentintervention?; ifyes,isthisinterventionbestprovidedinitscurrentform,inanewformor alignedwithexistingbestpracticeelsewhereinGovernment,forexample apprenticeships?;and whatistheoptimumlevelofGovernmentintervention?

Duringstagefour,DeloitteandOEcarriedthreetasksinlightoftheearlierresearch:

22

Reviewcontext

Thischaptersetsoutthecontexttothisreview.Itpresentssomedescriptivestatistics aboutthemaritimesectoringeneral,andtheshippingsectorandmaritimeclusterin particular.Thelatterpartofthechapteroutlinesthecurrenttrainingregimeforseafarer trainingintheUKandassociatedsupportschemes. Thischapterisintendedtoactasaprimerforthoseunfamiliarwiththesectorand seafarertraining.Forthosealreadywellacquaintedwiththeissues,thischaptercanbe skipped. 4.1 TheUKMaritimeSector

TheUKmaritimesectorisverydiverse,coveringarangeofactivitiesandservices,beyond shipping.Thesectorincludescommercialshipping,ports,maritimelegalandfinancial services,leisureshipping,educationandtraining,commercialfishing,oilandgas, defence,energy,conservation,manufacture,maritimetechnologiesandresearchand agriculture. WhilstsomemedianarrativeshavesuggestedthattheBritishmaritimesectorisindecline duetowelldocumentedfallsinemploymentintheshipbuildingsectorandshipping industries,itremainsasignificantcontributortotheUKeconomy.AsOE 2 pointout,the industryisalargeremployerthanthegeneralmedicalpracticeindustryandmakesa largercontributiontoUKGDPthancivilengineering.Thesectorisresponsiblefor1.8per centoftotalUKemployment,1.9percentofUKGDPand1.6percentoftotal governmentrevenue. DataontheentireUKmaritimesectorisnotreadilyavailable.However,oneofthemost recentstudiesbyOE 3 examiningtheeconomicimpactofthesectortotheUKsuggested thatin2009thesector: directlycreated227,000jobsandanadditional304,000jobsthroughindirect andinducedeffects; directlycontributed13.1billiontoUKGDPandanadditional13.4billion throughindirectandinducedeffects;and generated3.1billionintaxreceiptsfortheExchequerdirectlyandafurther 4.7billionthroughindirectandinducedeffects. However,itshouldbenotedthattheabovedataonlyrefertothemaritimeservices sector(definedasports,shippingandmaritimebusinessservices).Itdoesnotinclude maritimeactivitiessuchastraining,oilandgas,defenceandmanufacturing,suggesting theabovefiguresmayunderestimatethefullcontributionofthesector. Forthepurposesofthisreview,thesectorissplitintotwosubsectors: theshippingsectorwhichcoversthepartofthemaritimesectorthatis concernedwiththecarriageofgoodsandpassengersandthecharteringof vessels;and themaritimeclusterwhichcoversthepartsofthemaritimesectorthatare basedonshoreincluding,butnotlimitedto,ports,legalandfinancialservices, researchanddevelopmentandtraining. Thetwosubsectorsareverycloselyinterlinked.Figure4.1.abelowillustrates. Figure4.1.a:ComponentsoftheUKmaritimesector

2 3

TheeconomicimpactoftheUKsMaritimeServicesSector,OxfordEconomics,May2011. Ibid. 23

Source:http://www.marinetraffic.com/ais/,DeloitteAnalysis

Whilethereissomeoverlapbetweenthesesubsectors,withmanybusinessesoperating inboth,stakeholdershavesuggestedthisisthemostcommonlyusedsplitandalignswith thedefinitionofseafarersandexseafarers(seebelowandglossaryalso). ContributionoftheshippingsectortotheUKeconomy TheUKshippingsectorisakeyelementofthewidermaritimesector.Itisestimatedthat 90percentoftheUKsvisibletradeistransportedbysea(globallyshipscarry77percent ofworldtrade) 4 . AsOEnote 5 theshippingsectorhas,ingeneral,enjoyedbuoyantgrowthoverthelast decadefollowingtheintroductionofthetonnagetaxin2000.OEestimatethatthatthe shippingsectoralonecontributedaround13billiontoUKGDP(direct,indirectand inducedeffects)in2009comparedtonearly10billionin2007.In2009,thesector supported268,000jobsandgenerated3.7billionintaxreceipts 6 .AnearlierOEreport 7 , alsofoundthattheshippingsectorwasmoreproductivethanmanyotherindustries, giventhefindingthateachworkerwithinitproduced11.4percentmoreGDPthanthe averageworkerintheUKeconomy. Thedeadweighttonnage(dwt)oftradingshipsontheUKregisterwas17.3milliondwtin 2009,representinganincreaseof531percentfromthe1991figureof2.7milliondwt. TheUKregisteredtradingfleettotalled701shipsin2009.However,shipsontheUK registerarenotnecessarilyownedbyUKinterestsandviceversa. In2009,UKcompaniesdirectlyowned21.5milliondwtandhadacontrollinginterestin 35.5milliondwt.Inaddition,UKcompaniesmanaged64.4milliondwt.Thetotalworld tonnageoftradingvesselsin2009reached1,249milliontonnes 8 .AccordingtoUNCTAD 9 statistics,theUKisranked13outof35flagsofregistrationonJanuary2010byshareof worldtonnage(ithas1.39percentofworlddwt).However,itisinstructivetonotethat thisfigurerepresentsanincreaseofover11percentfrom2009. TheUK,andEuropemorewidely,remainmajorcentresofshippingtraffic.Figure4.1.b showsthelevelofmaritimetrafficatapointintimeonSeptember27th2011.The hotspotsrepresentareaswithasignificantnumberofvesselsataparticulargeographic

QuotedinSTEMChoices7.IndustryFocus:UKMaritimeIndustry, www.futuremorph.org/_db/_documents/STEMchoicesUK_Maritime_Industry.pdf
5 6

Ibid.

Itisimportanttonotethattheindividualcontributionsoftheshippingsectorandmaritimeclusterdonotsum exactlytothetotalcontributionofthemaritimesector.Thisisbecausetheoverallcontributionhastobe adjustedtoaccountforanypotentialdoublecountingcausedbyoverlappingeconomicactivity.

7
8 9

TheeconomiccontributionoftheUKshippingindustryin2007,OxfordEconomics,FinalReport(2009)

AllstatisticsquotedfromTransportStatisticsReport:MaritimeStatistics2009,DfTandNationalStatistics ReviewofMaritimeTransport2010,UNCTAD,www.unctad.org/en/docs/rmt2010_en.pdf 24

locationatthistime.Fromthissnapshot 10 ,itisclearthatEuroperemainsamajorglobal hubwiththemosttrafficpassingthrough. Figure4.1.b:Worldseafreighttraffic,September2011

Source:www.marinetraffic.com/ais/;DeloitteAnalysis

WithinEuropeitself,oneisabletoseelargetrafficflowsthroughUKports.AsEuropeis importantinaglobalshippingcontext,likewisetheUKappearsveryimportanttothe Europeanshippingtrade(andthereforeglobalshippingtrade)ifonelooksattrafficalone. Forexample,a2010reportbyMarisec,showsthatnineoutofthetop20nationsinterms ofmillionsofgrosstonnesofshippingareinEurope.TheUKranksfifthamongstthese ninenations. TheUKshippingindustryissubjecttoanumberofregulationsandpiecesoflegislation fromanumberofsources.Theseinclude: VariousUnitedNationsagenciessuchastheInternationalMaritime OrganisationandInternationalLabourOrganisation:Forexample,compliance withtheILOs2006MaritimeLabourConvention(MLC) 11 whichprovides comprehensiverightsandprotectionatworkfortheworldsseafarers; Europeanmaritimelegislation:Forexample,compliancewithEUmaritime safetystandardslegislation;and UKlegislation:Forexample,theminimumtrainingobligationaspartofthe tonnagetaxregimerequiringcompaniestotrainoneofficertraineeforeach15 officerpostsinexistenceonthevesselitoperates. TheMaritimeandCoastguardAgency(MCA),anexecutiveagencyofDfT,isresponsible forimplementingthemaritimesafetypolicyintheUK ContributionofthemaritimeclustertotheUKeconomy TheUKiswidelyregardedinternationallyashavingacentreofmaritimeexcellence(the maritimecluster)TheInternationalMaritimeOrganisationsHQisinLondon.TheUK isseenasbeingparticularlystronginprovidingmaritimefinancialandlegalservices, researchanddevelopmentofoffshoreoilandgasextraction,marinemanufacturingand yachtdesign,buildingandracing.

10 11

ItisassumedSeptemberisarepresentativemonth. Thishasnotyetenteredforce. 25

Dataisnotavailableforalltheelementsthatmakeupthemaritimecluster.However,OE haverecentlyestimatedthecontributionsoftheportsindustryandmaritimebusiness servicessectoras: theportsindustrycontributing16.9billiontoUKGDP,supporting337,000jobs andraisingover5.7billionintaxrevenue;and themaritimebusinesssector,centredintheCityofLondon,contributing3.8 billiontoUKGDP,supporting68,000jobsandraising1.4billionintaxrevenue. In2009,UKportshandledover500milliontonnesoffreighttraffic(morethananyother Europeancountry),althoughsince1999domestictraffichasfallenby26percent 12 . 4.2 Seafarersandexseafarers

Seafarersarethoseindividualswhopredominatelyworkatsea.Theyaretypicallyfound intheshipping,oilandgasandleisureshippingsegmentsofthemaritimesector.Upon leavingtheshippingsector,exseafarersoftenmoveonshoretoworkinthemaritime clusterorgoontoworkinthewidereconomyinaroleunrelatedtothemaritimesector. Seafarerscanbecategorisedas: Officers:whoaremembersoftheshipsmanagement.Officerstypicallyworkin twodepartmentsnavigation(deck)andengineering.Whilstonduty(calleda watch),aDeckOfficerisresponsibleforsteeringandmanoeuvringtheship, controllingnavigationandcommunications.EngineeringOfficersareresponsible foroperatingandmaintainingmechanicalandelectricalequipmentthroughout theship. Ratings:areseafarerswhoassistOfficersacrossalldepartments. NewlyqualifiedDeckOfficersjoinattherankofOOWDeckOfficersandcanprogressto becomeChiefMate/OfficerandfinallyMaster.EngineeringOfficersbeginasOOW Engineering,movingto2ndEngineerandthenChiefEngineer.Rankingsforratingsvaryby DeckandEngineeringandincludeThirdMate,Bosun,AbleandOrdinarySeaman. ThefigurebelowchartsthenumberofUKnationalseafarersactiveatsea. Figure4.2.a:NumberofUKnationalseafarersactiveatsea,20022010*

Source:DfT/NationalStatisticsUKSeafarerStatistics2010
13

ThenumberofUKnationalcertificatedofficersactiveatseahasdeclinedsince2002DfT estimatesthatsince1997thenumberofactivecertificatedofficersatseafellby21per

12 13

Source:Factsheet:MaritimeStatistics,DepartmentforTransport Assumesaretirementageof62.Numbersrisewitharetirementageof65 26

cent.Onereasongivenforthisdeclineistheinsufficientnumberofnewentrantscoming toseafaring(seechapter5),althoughthenumberofofficertrainees(cadets)has increasedsince2002.Asecondreasongivenforthedeclineinactiveseafarershasbeen themovebymanycertificatedofficersonshoretoworkinthemaritimecluster. Accordingly,theyarenotcurrentlyatseaandhencedonotappearintheabovestatistics. Datareceivedfromtheonlinesurveyconductedaspartofthisreviewsuggeststhatless than25percentofcadetswhobegintrainingfortheCoCfailtocompletethe qualification,suggestingthatthemajorityofthecurrentcohortofcadetswillgoonto becomeofficers. OneconsequenceofthedeclineinUKseafarernumbershasbeenanageingofthe stockofseafarers.Asthenumberofnew,youngerseafarersenteringtheactivestockof seafarersislessthanthoseleaving,theageprofileofallseafarershasbeengettingolder. AsFigure4.2.bbelowshows,twothirdsofUKcertificatedactiveofficersareover40 yearsold. Figure4.2.b:AgeprofileforCertificatedOfficersandRatings,2010

Source:DfT/NationalStatisticsUKSeafarerStatistics2010

The2010ManpowerUpdate 14 providessomeglobalcontexttothedemandandsupply forseafarers.Thereportindicatesthatthereisaslight(2percent)shortageofofficers globally.However,thisshortageismoreacuteinspecialisedareassuchastankers. Interestingly,demandforseafarershascontinuedtogrowinaglobalcontextinspiteof therecession.Crucially,itishighlightedthattheshortageisexpectedtopersist(evenina conservativelevelofdemandgrowthscenario)unlessmaritimetrainingisincreased andmeasuresaretakentoreducewastagerates. Chapter8containsthisreviewsestimatesoffuturedemandandsupplyforseafarers basedonnewresearchandstakeholderconsultations. Seafarerpayandworkingconditions A2009NautilusInternationalsurveyofseafarerslivingandworkingconditions 15 illustratedthatpay,averageleaveandtourlengtharethethreemostimportantaspectof theirlivingandworkingconditions.Outofthese,seafarersplacedthemostimportance onincreasedpayandtheleastonareductionintourlengths. Table4.2.abelowshowsasampleofaveragesalariesacrossdifferentgradesinthe shippingsector.

14

TheWorldwideDemandforandSupplyofSeafarers,BIMCO/ISFManpower2010Update

15

ANautilusInternationalsurveyofseafarerslivingandworkingconditions,2011,NautilusInternational, www.nautilusint.org 27

 Table4.2.a:Annualnetsalaryperofficerrank
Rank Master ChiefEngineer SecondEngineer AveragePay Containers 54,331 51,077 41,000 48,803 Tankers 59,925 56,393 45,695 54,004

Offshoresupplyvessels 55,165 51,379 44,036 50,193

Source:Deloitte/OEAnalysison2011paydataprovidedbyNautilusInternational

From2011paydataprovidedbyNautilusInternationalonselectedshippingcompanies holdingagreementswiththeunioninthecontainer,tankerandoffshoresupplyvessel sectors,DeloitteandOEanalysisshowsbywayofanexamplethatofficersofdifferent rankswhoworkaboardtankersreceivedthehighestaveragesalaryofc.54,000 16 this mayreflecttheaforementionedshortageofofficersontankers. Incomparison,seafarersaboardsupplyvesselsandcontainersreceivedaloweraverage salary(50,193and48,803respectively).Whilstthesefiguresaremeanaveragesand maybebiasedupwardsordownwards,theycomparefavourablywithmeanUKaverage salaryofc.24,000 17 . Thisdataalsoshowsthatseafarerpayhasincreasedinthelastthreeyearsacrossall categorieswithintheshippingindustry 18 .Theofficerswhoreceivedthehighestgrowthin payoverthethreeyearswerethosewhoworkedaboardsupplyvessels,atarateof3.9 percent,althoughtheseofficersalsoreceivedthelowestnumberofleavedays183days ofleavep.a.Annualpayforseafarersaboardcontainersgrewtheleastoverthepast threeyearsatarateof2.2percentalthoughseafarerswithinthiscategoryreceive233 daysofleavep.a.,thegreatestamongstthefourcategories. Datahasnotbeenavailableonannualsalariesofratingsorexseafarers. 4.3 Seafarertraining

Traditionally,seafarertrainingintheUKfollowedaninformalsystemofapprenticeships wherebytraineesorcadetswereattachedto,andworkedwith,mastermarinersand chiefengineerstoacquireskillsandexperience.Recentchangesnotwithstanding,the currenttrainingstructureforbothratingsandofficersmaintainsthebasicapprenticeship styleformat,withshippingcompaniesplayingasignificantroleinthetrainingofcadets 19 . Uponcompletionoftraining,cadetsreceivebothanacademicqualificationanda professionalqualificationand,incontrasttoothercountriesseafarertraining programmes,theUKseafarertrainingsystemallowsstudentstoimmediatelyenterintoa definedprofession(seeChapter6forinternationalcomparisons).Thecombinationof practicalandacademictrainingmeansseafarertrainingissimilartoothersandwich coursesthatcombineworkexperiencewithclassroombasedstudy. Therearecertainminimumstandardsthatallpotentialseafarersmustmeetbefore enteringtheprofession.Allprofessionalseafarersarerequired,bylawtomeetbasic requirementscoveringmedicalfitness,trainingandexperience.Primarily,seafarersmust bemedicallyfitwithgoodeyesightandhearing.Inadditiontothesephysical requirements,therearespecifictrainingrequirementsforofficersandratingsthatmust meetinternationalandnationalstatutoryrequirementscoveringdifferentaspectsof trainingandqualificationsintheMerchantNavy.

Averagepayiscalculatedfromthe2011paydataprovidedbyNautilusInternationalacrosstheseafarerranks ofMaster,ChiefEngineerandSecondEngineer 17 Source:Labourmarketstatistics:October,2011,www.ons.gov.uk/ons/dcp171778_237932.pdf.Figure calculatingbymultiplyingaverageweeklywageof463by52weeks.

18 19

16

Basedontheanalysisofthefourcategoriesinthe2011NautilusInternationaldata

Althoughitshouldbenotedthatshippingcompaniesdonotemploycadetsduringtheirtraining. 28

The1978InternationalConventiononStandardsofTraining,Certificationand WatchkeepingforSeafarers(STCW)adoptedbytheInternationalMaritimeOrganisation (IMO),asamendedin1995istheprimaryinfluenceonseafarersstandardsinthe MerchantNavy 20 .124ofthe192countriesaresignatoriestotheconvention,meaning that,withonlylimitedexceptions,allprofessionalseafarersaroundtheworldmusthold certificatesthatareSTCWcompliant. Individualcountriesareresponsibleforensuringtheirnationaltrainingschemesare compliant.IntheUK,theMCAisresponsibleforensuringtheprovisionsofSTCWare compliedwith.IthasdevelopedasuiteofNationalOccupationalStandards(NOS)thatare consistentwithSTCW. CertificatesofCompetency(CoCs)areissuedtothoseseafarerswhomeetthese requirements.TherearemultipleCoCscoveringthedifferentcrewdutiesandofficer ranks.BroadlyspeakingthesedividebetweendeckdepartmentCoCs,engineeringCoCs andWatchRatings.ACoCisvalidforfiveyears,unlessotherwisestated 21 .Eachmaster, officerandradiooperatorintendingtoserveatseamustrevalidatethecertificateatleast onceeveryfiveyears.WatchRatingcertificatesdonothaveanexpirydateanddonot needtoberevalidatedeveryfiveyears. Asnotedabove,basedontheonlinesurvey,aroundaquarterofcadetsfailtocomplete theirCoC.Datafromtheonlinesurveysuggeststhat75percentormoretraineeswho completedtheirfirstCoCwentontoworkwiththeshippingcompanytheyhadtrained with.However,itshouldbenotedthatthemajorityofshippingcompaniesdidnot guaranteeajobuponcompletion.ThisisconsistentwithasurveybyNautilus Internationalin2010ofcadetswhichfound75percentofcadetsoptimisticaboutfuture careerandemploymentprospects22 . OfficerscanonlyserveonaUKshipiftheyholdaUKCoCoraUKCertificateofEquivalent Competency(CEC).ACECisissuedbytheMCA,allowingseafarerstoworkasofficerson UKregisteredships.Anequivalentprocessapplies(asprovidedforunderSTCW)forUK seafarerswishingtoworkonforeignshipstheywillneedtoapplyforaCECwiththe relevantmaritimeauthorityofthecountrywheretheshipisregistered. Figure4.3.abelowshowsthenumberofUKCECscurrentlyinissueandthenationalityof thoseofficersholdingthem.

ChangestotheconventionwereadoptedinJune2010(knownastheManilaamendments)thatwillcomeinto forcefromJanuary2012.Amongthemostrelevantchangestothisreviewwere: Improvedmeasurestopreventfraudulentpracticesassociatedwithcertificatesofcompetencyand strengthentheevaluationprocess(monitoringofParties'compliancewiththeConvention);

21

20

Revisedrequirementsonhoursofworkandrestandnewrequirementsforthepreventionofdrugand alcoholabuse,aswellasupdatedstandardsrelatingtomedicalfitnessstandardsforseafarers; Newcertificationrequirementsforableseafarers; Newrequirementsrelatingtotraininginmoderntechnologysuchaselectronicchartsandinformation systems(ECDIS); Newrequirementsformarineenvironmentawarenesstrainingandtraininginleadershipandteamwork; Newtrainingandcertificationrequirementsforelectrotechnicalofficers; Updatingofcompetencerequirementsforpersonnelservingonboardalltypesoftankers,includingnew requirementsforpersonnelservingonliquefiedgastankers; Newrequirementsforsecuritytraining,aswellasprovisionstoensurethatseafarersareproperlytrained tocopeiftheirshipcomesunderattackbypirates; Introductionofmoderntrainingmethodologyincludingdistancelearningandwebbasedlearning; Newtrainingguidanceforpersonnelservingonboardshipsoperatinginpolarwaters;and NewtrainingguidanceforpersonneloperatingDynamicPositioningSystems.

Accordingly,thenumberofcertificatedofficersintheUKshowninFigure4.3areferstothoseholdingCoCs thatarecurrentlyvalid.Nodataisavailableforthoseofficersworkingelsewhereinthemaritimesectorholding expiredCoCs.

22

CadetSurvey2010,NautilusInternational 29

Figure4.3.a:NationalityofnonUKofficersholdingCEC,2010*

Source:DfT/NationalStatisticsUKSeafarerStatistics2010 *ThesearenonUKnationalsholdingequivalencycertificatesrequiredtoserveonaUKregisteredship.Notall willbeworkingonUKshipshowever.

MoredetailsaboutOfficerandRatingtrainingroutesareprovidedbelow. Officertraining ThemodernofficertrainingprogrammeintheUKcomprisesoftimespentatseaand timespentonshoreatanauticalcollege.Traininginvolvesdevelopingamasteryofa rangeoftraditionalseafaringskillssuchasnavigation,seamanshipandshipstability.In addition,deckofficersstudycoursesinIT,businessandlaw,whilstengineeringofficers studymarineengineeringprinciples,thermodynamics,shipconstructionandelectrics. Themainentryroutestobecominganofficerareshownbelow. Figure4.3.b:Officerentryroutesandqualifications

Source:adaptedfromMerchantNavyTrainingBoard

AllentryroutesleadtotheseafarerachievingtheSTCWOfficeroftheWatch(OOW) certification,qualifyingtheseafarerasaJuniorOfficer.Thisisthefirststageofgainingfull professionalseafaringqualifications(MasterandChiefEngineerlevel).Ittakesthree yearstotrainforafirstCoCindeckorengineering.

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 Ratingtraining

Unlikeofficertraining,therearenominimumacademicqualificationsforratings qualifications,althoughpotentialratingsmustmeetmedicalandeyesightrequirements. However,thatnotwithstanding,potentialratingsusuallyneedtopossesthree GCSEs/ScottishStandardGradesbetweenGradeA*andD. CandidatesstudyingtobecomeDeckRatingsundertakesafetyandprofessionaltraining, coupledwithseatime,toobtainaNavigationalWatchRatingcertificate(RatingGrade2). TheycanthenprogresstobecomeaGrade1DeckRatingandmayobtainanAble SeamansCertificationfollowingcompletionoftheEfficientDeckHandCertificate,the ProficiencyinSurvivalCraft&RescueBoatscertificateandfurtherseaservice. EngineeringRatingsstudyfortheEngineRoomWatchRatingCertificate.OtherRatingsin specialistroles,suchasthoseservingontankerships,arerequiredtohaveadditional trainingandvocationalqualifications. CateringRatingqualificationsarethoseassociatedwithfoodpreparation,cookingand serving.CookscanobtaintheMCACertificateofCompetencyasShip'sCookandother ratingsmayobtainsuitablequalificationsissuedbythecateringindustryingeneral. Seafarertrainingproviders TheMerchantNavyTrainingBoardlistsaround15institutionsthatofferseafarer education,trainingprogrammesandcoursesleadingtoanOOWCoC 23 .Theseinclude dedicatedmaritimecollegesaswellasuniversitieswithatraditionofmaritimetraining andresearch.Thereareover300trainingcentresintheUKwhichhaveMCAapprovalto delivervariousformsoftrainingcourses.Anumberoftheseinstitutionsarealsorunfor profit. SMarTfundingispaidtothetrainingproviderunderSMarT,atrainingprovideris a sponsoringcompany(usuallytheshippingcompany). 4.4 SupportforseafarertrainingintheUK

TheUKGovernmenthashistoricallyprovidedsupportforseafarertrainingintheUK. PreviouslysupportforUKseafarershadbeenprovidedthroughGAFTSandDOCS. Bythe1990sthedeclineinthemaritimeskillsbasehadbecomecriticalandmanywere arguingforGovernmentintervention.Afterassessingthesituation,theGovernment adopteditsfirstevercomprehensivepolicyforshippingoutlinedintheGovernment WhitePaperBritishShipping:ChartingaNewCoursein1998.Itisthispolicywhichlaid thegroundforthemaininstrumentsfortherecoveryofshippingoneofwhichwasthe SMarT(SupportforMaritimeTraining)scheme. ThefocusofthisreviewisprimarilyonSMarTandaccordinglyothersupportmechanisms forseafarertraining,andthemaritimesectormoregenerally,arenotdescribedindetail. Nonetheless,itisimportanttoplaceSMarTinthecontextofwiderinitiativesdesignedto promotetheUKshippingsectorandmaritimecluster.Otherinitiativesincludethe tonnagetax(introducedin2000)andotherinvestmentincentives.Theseareoutofscope ofthisreviewandarenotdiscussedinthisreview. TheSMarT(SupportforMaritimeTraining)scheme Intheabsenceofgovernmentsupportforseafarertraining,thefullcostoftrainingwould eitherbebornebyemployers(inthiscaseshippingcompaniesduetotheoffshore elementofcadettraining)oremployeesthemselves.AccordingtoGekara(2008) 24 ,the costofafullcoursepercadetisc.40,000forathreetofouryearprogramme.Thiscost

23 24

Seewww.mntb.org.uk/nautical_colleges_amp_universities18.aspx.

Globalisation,StateStrategiesandtheShippingLabourMarket.TheUKsResponsetoDecliningSeafaring Skills,Gekara(2008) 31

maybeprohibitiveformanypotentialcadetsandshippingcompaniesmayfacea disincentivetocommittothiscostiftheyfearcadetswillnotstaywiththempost completionchoosinginstead,togotoanotherareaofthemaritimesectorwhichpays more(whatisknownasthefreeriderissueineconomics).Hence,thereisoftenarole forgovernmenttoplaytocorrectforthismarketfailure. Accordingly,theaimofSMarTistoprovidegovernmentfundingfortherecruitmentand trainingofcadetsintheUKand,asaresult,increasethenumberofofficertrainees, whichinturnbenefitsthewholesector. ItshouldbenotedherethattheoriginalaimofSMarTwasnotjustcadets.Thescheme wasoriginallydividedintofivedifferentcategorieswiththeobjectiveofcoveringthe trainingprocessinfull.Thisincludedrecruitment,trainingandfundingofcadet programmesandalsocoveringallpossiblepathsofseafarersskilldevelopment.The schemeprovidesupto50percentofactualtrainingcoststoemployers.Unlikeother vocationaltrainingschemes,SMarTfundingisprovidedtoemployerstosupportexisting employees,ratherthanbeingdirectedattheunemployed 25 . SMarTisadministeredbytheMarineTechnologySupportUnit(MaTSU),whichitselfisan independentunitofAEATechnologyplc.MaTSUactsasanAdministeringBody(AB)in accordancewithcontractspecifications.AlthoughSMarTisadministeredbyMaTSUfor thepaymentoffunds,itistheMCAwhichmanagestheschemeandholdsthebudget TherearefiveSMarTprogrammeswhichareapprovedbytheMNTBandMCA. SMarT1:thisiswherethebulkoffundingisdirected.Itisfortraineesservingin asupernumerarycapacity(i.e.theyarenotregularactivemembersofthecrew duringtraining)andinvolvesfollowinganapprovedprogrammeoftraining leadingtoafirstcertificateofcompetencyasadeck,engineerordualofficer. CompletionofthistrainingleadstotraineesreceivingtheirfirstSTCWCertificate ofCompetency. SMarT2:thisisforjuniorofficertraineesandleadstoasecondSTCWcertificate ofcompetencythisisshorebased. SMarT3:isforratings,officersandotherexperiencedseafarersfollowingan approvedshorebasedprogrammelasting52weeksorless. SMarT4:isforofficersalreadyholdingcertificatesofcompetence.They undertakeshorebasedtrainingtorevalidatetheircertificatestomeetthe requirementsofSTCW95.ThiscategorywasscheduledtocloseinJuly2002,asit wasexpectedthatallofficerswouldhaverevalidatedtheircertificatesbythis date. SMarT5:isforratingsandexperiencedseafarersundertakingapprovedtraining leading(morethan52weeks)tospecifiedlevel2VocationalQualification(such asapprenticeships)andservinginasupernumerarycapacity.Italsoappliesto fishingvesselpersonnel,exservicepersonnelandotherexperiencedseafarers undertakingseaserviceinasupernumerarycapacityinordertoobtainmerchant navyqualifications. TobeeligibleforreceiptofpaymentunderSMarT,atrainingprovidermustbe: anorganisationbasedintheEEAorBritishIsles; haveenteredintoawrittenagreementwiththeMCAundertakingtoprovide trainingplacesforeligibletrainees;and

Although,whenconsideredintheroundwiththeprovisionsofthetonnagetaxaroundrecruitingnewcadets, itcanbearguedthatSMarTsupportsthetrainingoftheunemployed. 32

25

beabletoprovideandmonitorthetrainingopportunitiesnecessaryfortrainees tomeettherequirementsoftherelevantapprovedtrainingprogrammesleading toaUKCertificateofCompetency.

TobeeligibleforpaymentunderSMarT,traineeshaveto: beanationalofaMemberStateoftheEEA; ordinarilyresidentintheUK; proficientinspokenandwrittenEnglish;and sponsoredbyatrainingprovider. UnderSMarT,Trainingprovidersaretypicallyshippingcompaniesthemselves(sometimes inconsortia). TheSMarTschemehasbeenapprovedbytheEuropeanCommissiontocomplywithState aidguidelinesunderArticle107(3)(c)TFEU26,firstin1998andthenagainin2004(when SMarT5wasintroduced). Inits2004clearanceofSMarT,theECnotedtherationalefortheschemeasaddressing: thecontinuingseriousshortfallinofficerrecruitment; afallingproportionofcadetscontinuingtosecondcertificatetraining; areportedhighdropoutrateduringofficertraining(asmuchas25%); theaboveaverageageprofileamongsttheUKofficerpopulation; lownumbersofratingsprogressingtoofficerqualifications; increasingdemandforhighlyskilledratingsand decliningopportunitiesforunskilledratings. TheECsclearanceisbasedonthesupernumerarySMarTschememeetingthegeneral criteriaofbeingproportional,nondiscriminatoryandtransparentand,where appropriate,relatingtotrainingcarriedoutonboardshipsenteredinaCommunity register. ThefinancialcostofSMarTtoGovernmentvariesbetweenitsdifferentlevels.Thetotal supportavailableforUKseafarertrainingwasrecentlyrevised12millionforthe financialyear201112 27 .Figure4.4.achartsthetotalcostofSMarTsinceitsintroduction. Figure4.4.a:AnnualcostofSMarT

26

Thatisaidtofacilitatethedevelopmentofcertaineconomicactivitiesorofcertaineconomicareas,where suchaiddoesnotadverselyaffecttradingconditionstoanextentcontrarytothecommoninterest. 27 SeeMGN431(M)TheGovernmentSupportforMaritimeTrainingScheme(SMarT)RevisedArrangements from1April2011to31March2012,www.dft.gov.uk/mca/mgn_431.pdf 33

Source:DFT

Totalannualfundingrosefrom7.5millionin20012toapeakof15.6millionin2010 11,beforefallingto12millionfor201112.Intermsofcumulativespend,atotalof110 millionhasbeenspenttosupportUKseafarertrainingthroughSMarT. Figure4.4.bbelowshowsthenumberofnewcadetsstartingunderSMarT1since1999. Figure4.4.b:OfficertraineestartsunderSMarT,19992010

Source:DfT/NationalStatisticsUKSeafarerStatistics2010

Datafromtheonlinesurveyshowsthataroundhalfofallshippingcompaniesreceived SMarTfundingforalloftheircadets,withfundingtypicallycoveringbetween25and50 percentofthetotalcostoftraining. OnthebasisofamoregeneralquestionondropoutratesfromCoCcourses(irrespective offundingsource),itwouldbereasonabletoassumethedropoutratesfromSMarT fundedcadetsisalsolessthan25percentoverathreeyearperiodthoughitisnot possibletosayhowmuchless.Asacomparison,HESAreportsthatthenoncontinuation rateinhighereducationintheyearfollowingentryis6.5percent 28 ,compoundedfor comparisonthiswouldbeoftheorderof20percent. TherearedifferingviewsastowhetherSMarTisapolicytoolworthhavingintheUK economyalthoughstakeholdersconsultedforthisstudywerealmostallinfavourof someformofcontinuinginvestmentintrainingfromGovernment.Thisisdiscussedat lengthinChapter7. RecentdevelopmentstoSMarT

Source:HESAnoncontinuationrates, www.hesa.ac.uk/index.php?option=com_content&task=view&id=2064&Itemid=141 34

28

On12December2010ParliamentaryUnderSecretaryofStateforTransport(Mike PenningMP)announcedapackageofmeasuresrelatingtothemaritimeindustry followingtheSpendingReview.WithregardstotheSMarTscheme,MCAmaintainedthe programmewith12millionallocatedforthefinancialyear201112.Themajorityofthis moneywouldbefocusedonsupportinginitialtrainingforcadetsstudyingatjuniorofficer level(SMarT1).MCAestimatesthatthefundingwillallowforthetrainingofupto1,000 newcadets.MrPenningalsoconfirmedthatfundingwillbeavailablebeyondnextyear forallcadetsstartingSMarT1trainingin2011/12,andthosealreadyundergoingSMarT1 training,forthedurationoftheirstudiestotheirOfficeroftheWatchCoC. Inaddition,itwasconfirmedthatfundingwouldremainavailablein201112forratings trainingandforratingstoofficerconversiontraining,aswellassomefundingtosupport thefirstinstalmentofSMarT2.However,fortheremainingpartsoftheSMarT programme,includingSMarT2trainingbeyondthefirstinstalment,theGovernment confirmedthatitspositionwasthat,undercurrentcircumstances,itismoreappropriate thatthecostofthisadditionaltrainingshouldbemetinfullbyemployers. TheDfTalsonotedthatitwouldbeconsideringthecontinuingrationaleforGovernment supportformaritimetrainingandskillsdevelopment.Asaresult,nonewtraining providerswouldbeallowedtojoinSMarT,whichalsoincludesjoininganexisting consortium. Othersupportschemesforseafarertraining AswellasSMarTthereareanumberofotherschemesforseafarertrainingintheUK. TwoexamplesarethoserunbyTrinityHouseandMaritimeLondon. Figure4.4.c:TrinityHouseMerchantNavyScholarshipScheme
TrinityHouseistheGeneralLighthouseAuthority(GLA)forEnglandandWales.Incorporated endowments.TheCorporationspendsaround4meachyearonitscharitableactivities

byRoyalCharterin1514,TrinityHouseisalsoamajormaritimecharity,whollyfundedbyits includingwelfareofmariners,educationandtraining(throughascholarshipscheme),andthe promotionofsafetyatsea. TheTrinityHouseMerchantNavyScholarshipSchemeprovidesfinancialsupportforyoung

peopleseekingcareersasofficersintheMerchantNavy.Cadetsmust;

bebetween16and18yearsoldwithaminimumof5GCSEsatGradeCorbetter, andmusthavepassedtheDepartmentofTransportmedicalexamination.Theymust alsobeBritishandpermanentlyresidentintheBritishIsles;and undertakeathreeorfouryearprogrammesplitbetweennauticalcollegeandtimeat seainavarietyofBritishmanagedvessels.CadetscantrainaseitherDeckor EngineerOfficersorpursueaMarineCadetshipencompassingbothdisciplines.

Figure4.4.d:MaritimeLondonOfficerCadetScholarship
MaritimeLondonisapromotionalbodyforUKbasedcompaniesinthemaritimecluster. Scholarshipsupportscadettraining.Allcostsexcludingaccommodationarecoveredbythe

OriginallytheLloydsofLondonOfficerCadetScholarship,theMaritimeLondonOfficerCadet scholarship,althoughagrantofapproximately8,000isavailabletohelpcovercosts. Cadetsmust: 4.5

beolderthan16andbeEUnationals,permanentlyresidentintheUK.Theymust passbasicmedicalandhealthtestsandhold5GCSEsatGradeCorbetter;and havecompletedcoursesinAlevelmathsandphysicsandachievedapassineither.

Conclusion

ThischapterhasprovidedanoverviewoftheUKmaritimesector.Thesector,whichcan bedividedintheshippingsectorandtheonshoremaritimecluster,remainsasignificant

35

contributortotheUKeconomy.TheUKremainsamajorshippingcentreglobally,andits maritimeclusteriswidelyacknowledgedasbeingbestinclass. Oneofthefactorscontributingtothesectorscontributionisawellregardedtraining programmeforseafarers.Thistrainingcombinesclassroombasedlearninganda significantelementofatseaexperience. Inresponsetoadeclineinthemaritimeskillsbased,theUKGovernmentintroduced SMarTasamechanismtosupportandpromoteseafarertraining.Theschemesoughtto remedythemarketfailurewherebythosecompaniesthatfinancedcadettrainingdidnot alwayscapturethefullbenefitoftheirinvestment.Sinceitsintroduction,thenumberof traineecadetshassteadilyincreasedreachingc.850newstartersin2010. Duetowidermacroeconomicpressures,theSMarTschemeisbeingreexaminedinlight ofthecontinuingeconomicrequirementforseafarertrainingintheUK.

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Keythemesemergingfromthe literaturereview

Theissueofseafarertraininghasbeenexaminedbyanumberofresearchersand policymakers.Awealthofmaterialwasproducedaroundtheintroductionofthetonnage taxintheUKandsubsequentresearchhassoughttoexamineandexplaintrendsinUK seafarernumbers.Thischaptersummarisesthekeythemesemergingfromtheliterature thatwillinformtherecommendationsofthereview. Thisliteraturereviewhascoveredacademicjournals,previousreportsandspecialistand generalpressarticles.Itisnotanexhaustivereviewoftheliterature,ratherfocusingon keythemesarisingfromit. 5.1 Context

Oneofthekeymotivatorsfortheliteratureonseafarersandseafarertrainingwasthe 1998WhitePaper,BritishShipping:Chartinganewcourse. Figure5.1.a:SummaryofBritishShipping:Chartinganewcourse BritishShipping:Chartinganewcourse(1998) Bythe1990sthedeclineinthemaritimeskillsbasehadbecomecriticalandmanyarguedthat thisrequiredeffectiveandimmediateattention(e.g.ObandoRojasetal,1999;Selkouand

Roe,2002).Worriesthatthedeclinewashavinganegativeimpactonthemaritimecluster

promptedthegovernmenttointervene.TheGovernmentsoughttobringtogethermaritime governmentadopteditsfirstevercomprehensivepolicyforshippingoutlinedinthe governmentWhitePaperBritishShipping:ChartingaNewCoursein1998.

UnderthebackingofJohnPrescott,thenSecretaryofStatefortheEnvironment,Transport andtheRegions,theWhitePaperraisedmanyissuesandpolicysuggestionsthatstillremain highlyrelevanttoday.ThefourcentralaimsofpolicyidentifiedbytheWhitePaperwere increasingskills,encouragingemployment,increasingtheUKsattractivenesstoshipping enterprisesandgainingsafetyandenvironmentalbenefits. stakeholdersinordertofindawayofreversingthesituation.Aftersomedeliberation,the

TheWhitePaperemphasisedtheshippingindustryasbeingoneofparticularimportanceto environmentshippingoffers,theneedformaritimeskillsinoffshoreindustriesandforreasons ofnationalsecurity.Itwouldbefairtosaythattheretheindustrystillholdsthesepotential

advantagesfortheUK. theUK.Thiswasbasedonourdependenceonseatransport,thesustainabilityintermsofthe

Similartotheissuesfacedtoday,theerosionoftheindustryintermsofbothregisteredflagsin includechangesinthepatternoftrade,globalisation,lowwageforeigncompetitionanda

theUKandtheskillspoolofUKseafarerswasattributedtoamultitudeoffactors.Suchfactors declineininterestamongstyoungpeopleintheUKshippingindustry.Ascanbeseeninthe literaturereview,manyofthesefactorscontinuetoresonateatleastasmuch,ifnotmore

strongly,today.

Intermsofpolicy,severalmeasuresweresuggestedandcanbesummarisedasfollows: increasingskillsbyaimingtochangeperceptions,promotetraining,andfacilitating Britishseafaringemployment; increasingtheattractivenessoftheUKasashippingdestinationthroughfiscal supportandthefacilitationofshipregistrationundertheUKflag;and

gainingsafetyandenvironmentalbenefitsofshipping.

Anumberofstakeholders,inrespondingtothisreview,havemadeitclearthattheyfeel Chartinganewcourseremainsveryrelevanttoday. FollowingthepublicationoftheWhitePaperandtheintroductionofvariouspolicy initiativesinthesector,therehavebeenanumberofacademicstudiesinthisarea.As

37

wellasdirectlyrespondingtotheissuesraisedintheWhitePaper,thisliteraturehasalso examinedseafaringandmaritimeissuesinthelightofwidereconomicandsocialtrends, suchasglobalisation,securityissuesandmigration.Aswellasacademicresearch,during thisperiod,policymakerssuchastheEuropeanCommissionhavealsopublishedposition papersonseafaringandthemaritimesector. Forthepurposesofthisreview,thekeythemesfoundincontemporaryliteratureofthe lasttenyearsthataremostrelevanttoseafarertrainingandSMarTarepresented.Much oftheliteraturehasnotfocusedonseafarertrainingandSMarTinisolation,preferringto considertheirimpactinconjunctionwiththetonnagetax. DeloitteandOEhaveidentifiedthefollowingthreekeythemesarisingintheliterature: reasonsproposedforthedeclineinthenumberofUKseafarers; therelativeattractivenessofonshoreworktooffshorework;and thecaseforhavingtrainedseafarersfromdevelopedmarkets. Theseissuesarediscussedinmoredepthbelow. 5.2 ThedeclineinthenumberofUKseafarers

Asdiscussedinthepreviouschapter,oneoftheaimsofGovernmentsupportforthe maritimesectorhasbeentoexpandtheskillsbasethroughtheprovisionofmoretrained seafarers.Thiscanrefertobothofficersandratings.Theliteraturehastendedtoconfirm thattoofewseafarersarebeingtrainedintheUK.Forexample,Lewarn(2009) 29 notes, thereisthefeelingthatannualintakesofratingshavebeeninsufficienttoprovideforthe requiredmaritimeskillsbase. ThisisnotjustaUKrelatedphenomenonbuthasalsobeenexperiencedbymuchofthe EU.ThereportoftheTaskForceonMaritimeEmploymentandCompetitivenessand PolicyRecommendationstotheEuropeanCommission(June2011) 30 foundthattherehas beenatrendincreaseintherecruitmentofnonEUseafarersattheexpenseofEU ratings.Europeanofficerrecruitmentandretentionalsoremainsproblematic,thoughthis hasbeenmaskedduetotheuseofpersonnelfromthenewMemberStates. FocusingspecificallyontheUK,theliteraturehasproposedanumberofreasonsto explainthedeclineinseafarernumbersinspiteofSMarT.Theseinclude: globalcompetitionforseafarers; unattractivenessoftheshippingindustryandmaritimesectorforyoungpeople; retainingexistingseafarers;and Ahighdropoutrateamongstcadets. Thefirstreasoncanbecategorisedasademandsideexplanationforthedecline,whereas theotherthreereasonscanbethoughtofassupplysideexplanations.Theliterature givesdifferentweighttodifferentfactors,withglobalisationoftenbeingidentifiedasthe keycause. Globalcompetition OneofthemainreasonscitedforthedeclineinUKseafarernumbersintheliterature relatestoglobalcompetition.Themarketfortrainedseafarersisglobalwiththe existenceoftheCECallowingforseafarersnotholdingaUKCOCtoworkonboardUK ships.AsGekara(2007)notes,thereasonbehindthedeclineinUKseafarerscouldbeas

29

Lewarn,B.(2009),Areviewofsomesolutionstotheshortageofmaritimeskills,MaritimeTransportPolicy Centre,AMC ReportoftheTaskForceonMaritimeEmploymentandCompetitivenessandPolicy.Recommendationstothe EuropeanCommission(June2011) 38

30

simpleasshippingcompanieschoosingtoemploynonEUseafarersoverUKandEU seafarersforcostreasons.EvidenceofthiscanbefoundintheUKunionsbackingforan amendmenttotheEmploymentBillof2008whichhighlightedthatissuethatthenational minimumwagewasnotbeingappliedtoforeignseafarers 31 . Accordingtoa2005BIMCO/ISFManpowerSurvey,only25percentoftheglobalsupply ofseafarerscamefromthedevelopedworld/OECDwhilsttherestwasmadeupof seafarersfromEasternEurope,Africa,LatinAmerica,theFarEastandtheIndian Subcontinent. ThistrendissupportedintheanalysisofPettit,Gardneretal(2004) 32 whoassertthatas theshippingindustryhasadaptedtothegloballabourmarket,theUKhasincreasingly employedforeignseafarers.Thishasinturnledtoasignificantdecreaseinthenumberof UKnationalstrainingasseafarercadets.Itissuggestedthattheuseofforeigncrewsby Britishshipownersreducesthetrainingpotentialbyreducingthenumberoftraining sponsors. Effectivelyshippingcompaniesareonlyincentivisedtoinvestfullyintrainingandcareer developmentiftheythemselveshavealongterminterestandcommitmenttothehost country.AnecdotalevidencecitedsuggestsfirmswithsuchcommitmentintheUKare fewandfarbetweenandthereforethepriorityistoemploycheaplabourwhichisin greaterabundancefromtheemergingmarkets. ReflectingtheinfluenceofglobalisationonthemarketforUKseafarers,thepolicy implicationdrawnbytheliteratureisthattargetedattentionneedstobegiventothe demandsideofthemarket.WhileSMarTisdesignedtoimprovethetrainingand recruitmentofseafarers,Gekara(2008)cautionsthatsuchapolicywillnotachieveitsfull potentialifthereisalackofdemandfromshippingcompanies.IfUKofficersaremore expensiveincomparisontotheirforeigncounterparts,unlessthereisaclearquality premium,shippingcompanieswillfaceincentivestoemploynonUKseafarers.Thus, therepotentiallyexistsatensionbetweenemployerswhowishtoreducecostsby employingcheapforeignseafarersandtheGovernment,whowishtoboostgrowthinthe nationalskillsbase. Attractingyoungpeopleandretainingexistingseafarers Theliteraturenotesthatinrecentyears,theshippingindustry,andthemaritimesector moregenerally,hasstruggledtoattractyoungpeoplefromtheUK.Theimpactofthis phenomenonisthatasolderseafarerstransitiontobecomingexseafarers(eitherby movingonshoreorretiring),theyarenotreplacedbyyoungerseafarersfromtheUK. Botheconomicandsociologicalexplanationshavebeenofferedtoaccountforthislackof supplyofUKseafarers.Oneofthemostcitiedreasonsisignoranceofseafaringasa careerbyyoungpeopleandthedeclineinthecostoftravel.ArecentECreport 33 argues that,unlikeinthepast,thefallingcostofglobaltravelcoupledwithshortertimespent onshorewheninporthasmeantseafaringisnolongertheonlywayforyoungpeopleto seetheworld. InsurveysconductedbyGekara(2008) 34 ,manyhumanresourcemanagersofshipping companiesreportedconcernsthatthelevelofinterestinseafaringcareersamongthe youthintheUKhasdeclinedtothepointwhereBritishsocietycannolongeradequately

Seewww.rmt.org.uk/Templates/Internal.asp?NodeID=113977 Pettit,S.J.,Gardner,B.M.,Marlow,P.B.,Naim,M.M.,andNair,R.2004.ExSeafarersShoreBased Employment:TheCurrentUKSituation.MarinePolicy,29,pp.521531.

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33

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ReportoftheTaskForceonMaritimeEmploymentandCompetitivenessandPolicy

RecommendationstotheEuropeanCommission(June2011) Globalisation,StateStrategiesandtheShippingLabourMarket.TheUKsResponsetoDecliningSeafaring Skills,Gekara(2008) 39

34

supplymerchantnavyofficers.Thisisperhapssomewhatsurprisinggiventherelatively favourablepayconditionscomparedtootherprofessions. However,theviewthatthereislowawarenessofseafaringisnotuncontested.Many trainingcollegessurveyedbyGekaradisagreedwiththeassertionthatinterestinthe sectorhaddeclinedsignificantly. Attractingthenextgenerationofseafarersisrecognisedasachallengebytheauthorities. TheEUhasidentifiedthemaritimesectorasanareaitwishestoencourageandremain stronginforacombinationofeconomic,environmentalandnationalinterests.A2009 communicationtotheEuropeanParliament 35 outlinedanumberofpotentialmeasuresto addressdecliningnumbersofnewentrants.Furthermore,the2011TaskForcegroup 36 recognisedsomeadditionalkeycomponentsthatarelikelytobesuccessfulinattracting andretainingEuropeanstomaritimeemployment,specificallyrelatedtothetopicofthis review,namelyhumancapitalimprovements. Retainingexistingseafarers AnotherreasoncitedfordecliningnumbersofUKseafarersarethelowlevelsofretention amongstexperiencedseafarers.Oneexplanationforthisaretherelativelylowwagespaid toseafarersrelativetocomparablesectorsalthoughthismaybemoreamatterof perceptionratherthanactualdifferences.Asdiscussedinthepreviouschapter,mean averagewagelevelsofofficers(albeitfromasmallsample)comparefavourablywith othersectors. Accordingtoa2007/8survey 37 ofcurrentseafarersatsea,themajorityofrespondents didnotfeeltheyreceivedafairwageforwhattheydid.Thiscanhavetwoeffects.Firstly, itmaymotivateexistingseafarerstoleavetheshippingsectorandeithermovetoan onshoreroleoranothersectorentirely,whichinturncanreduceincentivesforshipping companiestotrainUKseafarersandinsteadencouragethemtolookabroad.Secondly,it candissuadepotentialentrants.Thereasonscitedastowhythewageisnotperceivedas faircoverfactorssuchasthetimespentawayfromfamily/friends,lackofinternetaccess andoftenatoughenvironment. Itisimportanttocapturethisnuanceasapotentialexplanationofthedifference betweenperceptionsofwagesandactuallevelsofwagescomparedtootherindustries. Theliteraturesuggeststhatitisnotsimplyamatterofseafarersbelievingtheirwageis inadequateperse,butratherthatitisnothighenoughgiventhefactorsdescribed.The isolationfromland,friendsandfamilycombinetooftencreateverystressfulworking conditionswhich,inturn,produceanenvironmentinwhichseafarersbelievetheyshould becompensatedmorethantheyare. Highcadetdropoutrate38 Despitetheintroductionofmeasurestoarrestthedeclineinseafarernumbers,muchof theliteraturereportstotalnumberscontinuingtodecline.Oneofthereasonsforthis,as statedinanumberofECreports,isthedropoutrateoftraineecadets.Thissuggeststhat whilethenumberofcadetsbeginningofficertraininghasincreased(potentiallydrivenby SMarTintheUK),theactualnumberofcadetscompletingthetrainingisfarfewer. Variousexplanationshavebeengivenforthis.Gekara(2006)pointstoadeclineinthe

35

CommunicationfromthecommissiontotheEuropeanParliament,thecouncil,theEuropeaneconomicand socialcommitteeandthecommitteeoftheregions(2009)

ReportoftheTaskForceonMaritimeEmploymentandCompetitivenessandPolicy.Recommendationstothe EuropeanCommission (June2011)

37

36

LifeatSeaSurvey2007/2008.SeafarerSalaries&EmploymentBenefitsSurveyReport,Shiptalk(2008)

It should be noted that the discussion of dropout rates is based largely on qualitative evidence there are no statistics available on cadet dropout rates in the literature, beyond those collected in the online survey conductedaspartofthisreview.

38

40

academicand/orphysicalcapacityofapplicantsasareasonbehindthedeclineandhigher dropoutrates.Arelatedfactorisaperceptionthatcadetsaretooyoungwhenstartingon thecourseasmentionedbytrainingproviderscitiedinGekara(2008)above. However,asacounter,Gekaraalsoreportsthatcadetsthemselvesputhighdropout ratesdowntopoorsupport(bothfinancialandemotional)whenconfrontedwiththe coursecontent,thetoughlifeatsea,alackofadequatefacilitiesincolleges,inadequate onboardtraining,abusiveandinsensitiveseniorofficersduringseatimeand inappropriatedeploymentofcadetswhiletrainingatsea.Further,somecitedcareerand futureopportunityanxietiesasareasonfordroppingout.RecentsurveysbyNautilus Internationalalsopointtoasimilarstory 39 . Gould(2011) 40 alsofoundcorroboratingevidencerelatingtoconcernsamongstcadets oversecuringemploymentuponcompletionoftheirtraining.Frominterviewand questionnairedatagatheredovertheperiod20045,Gouldfoundthatcadetsfeltlet downontwofrontsinregardstoalackofopportunityafterqualifying.Firstly,theyfelt thattheyhadbeenledtobelievethattherewouldbeastrongdemandfortheirskills whichnolongerappearedtobethecaseandsecondly,therewasaperceptionthatthe MTOaspartofthetonnagetaxhadcausedcompaniestotakeoncadetswhomtheyhad nointentionofofferingajobtopostqualification. 5.3 Therelativeattractivenessofonshoreworktooffshorework

Asdiscussedintheprecedingsection,theliteratureidentifiesperceivedlowwages relativetoothersectors(inparticularthemaritimecluster)asafactorexplainingthe declineintrainedseafarersworkingoffshoreseafarersareattractedonshoreduetothe highwagesandabetterlifestyle.Thehigherwagesavailableinthemaritimecluster reflectsthedemandforhighlyskilledexseafarers. A2003studycommissionedbytheDfT 41 examinedtheimportanceattachedby employersinthemaritimeclusteronhavingprospectiveemployeeshavingprofessional seafaringexperience.Thestudyexaminedtrendsinrecruitmentadvertisementsplaced byemployersinthemaritimecluster.Thestudychartedtherequirementthatprospective employeesbeexseafarersaseitherabsolutelyessentialoradvantageous.Thestudy classedabsolutelyessentialasmeaningaprospectiveonshoreemployerwouldonly considerapplicantswhohadprofessionalseafaringexperience.Advantageouswas definedasasituationwhereseafaringqualificationsand/orexperiencewerenot necessarilyrequiredbutwouldbeseenasanadvantage. Thestudyfoundthatsince1996,therehadbeenatrendbyemployersinthemaritime clustertoreclassifytheirdemandsforexseafarersfromabsolutelyessentialto advantageous.DependingonLloydsRegisterassumptions,itwasfoundthatbetween c.7,00010,000jobsinthemaritimeclusterin2003werecategorisedbyemployersas onesinwhichitwasessentialtobeanexseafarer.Thiscomparestoafigureof c.12,000inthe1996study.A2007OEstudysuggestedthatemployersinthemaritime clusterpreferredexseafarersforaround16,000shorebasedjobs(andforhalfofthese, seafaringexperiencewasdeemedessential). However,theDfTstudycautionedinterpretingthisfindingasindicativeofareductionin demandforexseafarers.Thiswasbecauseprospectiveonshoreemployerscouldbe adjustingtheirrequirementsinresponsetoareducednumberofseafarersinaggregate, duetoadeclineinnewcadets.

39

SeeCadetSurvey2010,NautilusInternational.

40

Gould,E.(2011), Personalities,Policies,andtheTrainingofOfficerCadets, SIRCSymposium,Cardiff University

41

Gardner,B.M.,Marlow,P.B.,Naim,M.M.,Nair,R.V.andPettit,S.J.(2003):TheUKeconomysrequirements forpeoplewithexperienceofworkingatsea,CommissionedbytheDepartmentforTransport,theChamberof ShippingandtheMarineSociety 41

 5.4

Thecasefortrainedseafarersfromdevelopedmarkets

Thefinalmajorthemetoemergefromtheliteraturereviewhasbeenthedebatearound whetheritmattersthattheUKhasapooloftrainedseafarersandexseafarers.Indeed, somecommentatorshavehighlightedtheincreasingwagedifferentialbetweenUKand nonEUseafarersasindicativethatseafaringshouldbetreatedasadevelopingcountry occupation(Gekara2008) 42 .Glen(2008)explainsthisinamoreformalwaythrougha statisticalanalysisthatfindsapositiverankcorrelationbetweentheproportionof certifiedofficersagedmorethan40andtherankorderofGDPpercapita.Theinference beingthatseafaringasanoccupationisoneinwhichthenationalsupplyofseafarerswill reduceasincomesrise,astheopportunitycostofaseafaringcareerrises. However,theliteraturefindsthatwhilemaritimecompaniesarekeentoreducelabour costs,thereremainssignificantinterestinemployingfromhomemarkets.Gekara (2008)foundthatrecruitmentmanagershireonskillsandqualificationsratherthan nationalities(asaproxyforcost).Hisresearchshowscompaniescontinuingtotrainand recruitalargenumberofBritishseafarersintohighlyspecialisedandtechnicalroles, particularlyintheoil,gasandshippingsectors.Themainreasongivenwastheconfidence placedbythesecompaniesintheUKseafarertrainingprogramme,certification proceduresandproventrackrecordofBritishseafarers. Relatedtothis,onehypothesisoutlinedintheliteratureisthatincreasinglycompanies aredemandinghighlyskilledseafarersandexseafarerstodeliversafeandhighquality servicestoclients.Thishypothesisimpliesthatitmaynotautomaticallyfollowthatthe demandforUKseafarersdeclinesinthefaceoflowerwagecompetitionfromthe developingworld,ascompanieswillstillrequiretheskillsthatUKseafarerspossessover andabovetheirrivalsfromdevelopingmarkets.Insomecases,thispreferencewill manifestitselfinshortagesforhighlyqualifiedseafarers. Leggate(2004) 43 supportsthishypothesis.Theargumentputacrossisthatthereisnota shortageofseafarerspersegiventhelargenumbersavailablefromdevelopedcountries. However,theissueisthatthereisashortageofqualityseafarers.Onceagainthis emphasisesthecontinuingdemandforUKseafarers,forwhomnationalityisaproxyfor highquality. OtherssuchasBrownriggetal.(2001) 44 havearguedthatthereasoncertainkeysectors oftheUKshippingindustryholdacomparativeadvantageintheworldmarketisdue theadvantageofhavingahighpresenceofskilledUKseafarersandexseafarers.This advantage,theyclaim,isduetoacombinationoffactors,includingtheiruseofEnglish... theirmanagementexpertise,marketingskillsandmanyyearsexperienceinthe industry.Further,theyhighlightthatthesamecomparativeadvantageholdsforon shoreactivitiesincludinginsurance,legalservicesandbanking. RelatedtothedemandforBritishtrainedseafarers,istheirabilitytoadapteasilyto onshoreroles.Britishexseafarersareprominentacrosstheentiremaritimesector. Traditionally,theCityofLondonhasusedexperiencedseafarersassubjectmatterexperts inindustriessuchasinsurance.Therefore,itcanbearguedthatthereisaderived demandforseafarersfromthecity. 5.5 Conclusion

Tosummarise,theliteraturehashighlightedthedeclineinthenumberofUKseafarers overthelastdecadeadeclinetheintroductionofSMarTandotherpolicymeasures havenotfullyarrested.

42 43 44

Aretherejobsforallintheshippingindustry?,TheSIRCcolumn,Gekara(2008).
Leggate,H. Thefutureshortageofseafarers:willitbecomeareality?(2004)

Brownrigg,M.,Dawe,G.,Mann,M.,andWeston,P.(2001):DevelopmentsinUKShipping:theTonnageTax, MaritimePolicyandManagement28(3):213223.

42

Therearedifferentviewsastothereasonsbehindthedecline,rangingfromincreasing globalisation,adeclineintherelativeattractiveofthemaritimesectorandpoorerquality entrants.However,theliteraturealsoarguesthatdespitethesetrendsthereremains demandforUKseafarers,particularlyinareaswheregreatertechnicalexpertiseis needed. Chapter7presentstheviewsofstakeholdersonthesekeythemes.Insomecases,these viewscoincidewiththeliterature,whilstinothercases,asonemightexpect,stakeholder viewsdiffer.However,beforethis,Chapter6exploreshowothercountriesprovide supportforseafarertraining.

43

Internationalcomparison

Iftheshippingindustryisviewedasstrategicallyimportanttoaneconomy,itoften followsthatsomesortofgovernmentinterventionisregardedasimportantin maintainingacountrysshareofglobalshipping.Certainly,thishasbeentheroute followedbyEuropeancountriessuchasHollandandNorwayandincreasinglyAsianand Africancountries. Thischapterprovidesabriefcomparisonofseafarertraininginothercountriesandthe supportavailabletoshippingcompaniesfromothercountries.ItseekstoplacetheUK experienceinabroadercontextandhighlightthesimilaritiesanddifferenceswithits shippingsupportregimeandthoseofothercountries,aswellashighlightingthe increasinglycompetitiveglobalenvironmentformaritimeservices. 6.1 ComparisonswithtraditionalEuropeanrivals

Collectively,theEuropeanmaritimesectorisasignificantcontributortoeconomicactivity acrosstheEU/EEA.AtarecentECSAworkshop 45 ,itwasestimatedthattheshipping sectordirectlyprovidesnearlyhalfamillionjobsatseaandafurther126,000onshore.It isestimatedthatintotalaround3millionpeopleworkintheEuropeanmaritimecluster. However,thereisanxietyattheEuropeanlevelthatwhilstmanyofthelargestshipping companiesgloballyareEuropean,theyemployrelativelyfewEuropeannationals.Ofthe estimated470,000jobsatsea,around165,000areheldbyEU/EEAnationals.Accordingly, anumberofcampaignshavebeeninitiatedtocounterthistrend.Ashasbeendiscussed inanumberofpanEuropeanreports,anumberofEuropeancountriesnowhavewell establishedtrainingprogrammesandassociatedsupportschemesfornewseafarersand alsoprovidefurthersupporttotheshippingsectorintheformoftonnagetaxes.Theissue ofpromotingEuropeanseafaringandthemaritimeclusterremainsaliveissuefor individualcountriesandtheEuropeanUnion. Below,thetrainingstructuresofDenmarkandHollandareoutlinedindetail.Theseare traditionalrivalstotheUK,withbothofthesecountrieshostingdevelopedmaritime clustersandshippingsectors. Denmark Denmarkhasawellestablishedmaritimesectorconsistingofbothadevelopedshipping sectorandamaritimecluster(knownasDetBlDanmark).Shippinghasbecome Denmark'ssecondmostimportantexportsector,withanaggregateturnoverestimated tobemorethan100billionDKK 46 andin2002around4percentoftheworkforcewas involvedinthemaritimecluster. Thetrainingprogrammeforratingsandofficersisacombinationofdeskbasedlearning andvocationallearning. Ratingsbegintrainingafteraminimumofnineyearsofprimaryandsecondary educationandcompleteasixmonthbasiccourse,followedbysixmonthsatsea andthenanothersixmonthsatschool.Furtherqualificationsareavailablewith moreseatimetobecomeshipsassistants.Alongerversionofthisprogramme appliesforthosestudentswishingtobecomeshipsmechanics. Officersbegintrainingafteraminimumof12yearsofprimaryandsecondary educationandfollowatwopartprogramme.Thefirstpartlasts4.5yearsandis asandwichcourseconsistingofcollegeandseatimeandleadstothecadet becomingajuniorofficer.Thesecondpartlasts1.5to2yearsandcommences

ECSAWorkshop28 September2010reportontheprojectonenhancingrecruitmentandtraininginthe maritimesectorinEurope.

46

45

th

Source:www.danishshipping.com/danishshipping/ 44

afterthejuniorofficerhasbeenatseaayear.Thethispartallowsthejuniorto specialiseasMasterMarineroraChiefEngineer(orboth).

ECSAnotes 47 alargenumberofseafarersreturntothemaritimeclusterwhentheycome backonshore.Traditionally,exseafarerscanbefoundinlogistics,insurance,ports,cargo handling,surveying,educationandadministration,andsales. TheConsolidatedActonmaritimetrainingprogramme 48 authorisestheDanishMaritime Authority(DMA)tosubsidisehalfoftheoperationalexpenditureforapprovedtraining institutionsinDenmark.TheActalsoallowsfortheDMAtolaydownregulationsto reimburseshipownersexpensesforwages,boardandtravelinconnectionwiththe employmentofstaffcompletingaseafarertrainingprogramme.TheOrderonsubsidies forworkexperienceplacementsonships 49 calculatesthissubsidyasDKK20,000per threemonthactualdurationofservice,notingthattheseafarermustserveina supernumerarycapacity.Certaineligibilityconditionsapply. Inshouldbenotedthatuntilrecently,itwastheDMAthatwasresponsibleforthe constructionandoperationofDanishships,thecontrolofforeignshipsinDanishports andforthetrainingofseafarers.However,followingarecentgeneralelectionin Denmark,theDMAisnotlongerresponsibleforthetrainingofseafarers.Thefutureof seafarertraininginthecountryisyettobefinalised. Inadditiontosupportingseafarertraining,Denmarkalsosupportsitsshippingsector throughatonnagetax. Holland Hollandhasalongmaritimetraditionstemmingfromitsstrategicgeographiclocation.It hasanestablishedmaritimeclusterandshippingsector.In2005,thedirectproduction valueofthemaritimeclusterwasestimatedatapproximately30billion.In2006,around 187,000peoplewereeitherdirectlyorindirectlyemployedbythemaritimesector 50 . StudentsinHollandenterthemaritimeeducationsystemafteraminimumof12yearsof primaryandsecondaryeducationeitherattheageof16(enteringintointermediate vocationaleducation(MBO))orattheageof17(enteringintothehighervocational system(HBO)). Theintermediatevocationalroutetakesfouryearsandthehighervocationalroutetakes threeyears.AftercompletionoftheHBO,thestudentreceivesaBScqualification,and underbothroutestheycanachievetheirfirstCoC.Afterafurthertwotofouryears,with furtherstudy,officersmaybeawardedtheirCoCasMaster/ChiefEngineer. ECSAnotesthatmostDutchofficersarerelativelyyoungandreturntoshoreafterfive yearsatsea. IncontrasttoDenmarkandtheUK,Hollandsmaritimeindustryexhibitslessdirect governmentinvolvementinthetrainingofseafarers.Instead,seafarertrainingis coordinatedthroughfoundationsandprivateinstitutions.Onesuchinstitutionisthe DutchMaritimeNetwork,anindependentfoundationmadeupofprominentpersons fromvariousmaritimeindustrysectors.Thefoundationisactiveinthemaritimelabour marketeducation.Thisisaccompaniedbyvariousprivateinstitutionsthatoffer

47 48

InTheMappingofcareerpathsinthemaritimeindustries.

ConsolidatedActno207of4March2011issuedbytheDanishMaritimeAuthority, www.dma.dk/SiteCollectionDocuments/SOF/Uddannelsesplaner/LBK20704032011 maritime%20uddannelser.pdf. DMAOrderno131of23February2009, www.dma.dk/SiteCollectionDocuments/Legislation/Orders/2009/BEK13123022009 tilskud%20til%20praktikplads.pdf. 50 Source:Theeconomicsignificanceofmaritimeclusters:lessonsLearnedfromEuropeanEmpiricalResearch, TheDanishShipownersAssociation,July2010 45

49

individualsarangefrombachelordegrees,postgraduatedegreesandshortintensive coursesinmaritime.However,byofferingastudentfinancingscheme,theDutch Governmentdoesindirectlyfundindividualswhostudymaritimecoursesatuniversity (boththebachelorsandpostgraduatedegrees). Table6.1.abelowsummarisesthedifferencesandsimilaritiesbetweentrainingregimesin theUK,DenmarkandHolland. Table6.1.a:ComparisonoftrainingregimesintheUK,DenmarkandHolland Country

UK

Seafarertrainingregimes
ThecurrenttrainingstructureforbothRatingsandOfficers maintainsthebasicapprenticeshipformat,withshipping companiesplayingasignificantroleinthetrainingofcadets. Cadetsreceiveanacademicqualificationandaprofessionalone (CoC). OfficersachievetheSTCWOfficeroftheWatch(OOW) certification,qualifyingtheseafarersasJuniorOfficers Ratingsundertaketraining,coupledwithseatime,toobtain aNavigationalWatchRatingcertificategivingthemthe rankofOrdinarySeaman

Government support
SMarTprovides upto20,000 (50percentof actualtraining costs)percadet fortheduration ofthetraining programme

Denmark

Thetrainingprogrammeforratingsandofficersisacombination ofdeskbasedlearningandvocationallearning. Officersfollowatwopartprogramme.Allowsthejuniorto becomeeitherajuniorofficer,MasterMarineroraChief Engineer Ratingscompleteasixmonthcourse,followedbysix monthsatseaandthenanothersixmonthsatschool. Furtherqualificationsareavailabletostudents

SubsidisesDKK 20,000per threemonth actualduration ofserviceplus supportfor training institutions Nodirect support, although indirectsupport throughstudent finance schemes

Holland

StudentsinHollandenterthemaritimeeducationsystemaftera minimumof12yearsofprimaryandsecondaryeducation Therearetworoutesintoseafaring; Intermediatevocationaleducation(MBO)takingfour years Thehighervocationalsystem(HBO)takingthreeyears

AftercompletionoftheHBO,thestudentreceivesaBSc qualification,andunderbothroutestheycanachievetheirfirst CoC.

Source:Deloitteanalysis

OthersupportfortheshippingsectorandmaritimeclustersinEurope Aswellassupportfortrainingofseafarers,anumberofEuropeancountries(bothinside andoutsideoftheEU)haveinplacetonnagetaxregimestoattractshippingcompaniesto registerintheirjurisdictions. WhenaskedaboutthelevelofsupportreceivedfromtheUKGovernmenttothe maritimesectorvisvisotherEuropeanGovernments,mostrespondentstotheonline surveyfelttheUKGovernmentwaslessgenerousinitssupportthanotherEuropean Governments,althoughthoseofferingbettersupportwerenotmentioned.

46

Figure6.1.a:Surveyrespondentsviewonwhethertheyreceivemoreorlesssupport fromtheUKGovernmentcomparedtootherEuropeancountries

Source:Deloitte/OxfordEconomicssurvey

Over70percentofrespondentsinthemaritimesectorfelttheyreceivedmoresupport fromotherEuropeanGovernmentsascomparedtotheUKGovernment.Respondentsdid notspecifythenatureofthesupport,althoughanecdotallythisisthoughttoinclude greatersupporttoshippingcompaniestotakeonboardmorecadets. 6.2 Comparisonwithemergingrivals

Traditionally,themainrivalstotheUKmaritimesectorhavebeenotherEuropean maritimecentressuchasHollandandDenmark.However,inrecentyears,countries furtherafieldhavebeentakingactivestepstoestablishtheirownmaritimeclustersand alsodevelopalreadyexistingshippingsectors.Whenshippingcompaniesandcompanies inthemaritimesectorwereaskedintheonlinesurveytocomparethelevelofsupport theyreceivedfromnonEuropeanGovernments,respondentsfelttheyreceivedmore fromthesecountriesthanfromtheUK.However,whilstcurrentsupportfromnon EuropeancountriesforshippingandmaritimeclusterswasgreaterthanintheUK,itwas lessthanwhatwasprovidedbyEuropeangovernments. Figure6.2.a:Surveyrespondentsviewonwhethertheyreceivemoreorlesssupport fromtheUKGovernmentcomparedtononEuropeancountries

Source:Deloitte/OxfordEconomicssurvey

GivenwidespreadexpectationsthatAsiancountrieswillbeaggressivelyexpandingtheir ownmaritimesectors,itmaybethecasethatintheshortterm,moresupportismade availableforseafarertrainingtoattractcompaniestoregisterinthesecountries. Indeed,recentobservationsbytheAsianShipownersForuminMay2011,whose committeeonseafarersnotedthatincreasinglythereisactivecooperationbetween governments,traininginstitutionsandshipownersinAsiaonthetrainingand employmentofseafarers.Anumberofinitiativeshavebeenlaunchedtoattractnew recruitstothesector(seebelow).

47

ThiscouldhavethreepotentialimplicationsfortheUKandothertraditionalmaritime nations: giventheglobalnatureoflabourmarketsforseafarersandexseafarers, countriesthatareabletooffermoreattractiveremunerationpackageswillbe abletodevelophighqualityworkforceswithoutnecessarilyneedingtoinvestin theirowntrainingprogrammes(aglobalfreeriderissue); relatedtothepreviouspoint,thepoolofseafarersthatshippingcompanieswill beabletorecruitfromwillincreaseasmorecountriesdevelopcomparable trainingprogrammes 51 ;and giventhefootloosenatureoftheshippingindustryandelementsofthemaritime cluster,countriesthatofferincentivestorelocatewillbeabletoquicklyestablish asignificantmaritimesector. However,itshouldbestressedthatchangestothemaritimesectorarenotzerosum. Countriesmaritimesectorscanexpandandprosperwithoutnecessarilyharmingtheir rivalsespeciallyiftheoverallsizeofthesectorisincreasingwithrenewedeconomic growthandtradeactivity.Further,globallabourmobilitywillonlybeeffectiveinpractice ifshippingcompaniesareconfidentthatallcountriesseafarersadheretocommonbasic minimumstandards.Theriskofnotmeetingbasicminimumstandardsisthatseafarer qualificationsfromaparticularcountryarenolongerrecognisedorthoughtcredible 52 . Inthefollowingsubsection,trainingprogrammesandotherdevelopmentsinSingapore andtheFarEastarediscussed. Singapore Themaritimeindustryemploysover150,000workerswhichcontributesover7percent ofSingaporesGDP 53 .Therearetotal43,000seafarersofover100nationalitiesworking onboardSingaporeflaggedships,however,lessthan400arereportedtohold Singaporeannationality. Singaporeanshipshavealsofacedaproblemofretention.ManyqualifiedIndonesian seniorofficershavebeenluredawaybythehigherwagesonthedeepseainternational commercialfleet. In2011,TheCertificateofCompetency(SpecialLimits)programmewasintroducedby SingaporesMaritimeandPortAuthority(MPA)incollaborationwiththeNationalTrades UnionCongress(NTUC),theEmploymentandEmployabilityInstitute(e2i)andthe SingaporeWorkforceDevelopmentAgency(WDA).Theprogrammeisaimedattwoissues inparticular.TheGovernmentwantstoexpandthepoolofseafaringexpertiseamongits citizensandpermanentresidents(PRs),asfewSingaporeansserveonthecountryslarge nationalflagdeepseafleet.Thehopeisthatthiswillappearattractivetoyoungpeople whowanttoserveatseabutarewaryofspendinglongperiodsoftimeawayfromhome. Theprogrammeseekstoassistpotentialrecruitsinsecuringplacementswithemployers beforetrainingcommences.TheMPAbelievesthe21monthtrainingprogrammeoffers boththeoreticalandpracticalexposureandwillcoverhandsontrainingforpractical seamanship,boathandlingandsurvivaltechniques.Itisorganisedintothreephases:pre seainduction;onthejobtraining;andanexampreparatorycourse.Theaimofthe programme,developedincloseconsultationwiththeSingaporeShippingAssociation

51

ANautilusInternationalsurveycarriedoutin2010found30percentofshipshadover6differentnationalities onboardcomparedwith13percentin2001(source:ANautilusInternationalsurveyofseafarerslivingand workingconditions).

ThishasbeenthecaserecentlywiththeEUthreateningtobanFilipinoworkersfromEUregisteredships, followingareportbytheEuropeanMaritimeSafetyAgencywhichraisedconcernsaboutthelevelandqualityof trainingforFilipinoseafarers. 53 Source:ChairmansReporttothe20thASF,Bali,Indonesia24thMay2011 48

52

(SSA)andtheSingaporeMaritimeOfficersUnion,istotrain60recruitsoverthenexttwo years. Traineesstartasdeckcadetsonboardvesselsoperatingwithinportlimits.After obtainingtheCoC(SpecialLimits)certificate,theycanworkonboardbunkertankersas chiefmate(speciallimits).After23yearsofseatimeandwithcontinuedgood performance,achiefmatecanattendfurtherupgradingcoursesandtakeexaminations toqualifyasmaster(speciallimits).TheMPA,e2i,WDAandSSAsaffiliatedbunkering companieswillcontributemorethanS$2.3M(US$1.8M)tocoverS$19,000/trainee coursefeesandprovideallowancesforthecandidates.RecruitmentbeganinFebruary 2011. Thefigurebelowsummarisesthedifferencesandsimilaritiesbetweentrainingregimesin theUKandSingapore. Table6.2a:ComparisonoftrainingregimesintheUKandSingapore Country
UK

Seafarertrainingregimes
ThecurrenttrainingstructureforbothRatingsandOfficers maintainsthebasicapprenticeshipformat,withshipping companiesplayingasignificantroleinthetrainingofcadets. Cadetsreceivebothanacademicandprofessionalqualification (CoC). OfficersachievetheSTCW95OfficeroftheWatch(OOW) certification,qualifyingtheseafarersasJuniorOfficers Ratingsundertaketraining,coupledwithseatime,to obtainaNavigationalWatchRatingcertificategivingthem therankofOrdinarySeaman

Government support
SMarTprovides upto20,000 (50percentof actualtraining costs)percadet fortheduration ofthetraining programme

Singapore

TheGovernmentwantstoexpandthepoolofseafaring expertiseamongitscitizensandpermanentresidentsthrough offeringaCoCprogramme. The21monthtrainingprogrammeoffersboththeoretical andpracticalexposureandwillcoverhandsontrainingfor practicalseamanship,boathandlingandsurvivaltechniques Itisorganisedintothreephases:preseainduction;onthe jobtraining;andanexampreparatorycourse AfterobtainingtheCoCcertificate,theycanworkonboard bunkertankersaschiefmate After23yearsofseatime,achiefmatecanattendfurther upgradingcoursesandtakeexaminationstoqualifyas master

MPA,e2i,WDA andSSAs affiliated bunkering companies subsidisethe S$19,000(100 percent) traineecourse feesand provide additional allowancesfor thecandidates

Source:Deloitteanalysis

OtherrecentdevelopmentsinseafarertraininginAsia Thefollowingisanonexhaustivelistofrelevantinitiatives/developmentsoccurring aroundseafarertraininginAsia. China:thedemandforqualifiedseafarerscontinuestoincrease,whichhasledto wageinflation.Inresponse,maritimetrainingandeducationinstitutionsare activelyimprovingthequalityoftrainingtocomplywithinternationalstandards. HongKong:inresponsetolownumbersofHongKongseafarers,theHKSOA launchedaprogrammein2002toincreasecadetnumbers.Theprogrammeis reportedasachievingalmost100percentretentionwith136cadetsemployed (comparedtoatotalof147HongKongseafarersworkingonoceangoingships).

49

CadetsreceiveHK$5,000amonthfromtheGovernmentandthecostof developingtrainingfacilitieshasbeensubsidised. Japan:followingalongtermdeclineinthenumberofJapaneseseafarers,a taskforcewasestablishedin2008topromotetheprofession.Initiativesagreed includegreatercooperationbetweenmaritimetraininginstitutesandan internationaltrainingprojectionforAsianstudents. Taiwan:theMinistryofEducationhasapprovedabudgetforbuildingdedicated trainingshipsforstudentsofmaritimeuniversities.Thecostofstudyingin maritimevocationalschoolsremainsfree.

ItisclearthatanumberofAsiancountriesaretakingactivestepstoexpandanddeepen theirshippingsectorsandmaritimeclusters. 6.3 Experienceofhistoricrivals

ThissectionbrieflyconsidersthehistoricexperienceoftheUnitedStatesandAustralia. Bothcountrieshadsignificantmaritimeclustersthathavesubsequentlydeclined, althoughinthecaseofAustralia,stepsarebeingtakentoreversethisdecline. UnitedStates TheUnitedStatesshippingindustryrepresentsanumberofcoastalmaritimeclustersthat dealwithalargeproportionofthecountrysimportandexporttradebysea.South Louisiana,Texas,NewYorkandCaliforniaarethemainfourshippingclustersinthe country. ThecaseofNewYorkisparticularlyinstructive.NewYorkexperiencedrapidgrowthfrom thelate19thcenturythroughtothe20thcentury,mostnoticeablyinapostwarboom periodinthemid20thcentury.However,arapidanddrasticabandonmentofNew Yorkswaterfrontaroseduringthelate1960s.Thisappearstobemainlyasaresultofthe developmentofcontainerisationtechnology.Theportsslowreactiontotechnicaland economicinnovationssawitloseitscompetitiveedgetoportsinNewarkandNewJersey, losingnotjusttheshippingcompaniesbutalsotheassociatedactivity. Afurther,andmoredrastic,impactontheshippingindustryintheUnitedStatesasa wholewaswitnessedfollowingtheintroductionin1986oftheTaxReformAct.ThisAct repealedtheprovisionwhichhadallowedUSshippingcompaniestoexemptforeign incomefromitsoperationsforthepurposesoftaxation,makingtheUnitedStatesthe onlycountrytotaxsuchincome.Theresultsweredramaticfrom1988to1999the numberofUSowned,foreignflaggedshipsasapercentageoftheworldmerchantfleet droppedfrom5.6%to2.9percent. 54 Despiteachangeintaxlawsin2004,thelackofnewexpertisebothatseaandashore duringthe1990sismakingrecoverydifficult. Australia Australiaisregardedasoneofthemostimportantplayerswithintheglobalmaritime industryandisestimatedtohandlec.10%ofallglobalseabornetrade.However,overthe past16years,Australiahasexperienceddeteriorationintheperformanceofitsmaritime sectorwiththenumberofAustralianflaggedshipsfallingfrom55in1996to22thisyear. Those22AustralianshipsthatserviceAustralianportsareonaverage,20yearsold, aroundeightyearsolderthantheworldaverage.Also,thedomesticseafarerworkforceis ageing,withhalfoftheseafarersolderthan45.

54

TaxAnalystsViewpointsSeptember10,2007

http://fpgdc.com/images/Kies_ShippingArticle.pdf

50

Illustratively,therecentadvertisementforanAustralianPortMasterhereintheUK demonstratedtheshortageofAustralianexseafarerstoworkinAustralianports. Inresponsetothedeclineinitsmaritimesector,AustraliahaslaunchedStrongerShipping foraStrongerEconomy.ThiswillbeimplementedinJuly2012andseekstoincreasethe Australianshippingsectorsglobalcompetitiveness.Thepolicycontainsfourelements: taxreformstoremovebarrierstoinvestmentinAustralianshippingandtofoster theglobalcompetitivenessoftheshippingindustry; astrengthenedandsimplifiedregulatoryframeworkwithatransparentlicensing regimesupportedbyclearlystatedobjectives; theestablishmentofanAustralianInternationalShippingRegister(AISR)to encourageAustraliancompaniestoparticipateintheinternationaltrades;and establishmentofaMaritimeWorkforceDevelopmentForumtoprogresskey maritimeskillsandtrainingpriorities. ThepolicywillmeanthatAustralianresidentcompanieswithAustralianregisteredvessels willpaynocompanytax,withqualifyingincomefromshippingandroyaltywithholding taxalsoexempted.Thedepreciationratewillalsobecutfrom20yearsto10yearswith thehopeofacceleratingfleetrenewal.Rolloverreliefwillalsobeofferedandtaxoffsets willbeavailabletoAustralianemployersofresidentseafarerswhoworkininternational trade. Thenewregister,theAustralianInternationalShippingRegister(AISR),isdesignedto attractnewtonnagetothecountry.TheAISRwilloffersomeexemptionsfrom employmentlegislation,includingtheFairWorkAct,whentradinginternationally. ShipownerswillberequiredtocomplywiththeInternationalLabourOrganisations MaritimeLabourConventionandothertreaties.Afurtherprerequisiteisthatentrants willneedtoemployatleasttwoAustralianseafarerspership,preferablythemasterand thechiefengineer.Moreover,theFairWorkActwillstillapplyonvoyagesbetween domesticports. 6.4 Conclusion

Thischapterhaspresentedinternationalexamplesofseafarertrainingprogrammes. SomeofthesesharecommonfeatureswiththeUKmodelcombiningelementsof classroombasedlearningandatseatraining.However,unlikeothercountriestraining schemes,theUKseafarertrainingprogrammeallowsnewlyqualifiedofficersto immediatelyenterintoadefinedprofession. Nearlyallcountriesoffersomeformofsupportforseafarertraininginconjunctionwitha tonnagetaxandthereisfiercecompetitiontoattractshippingcompaniesregistering. Increasingly,traditionalcentresofshippingandestablishedmaritimeclusterswillface competitionfromAsiancountries,bothintermsofpoachingtalentfromEuropeanand developingtheirownpoolofhighlyqualifiedseafarers.TheexamplesofNewYorkand, untilrecently,Australia,demonstratethatshippingcentresandmaritimeclusterscannot affordtostandstillandmustcontinuetomaintainanddevelopaskillsbaseorrisklosing theircomparativeadvantages.

51

StakeholderConsultation
detailedonetoonediscussionswithPanelmembers; facilitatinganindustryworkshopfor16stakeholderorganisationstodiscussthe issues;and hostinganonlinesurveyseekingstakeholderviewsanddatathelinktothe surveybeingsenttoreadersofLondonMattersandthemembersofvarious stakeholderorganisations.

Aspartoftheevidencegatheringphaseofthisreview,DeloitteandOEhaveconducteda threeprongedapproachtocollectingdata:

Thischaptersummarisestheviewsofstakeholdersitdoesnotseektorecordverbatim allstakeholdercommentsreceived.Theviewspresentedareaggregatedandarenot attributabletoindividualstakeholdersconsulted. Itshouldbenotedthatsurveyresultspresentedarebasedonaresponserateof114 responsesfromarangeofcompaniesintheshippingsectorandmaritimecluster. Figure7.0a:Profileofonlinesurveyrespondents

Source:Deloitte/OEsurvey.Totalrespondents=114.

Whilstthisrepresentsacrosssectionofopinionacrosstheindustry,theresultsshouldbe treatedwithcautionandshouldnotbeconsideredacompletelyrepresentativesample. Astheabovefigurenotes,norespondentsidentifiedthemselvesasbeinginthefinancial servicessectorhowever,respondentscategorisingthemselvesasotherinsome casesspecifiedthemselvesasbeinginvolvedininsurance 55 .Further,notallrespondents completedallquestionsandforcertainquestions,thenumberofanswersreceivedwas toosmalltobeconsideredrobust.Lastly,givenrespondentsansweredthesurvey questionsinthecontextofareviewonthefutureofSMarTitshouldbeexpectedthat theiranswersmaybebiasedinaparticulardirectionDeloitteandOEhavenot attemptedtocleansethedataforbiases.

55

Respondentsalsoidentifiedthemselvesasfishingcompanies,crewmanagement,localauthorities,inland waterwaysandtourism. 52

Accordingly,thequantitativesurveyresults,whilstindicative,shouldbetreatedwithcare andthecontexttheywerecollectedinconsidered. 7.1 TheUKmaritimesector

Stakeholdersemphasisedthatevenwithintheshippingsectorsandmaritimecluster thereisadiversityofeconomicactivities.Theskillstrainedseafarershaveareapplicable acrossarangeofareasforexample,withintheshippingsector,seafarerscanbefound insurveyandexplorationaswellasfreightandtourism. Stakeholderslistedanumberofreasonswhytheybelievedthemaritimesectorwas differenttoothersectors. Criticalrole:themaritimesectortransportsover90percentoftheUKsvisible importsandexportswithoutit,tradewouldbeimpossible. Greatermobility:comparedtoothersectors,participantsinthemaritime cluster,andshippingsectorinparticular,wereidentifiedasbeingverymobile withfewbarrierstoentryintomostmarkets.Thismobilitymanifesteditself mostvisiblyintwosenses:globallabourmobilityandtheeasewithwhichaflag canbechangedinaveryshorttimeperiod.Comparedtootherindustries,a shippingcompanywassaidtobeabletomoveitsoperationsveryquickly potentiallyovernightinsomecases. Natureoftraining:theleadintimenecessaryforanewlyrecruitedtraineeto becomeanofficerislongerthanmanyotherindustries.Typicallythiscantake betweeneightandnineyearsofhighlyspecialisedtrainingthatmustconformto internationalstandardsassetoutintheSTCWconvention.Further,aperiodof serviceatseaiscompulsory.However,itshouldbenotedthatunlikemanyother professions,atpresent,cadetsaresaidtofinishtraining/qualifyingalmostdebt free. 7.2 Demandandsupplyofseafarersandexseafarers

ChangesinthenumberofUKseafarers Stakeholdersagreedwiththecontentionthattherehasbeenadeclineinthenumberof UKseafarers.ItwasarguedthatthenumberofUKseafarershadbeenindeclinesincethe late1970satrendwhichwasacceleratedinthe1980s.Stakeholdersidentifiedthree reasonsforthisdecline: areductionindemandcausedbycontainerisationwhichenabledtheuseof fewershipsthatcouldsailwithsmallersizedcrewscomparedtotraditional cargovessels; theeffectofglobalisationwhichputpressureontheBritishshippingindustryto makeefficiencysavingsandseekcheaperlabourfromoverseas;and theeffectsofaglobalrecessionthatmeantshippingcompanieshadover capacityandwerenotreplacingseafarerswholeftthesector. Theabilityofshippingcompaniestorecruitgloballywasfacilitatedbythecominginto forceofSTCWwhichsetcommonstandardsofcompetencyforseafarersalloverthe world.Stakeholdersarguedthatthesecommonstandardsgaveacompetitiveadvantage toofficersfromdevelopingcountries,whoaretrainedtothesestandardsinorderto performthejobsrequiredofthematseaatconsiderablylowercostthanthosefrom developedcountries.Stakeholdersconcurredwiththeliteraturethatthereisnowaready sourceofnonUKseafarers(officersandratings)forcompaniestodrawupon,someof whomwillbecheapertoemploythanUKseafarers.Thenotionofaracetothebottom wasmentionedreferringtodownwardpressureonwages.

53

Acumulativeeffectofthesetrends,arguedbystakeholders,wasthatmanycompanies thathadpreviouslybeenactivetrainersofseafarersceasedorreducedtheirtraining programmes 56 . CurrentdemandtrendsforUKseafarers StakeholdersrecognisedthattherehadbeenadeclineinthenumberofUKseafarers beginninginthe1970s.TheyarguedthatthelegacyofdecliningnumbersofUKseafarers wasbeingfelttoday.Theynotedthatseabornetradehasnowrecoveredto2008levels and,giventhatthegrowthinshipscapacitiesisincreasinglyconstrainedbythesizeof ports,thedemandfornumbersofshipsisincreasing(asevidencedbyrisingordersin Asia)which,inturn,isincreasingthedemandforskilledseafarers.Thatthedemandfor seafarersisafunctionofincreasedglobaltradeisalsoconfirmedinthesurveyresults. Figure7.2a:Driversofincreasedseafarerrecruitment

Source:Deloitte/OEsurvey

Ofthoserespondentsansweringother,someofthemostcommonresponseswerethat companieswouldrecruitmoreseafarersiftrainingcostswerelower,ifthequalityofnew cadetswerehigherandifthereweremoreonboardtrainingberths. Stakeholdersreportedthatthereisnowsaidtobeaworldwideshortageofofficers (especiallytechnicalofficers).Thismismatchbetweendemandandsupplyhashadan inflationaryeffectonsalariesbothforseafarersandexseafarersworkinginthe maritimecluster. However,itshouldbenotedthattheonlinesurveyreportedthat,oftheshipping companiessurveyed,halfsaidthat,ceterisparibus,theyplantohirelessthan25people overthenext12monthssuggestingthattheshortageperhapsonlyappliestocertain specialistrolesorthatintheshortterm,companiesremaincautious.Itisalsointeresting tonotethatsurveyresponsesindicatedalimitedreductioninheadcountacrossthe maritimesectorasaresultoftherecentglobalrecessionwith60percentofrespondents reportingnoreductionatallandafurther25percentreportingareductionofonly between0and10percentofheadcountstaff.Anexplanationforthismightbethat shippingcompanies,likeotherbusinessesintherecession,chosenottoreduce headcountbutratherreviseworkingpatterns,suchasgivingseafarerslongerbreaks betweenvoyagesoraskingthemtotakewagecuts. Nonetheless,whenaskedaboutintentionstorecruitoverthenextdecade,survey respondentsweremoreoptimistic.

56

However,somestakeholdersdidacknowledgethatthemaritimesectorwasnotuniqueinrespecttodeclining employment numbers the manufacturing sector had seen similar trends in employment numbers and has a similarlabourforceprofileintermsofagestructure.

54

Figure7.2b:Expectedrecruitmentlevelsoverthenexttwelvemonthsanddecadeper company

Source:Deloitte/OEsurvey

Overathirdofrespondentsexpectedtheircompanyoverthenextdecadetorecruit50or morestaffintothemaritimesector,with31percentpredictinganincreaseinexcessof 100newstaff.Ofcourse,itshouldbenotedthatnotallofthesewillbeUKnationalsand manyofthesestaffwillnotrepresentadditionalitytheymaysimplybereplacingleaving staff. Figure7.2cbelowsummarisesrespondentsviewsonthetypesofstafftheyexpectto employoverthenext12months. Figure7.2c:Demandforseafarersoverthenext12months

Source:Deloitte/OxfordEconomicssurvey

Withintheshippingsector,thebulkofnewemployeesareexpectedtobeactive seafarers(eitherofficersorratings).However,traineesareexpectedtomakeupof25per centofnewstaffforaroundhalfofrespondentsintheshippingsector.Intermsofthe maritimecluster(nonshippingcompanies),nearlyhalfoftherespondentsexpectedmore than25percentoftheiradditionalstafftobeactiveseafarers,i.e.seafarersdrawn directlyfromtheshippingsector(asopposedtoexseafarersalreadyworkinginthe maritimecluster). Theeffectofthemaritimeclusteronseafarernumbers Stakeholdersalsorecognisedthepullofthemaritimeclusteronactiveseafarers.They notedthatthedeclineinactiveseafarersreflectedstrongdemandforexseafarersin
55

onshoremaritimeclusteractivitiessuchasfinance,lawandthetechnologysector drawinguponthepoolofactiveseafarersintheshippingsector.Thestrongdemandfor highlyskilledseafarerswasreflectedinwageincreasesforsuperintendentsforwhom thereisalackofsupply. Thedemandforseafarersbythemaritimeclusterwasalsoconfirmedinthestakeholder survey. Stakeholderssuggestedthattheaveragetimebeingspentatseawasgivenasbetween7 10years,thoughitwaspossibletobeatseaforonesentirecareer.Somestakeholders contendedthatUKseafarersweremorelikelytomovebackonshoreearliercomparedto othernationalities.Stakeholdersacknowledgetheexistenceofafreeriderissue, referringtothoseshippingcompanieswhospentsignificantresourcetotraincadetsnot fullybenefitingfromtheirinvestmentbecausethesecadetslefttogoworkforother shippingcompaniesorothercompaniesinthemaritimecluster. ThesupplyofUKseafarers Intermsofsupply,stakeholdersalsorecognisedthatthemaritimesectorhadstruggledin recentyearstoattractyoungpeople.Historically,shippinghaddifficultyinrecruitingfrom outsideoffamiliesandcommunitieswithashippinglegacy.Inrecentyears,considerable resourcehasbeendedicatedtoincreaseawarenessofthesectorandbroadenthe recruitmentpool. However,anumberofchallengesremain.Theseincludetheyoungbeingdeterredfrom enteringtheprofessionduetotherebeingnohistoryofgoingtoseainthefamily, seafaringapprenticeshipsnotbeingrecognisedbyBISforthisindustryandareluctanceto beawayfromfamilyandfriendsandalackofaccesstosocialmedianetworkstokeepin contactwiththem.Stakeholdersreportedthatyoungpeoplearenolongerattractedby theideaofseeingtheworldgivenquickturnaroundtimes.Theindustryhasalso sufferedfromnegativepressandotherissuessuchaspiracyrecently. Conversely,somestakeholdersexpressedtheviewthatgiventhecurrenteconomic climate,interestinthemaritimesectorandcadettrainingcouldincreasegiventhat96 percentofcadetsgoontojobsatsea(asfoundinaMCAsurvey)andthat(currently)the costoftrainingislargelymetbyemployersandtheGovernment. Alsoonthesupplyside,itwassuggestedthatthelownumberoftrainingplaceswas constrainingthenumberofnewcadetsundertakingseafaringtraining. 7.3 ExperiencesofSMarTandothertrainingschemes

Theimportanceofseafarertrainingtothewidermaritimesector Stakeholdersmadeanumberofargumentsforwhyseafarertraining,andbyimplication supportmeasuressuchasSMarT,iscrucialinmaintainingtheUKmaritimesectors competitiveness.Theynotedthathavingapooloftrainedseafarerswasakeycontributor totheUKmaritimeclustersstrengths.Itwasstatedthat,ingeneral,maritimeclusters strengthswerebasedonshipbuildingand/orstrongskillbases.TheUKhasthelatter losingthiswouldjeopardiseitspositionasamaritimecentreofexcellenceandrisklosing thewidercluster.StakeholderspointedtotheexampleofNewYork,whichusedtobea globalshippingcentre,butonceinvestmentintrainingandotherfacetsceasedthis precipitatedarelativedeclinetoapointwhereithasarelativelysmallglobalprofile today. Havingtrainedseafarerswassuggestedasthesinglemostimportantfactorforthe industryinthelongterm.Stakeholderspointedtodatawhichshowedthatpersonnel withprofessionalseagoingqualificationsandexperienceareconsideredessentialor highlypreferableforaround16,000shorebasedjobsintheUK.Around95percentof respondentstotheonlinesurveydeemediteithervitalorhighlydesirablethattheroles currentlyperformedbyexseafarerswerefilledbythosewhohadpreviouslybeenatsea.

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Lookingtothefuture,newsectorssuchasoffshorerenewableenergywereidentifiedas requiringareadysupplyoftrainedseafarers. ThebenefitsofSMarTandtakeupbycompanies Stakeholdersweremorepositivethantheliteratureoverthebenefitsandinfluenceof SMarT.TheimpactoftheSMarTschemewassaidtohavebeenhighlysignificantin reducingthecostsoftrainingcompaniesforseafarersand,thereby,enablingthe numbersintrainingtobeincreased.Togetherwithpositiveeffectsonthefleetofthe tonnagetax,SMarTwasclaimedtoberesponsiblefortheriseinthenumberofofficer traineesrecruitedfromaround450inthelate1990stoaround900today 57 .In1998 58 ,it wasprojectedthattherewouldbebetween6,000and9,000certificatedUKofficersby 2012(dependingontheretirementageassumption)theactualfigureiscloserto 13,000.SomestakeholderquotesonthebenefitsandeffectivenessofSMarTfromthe onlinesurveyarereproducedbelow. Figure7.3a:StakeholderquotesonSMarT InadecliningindustryithashelpedtokeepuptheleveloftrainedBritishseafarerstonot onlyserveonBritishvesselsbutalsotoprovidetrainedpeopleformarinerelatedindustry
suchassurveyors,pilots,insuranceandports.

Thesupporthasencouragedshipownerstotrainyoungseafarersandwhilstonlyasmall shorebasedpositionswheretheirexperienceandexpertiseensuresUKowned/based

proportionremainatseabeyondabout8to10years,thevastmajorityeventuallyfeedinto companiescontinuetobeconsideredworldclass.

Ithasencouragedandenabledmanyshippingcompaniestostimulateatrainingculture, needsoftheindustry. TheinvestmentmadethroughSMarThasbeenvitalforthecontinuationofastrongBritish MerchantNavy,whichcontinuestocontributesignificantlytotheeconomyoftheUnited atseaandonshore,benefittingthecountryimmenselyintradeandrevenue. SMarThasnotbenefittedtheinlandandcoastalwaterspassengervesselindustryatallandit

isaflawinprocess. [It]formsatokenpaymentforthehighcostsoftrainingadeckofficerwhichhelpstheless Kingdom.Ithasgiventhousandsofmenandwomentheopportunitytopursueacareerboth whichinturnishelpingtoprovidenewlyqualifiedjuniorofficersinlinewiththeidentified

dedicatedshippingofficerstostarttraining.
Source:Deloitte/OEsurvey

Responsesbyshippingcompaniestotheonlinesurveyshowedthatoverhalfofthem receivedgovernmentsupportforalloftheircadettrainingviaSMarT.Forthesetrainees, shippingcompaniesreportedthatSMarTcontributedbetween25and50percentofthe totalcostoftrainingcadets.NearlyallSMarTtraineesweresaidtobeBritishnationals.

57 58

IndustryandGovernmentfigures

UnitedKingdomSeafarersAnalysis1997,LondonGuildhallUniversity,CentreforInternationalTransport Management,1998 57

Figure7.3.b:ProportionoftraineecostscoveredbySMarT

Source:Deloitte/OEsurvey

Whenaskedwhetherexseafarersworkingforcompaniesinthemaritimeclusterhad gainedtheirCoCunderSMarT,themajorityofrespondentsansweredinthenegative. Figure7.3.c:Proportionofexseafarersstaffworkingatcompaniesinthemaritimecluster whohavetrainedunderSMarT

Source:Deloitte/OEsurvey

However,thisresultislikelytoreflectthefactthatSMarThasonlybeeninexistencefor aroundadecadeandmanyexseafarerswillhavebeentrainedbeforeitwas implemented. SMarTfundingwasalsodeemedtobecrucialforspecialisttrainingcolleges.Byhaving BritishtraineesusingSMarTtogettheirCoC,trainingcollegesareabletoattractfurther foreignstudentsstudyingfortheirCoCasourceofexportearningsfortheUK.Inthe absenceofSMarT,suchcollegesrisklosingamajorfundingstreamandbeforcedtoclose whichcouldmeanthatthissourceofUKexportearningsdriesup. Thecounterfactual WhenaskedaboutrecruitmentplansintheabsenceofSMarT(thecounterfactual), surveyrespondentssuggestedthatfewertraineeswouldhavebeenrecruitedandthat companieswouldhavebeenunwillingtoshoulderthefullcostofthetraining 59 .

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Theseresultsshouldbetreatedwithcareandthecontextunderwhichtheywerecollected(aspartofa reviewexaminingthefutureofSMarT)beaccountedfor. 58

Figure7.3d summarisesrespondentsstatedcoursesofactioninrespecttotrainingif SmarThadnotexistedinrespecttorecruitmentnumbersandhowtrainingcostswould havebeenmet. Figure7.3.d:CadetrecruitmentintheabsenceofSMarT

Source:Deloitte/OEsurvey

SomestakeholdersarguedthatiftherewasnoSMarTsupport,trainingofcadetswould stilloccurinsimilarnumbersbuttherewouldbeconditionsarounditandcompanies wouldseektotailorthetrainingmoretowardstheirownrequirementsratherthanthat ofthewidersector,potentiallyreducingbenefitstoorganisationsemployingexseafarers. However,aspointedoutduringthecourseofthestudy,trainingprogrammesare developedbytheMCAandtheMNTB.Shippingcompaniesarenotabletotailorthemto theirownneeds.Thesyllabusoftrainingprogrammeswouldnotchangeiftherewasno SMarTfunding. OtherstakeholderscontendedthatifSMarTfundingwerewithdrawn,thiswouldleadto anincreaseinthemarginalcostoftraining,whichwouldinevitablyforcecompanies involvedintrainingtoscalebackthenumberofnewpersonnelthattheyrecruited.This effectwouldbefeltimmediately. However,inthelongerterm,thereductionscouldbeevenmoreserious.These stakeholdersalsoquestionedwhethershippingcompanieswouldstillremaininthe tonnagetaxschemeifthelackofSMarTfundingmeantitbecameuneconomictofulfil trainingobligations. SomestakeholderquotesonwhatwouldhappenintheabsenceofSMarTarereproduced below. Figure7.3.e:StakeholderquotesonSMarT
ManyoverseascompanieswanttotrainintheUKbecauseofthequalityandreputation,but couldbeputoffbythecostandlackofsupport. AnnualrecruitmentofUKofficercadetswillinevitablydeclineifSMarTfundingis discontinued,probablybybetween30%and50%oncurrentnumbers.Manyshipping companiescaneasilycomparethecostoftrainingperofficerbynationality,andSMarThelps tomaintainarelativelycompetitivebalanceforUKofficercadets.Withoutitsomecompanies willmovetowardsnationalitiesthencostinglessthanUKofficerstotraintofirstcertification. AreductionofSMarTfundingisofconcerntousasitwillintroduceadditionalcoststoour businessinanalreadydifficultandchallengingfinancialclimate.Thiswouldleadtoapotential reductionintrainingofseafarers,whichinturnwouldleadtoalackofqualifiedofficersforthe industry. WiththeplannedchangesinUniversityandCollegefundingin2012,ifthefundingfor seafarersiswithdrawnthensmallercompanieswillnolongerbeabletotakeonUKcadetsand thiswillhaveahugelynegativeimpactontheUKMaritimeIndustry Asshippingcompaniesarenotthefinalenduserformanyexseafarersitrequires governmenttointervenetoensureadequatenumbersaretrained.
Source:Deloitte/OEsurvey 59

 Comparisonwithothercountries

Anumberofstakeholderscommentedthattrainingcostsforshippingcompanieswere lowerinotherEUcountriescomparedtotheUKdespiteSMarTsupport.Theyreported thatintheUK,theGovernmentcontributedupto50percentofthecostascomparedto 75percentinDenmarkand80percentinHolland.Moregenerally,asdiscussedin Chapter5,mostrespondentstothesurveyfelttheUKofferslesssupporttothemaritime industrythanitsrivals. Figure7.3.f:ComparingsupportforthemaritimesectorintheUKwithEuropeanandnon Europeancounterparts

Source:Deloitte/OEsurvey

AfurtherpointofcomparisonmentionedwasthattheDanishandDutchweresaidto frontloadtheirtrainingaspartoftertiary/furthereducation. 60 Asaresult,theUKtraining programmeisregardedassuperiortootherEuropeanschemes,thoughnotbyagreat dealandithastoworktomaintainitscomparativeadvantage.Indeed,itwasnotedthat inHolland,manystudentsdonotgoouttoworkatseaall,preferringinsteadtogo straightintothemaritimecluster. 7.4 ThecaseforhavingUKseafarersandexseafarersoverothernationalities

ItwasnotedbysomestakeholdersthattheconceptofdemandforUKseafarersisnot altogetherstraightforward.ItcouldrefertodemandforUKtrainedseafarersorUK nationalseafarers.Resultsfromtheonlinesurveysuggestthatforaroundhalfofall shippingcompanies,cadetsbeingtrainedunderSMarTareallBritishnationals,andfor theothers,BritishnationalsconstitutedthebulkofSMarTtrainees.ThissuggestsUK trainedseafarersandUKnationalseafarerscanlargelybethoughtofassynonymous. Thisnotwithstanding,stakeholdersarguedthattypically,companiesdonotactively recruitforaparticularnationality,suggestingthattherewasnosuchthingasdemand forUKseafarers.Further,itwasnotedthatcompaniestendtobeindifferentasto ratingsnationality. However,thisobservationnotwithstanding,otherstakeholdersdidhighlightanumberof reasonswhytheybelievedshippingcompaniesandcompaniesitthemaritimesectordo prefertoemployUKofficerseafarersandexseafarersoverothernationalities.Reasons included: UKseafarershavefewervisarestrictionsaremoregeographicallymobilethan othersomeothernationalities; UKseafarersandexseafarersaremorewillingtorelocate;

60

SeeChapter6foramoredetailedcomparisonoftherespectivesupportmechanismsforseafarertraining. 60

onaverage,UKseafarersarebettertrainedandhavebetterskillsthanmany othernationalities;and theyhavetheadvantageofEnglishasafirstlanguage.

ThiswasfurthercorroboratedbystakeholderswhohighlightedthatUKofficersarenot onlypreferredbyUKshippingcompanies,theyareindemandthroughouttheworld.The explanationgivenforthiswasthehighqualityoftheirtrainingandthestructureof seafarertrainingintheUKmakesanimportantcontribution.Stakeholdersnotedthatthe factthattraineesaresponsoredbypotentialemployersfromthebeginningoftheir traininggivestheircompaniesastakeintheirprogressandenablesthemtobeimbued withcompanyculturefromtheoutset.ThequalityofUKtrainingissaidtoberespected aroundtheworldwithlargenumbersofforeignnationalscometotrainatUKcollegesto obtainBritishcertificates. Thesereasonscoincidewithanswersgivenintheonlinesurvey. Figure7.4.a:ReasonsforpreferringBritishseafarersandexseafarers

Source:Deloitte/OEsurvey

ThemostpopularreasonsforpreferringUKseafarersandexseafarerstononUK seafarersandexseafarerswereexperienceandqualificationsparticularlyinthecaseof exseafarersworkinginthemaritimecluster.Whererespondentsansweredother,they tendedtoemphasisethattheadvantageofhiringBritishstaffwasacombinationof experienceandeaseofemployment,aswellasculturalawarenessofBritishworking conditions. Over70percentofrespondentsexpressedapreferenceforrecruitingofficerswithaCoC ratherthanbeingindifferentbetweenofficerswithaCoCandCEC.Theinferencefrom thisisthatUKofficersarepreferredtononUKofficers. Theseresultscapturecurrentpreferences.Somestakeholdersnotedthatsuch preferencesmaynotalwayslast,citingtheobservationthatsomeshippingcompaniesare nowincreasinglypreferringnonUKjuniorofficersforcostreason,meaningthereal preferenceisforexperiencedUKseafarers. 7.5 AlternativestoSMarT

StakeholderswereaskedwhatmightreplaceSMarTifitweretobeended.Inreplyingto thisquestion,stakeholdersdrewattentiontothefactthatchangestoseafarertraining cannotbeviewedinisolation.Aswellasconsideringthelargerbackdropofmaritime issues,seafarertrainingalsoneedstobeconsideredinlightofchangedfunding arrangementsforapprenticeshipschemesandnewfundingarrangements/charging structuresforuniversitiesandFurtherEducationcolleges.Collegefundingforofficer trainingcoursesunderGovernmentapprenticeshipschemesisnotaviableoption,as officertraineesarenotemployedonboardshipbutaresupernumerary. StakeholdersalsorecognisedthatwhenconsideringthealternativestoSMarT,thefree riderissuemustalsobeaddressed.Therewassaidtobeaclearbalancetobestruckon

61

equitablecontributionsfromallbeneficiaries(whichincludeGovernment),without jeopardisinganindustrywhichisclearlyopentotheeffectsofstronginternational competition. Whenpresentedwithalternatives,respondentsidentifiedtaxbreaksasthemostpopular alternativetoSMarTsupportforseafarertraining. Figure7.5.a:AlternativestoSMarT

Source:Deloitte/OEsurvey

Themostpopularotherresponsewaseithersubsidisingtuitionfeesormakingthem free. 7.6 Conclusion

Thischapterhassummarisedstakeholderresponsesontheissueofseafarertrainingin theUK.Theresponsesechotheconclusionsfromtheliteraturereview,inthat: themaritimesectordiffersfromothersectorsduetothehighlymobilenatureof companiesandlengthoftraining; themarketforseafarersandexseafarersisglobal; foranumberofyears,therewasaconsistentdeclineinthenumberofUK seafarers;and theUKsectorcannotaffordtostandstillitfacesgrowingthreatsfroma numberofestablishedandemergingshippingandmaritimeclusters. Itisclear,fromstakeholderresponses,thatSMarTiswidelyperceivedasbeingan effectivemechanisminpromotingthecompetitivenessoftheUKmaritimesector, althoughsomestakeholdersdidqueryitsrelevancetocertainmaritimeactivities. Responsessuggestithasbeeninstrumentalinraisingcadetnumbersagainsta counterfactualandensuringthereisareadysupplyoftrainedseafarersthatcanworkat seaandthenreturntothemaritimecluster,whichinturnmaintainstheUKspositionasa centreofmaritimeexcellence.

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Seafarerdemandandsupply forecasts

ThischaptersummarisesOEsprojectionsforthedemandforseafarersandexseafarers bytheUKmaritimesectoroverthenextdecade,andforthesupplyofthoseindividuals. Basedonthisanalysis,OEandDeloitteareabletoexpressapotentialsupplyshortfallfor UKseafarersinnumericalterms,showingthistobepotentiallysignificantinthecaseof DeckandEngineOfficersintheshippingsectorandinthesectorsemployingexseafarers (themaritimecluster). Thechapterisstructuredasfollows: recenttrendsandthestartingpointfordemandandsupply; demandintheshippingsectoroverthedecadeahead; seafarersupplyandtheshippingindustryskillsgap; exseafarersacrossthewiderUKmaritimesector; overviewofdemandandsupplyinthecentralprojection; alternativedemandandsupplyassumptions;and concludingcommentsonthepotentialroleforforeignseafarers. Onlyasummaryoftheprojectionsissetoutinthischapter.Detailednumbersanda muchmoreindepthdescriptionofthemethodologycanbefoundinannexeB. 8.1 Recenttrendsandthestartingpointfordemandandsupply

Estimatesofthenumberofofficersandratings,splitbynationalityandcategoryof responsibility,canbemadeusingacombinationofsurveydatafromtheUKChamberof ShippingandstatisticsonUKcertificatedofficersreportedbytheDepartmentfor Transport.Table.8.1a providesasummarywhilegreaterdetailissetoutinannexeB. ItcanbeseenthatemploymentintheUKshippingindustryincreasedsignificantlyover thesixyearperiod,helpedbyarobustincreaseintheproportionofnonUKstaff employed.Butasthedetailintheannexeshows,numbersofUKdeckandengineofficers areestimatedtohavegrownatonlyamodestpace. Table8.1a:EstimatedofficersandratingsemployedintheUKshippingindustry
Deckofficers Deckratings Engineofficers Engineratings Technical/generalratings Totaldeck&engine Technicalofficers Hotel&cateringofficers Hotel&cateringratings Totalother Overalltotal

2004
8,847 9,403 7,980 4,136 605 30,971 2,244 6,186 24,529 32,959 63,930

2010
13,952 15,170 12,240 6,289 1,313 48,964 3,830 4,742 40,498 49,070 98,034

Averageannual %change
7.9 8.3 7.4 7.2 13.8 7.9 9.3 4.3 8.7 6.9 7.4

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Averageannual %change

NonUKpersonnelas%: Deck&engineofficers Deck&engineratings Other(uncertificated)officers Otherratings

1 1

2004
29.9 44.1 67.0 69.3

2010
57.3 73.4 69.3 75.9

Includingtechnical/general.

Source:OxfordEconomicsestimatesbasedonUKChamberofShippingandDfTdata

Theactualemploymentfiguresestimatedaboveareunlikelytobeareflectionofboththe demandforandsupplyofseafarerstoserveintheUKshippinginagivenyear.Rather,it wouldbebettertoassume,inverybroadterms,that61 : whentheglobaleconomyisoperatingclosetoorabovefulleconomic capacity,thenactualemploymentinatypicalindustrywillbeconstrainedby andwillthereforebebroadlyequaltosupply,whilethetruedemandfor manpowerwouldbesomewhathigher;and whentheglobaleconomyisoperatingbelowitsfulleconomiccapacity,asin therecentpast,thenactualemploymentinatypicalindustrywillbeconstrained byandsobroadlyequaltodemand,withsupplysomewhathigher. LookingspecificallyattheUKshippingsector,theevidenceistentativelyconsistentwith thererecentlyhavingbeenasmalldegreeofexcesssupplyintermsofUKseafarers(see annexe).Reflectingthis,itisassumedthatactualemploymentin2010wasequalto demand,andthatadegreeofexcesssupplyexisted.Morespecifically,thisexcesssupply isassumedtohavebeen3.8percentofactualemploymentofUKnationalsinthatyear, equivalenttosome1.2percentofallUKandnonUKofficersandratingsworkinginthe sector. 8.2 Demandintheshippingsectoroverthedecadeahead

Inprinciple,developmentsinthedemandforseafarerswilldependonarangeoffactors, byfarthemostimportantofwhichisworldtradeingoods.Thatispartlybecausetradeat thegloballevelisadriverofUKshippingactivityinitsownright,andpartlybecauseitisa keydeterminantofUKspecifictrade,whichisalsoobviouslyimportantforthecountrys shippingindustry.However,reflectingthelatterpoint,wherethetrendinUKtrade divergesfromthatinglobaltrade,thetrendinUKshippingactivitywouldalsodiverge (thoughtoalesserextent)fromthatsuggestedbythetrendintotalglobaltradealone. ThetrendinemploymentintheUKshippingindustrywillalsotendtodivergefromthe trendinindustryactivity,reflectingchangesinproductivityovertime. Morespecifically,forthepurposesofthisreportitisassumedthatasimplerelationship holdsbetweenthetrendinglobaltradeingoodsandthetrendinthedemandfor seafareremployeesintheUKshippingsector,wherebythelattergrowsbythree percentagepointsperannumlessthantheformer.Thatallowsfor: ashortfallofaroundonepercentagepointreflectingthefactthatUKtradetends togrowmoreslowlythanglobaltrade,dueinlargeparttotheeffectoffast growingtradewithintheAsiaPacificandotheremergingregions.Overthe15

In practice it is possible for both excess demand and excess supply to exist in a given industry at the same time, due to skill mismatches or physical location issues. The assumption made here, that employment at any given time is equal to either demand or supply, is therefore a simplifying one. But it is not one considered to be unreasonable for the purpose at hand. It is also possible for a particular industry to be suffering from a shortage ofsupply,evenwherethegloballabourmarketasawholeisexperiencingexcesssupply.

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yearsto2008,globaltradeingoodsgrewonaverageby6.7percentayearand UKtrade(importsplusexports)by5.2percentayearadifferentialof1.5 percentagepoints(seechart).Andgoingforward,OEsmacroeconomicforecast suggeststhatthatdifferentialwilltendtobewider,atabovetwopointson average,asUKimportvolumesgrowlessrapidlythanoverthe19932008 period.TheshortfallofonepercentagepointallowsforthefactthatUKshipping activitydependsinpartonUKspecifictrade,andinpartdirectlyonglobaltrade. afurthershortfallofaroundtwopercentagepointsreflectingatendencyforUK employmenttogrowmoreslowlythanUKoutput.AcrosstheUKprivatenon financialservicessectorasawhole,employmentgrewby1.7percentper annumonaverageoverthe15yearsto2008,comparedwith4.2percentper annumforoutputadifferentialof2.5points.Forshippingspecifically,Oxford Economicshaspreviouslyestimatedvalueaddedoutputperworkerforthe period200409(seechart),findingthistohavebeensomewhaterraticoverthat timewithasharpdropin2009asthetrendinactivitywashitbytherecession. However,comparingtheaverageof2007and2008with2004,thedataare consistentwithannualproductivitygrowthintheregionof22percent,i.e. broadlyinlinewiththelongertermtrendfortheprivatenonfinancialservices sectorasawhole.Goingforwardthough,thegapisexpectedtobeslightly narrowerthaninthepast,asthescopeforproductivitygainsassociatedwiththe shifttolargershipsbecomesmorelimitedinthefaceofmorebinding infrastructureconstraints(portfacilities,canalwidthanddepthetc).

Figure8.2.a:TrendsinglobalandUKtrade
Annual % change in real terms
15.0 12.0 9.0 6.0 3.0 0.0 -3.0 -6.0 -9.0 -12.0 1981 1986 1991 1996 2001 2006 2011 2016 2021

World trade

UK trade

Source: Oxford Economics database

Figure8.2.b:Output,employmentandproductivityintheUKshippingsector

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TheDeloitte/OEsurveyaskedhowemploymentwouldchangeintheeventofa10per centriseinworldtrade.Excludingunknownsandwitheachfirmsanswerweighted accordingtotheiremploymentsizeband,46percentofcompanieswhosemainactivity wascommercialshippingsaidthattheywouldleaveemploymentunchanged,whilethe remaining54percentsaidthattheywouldincreaseitbutbylessthan10percent 62 .That isconsistentwiththeassumptionthatUKshippingemploymentwouldtendtoincreasein futureifglobaltradegrew,butataclearlymoremoderatepace. AsglobaltradeingoodsisindeedsettoincreaseoverthenextdecadeonOEscentral forecast,bysome6percentperannumonaverage,anincreaseonaverageof3percent perannumisthereforeprojectedinUKshippingsectoremploymentdemand.Onthe assumptionthatthepatternofdemandforthevariouscategoriesofofficersandratings remainsinlinewiththatin2010,thedemandprojectionsaresummarisedinthetable below.(Yearbyyeardetailisprovidedintheannexe.) Table8.2a:Projecteddemandforofficersandratings(UKandoverseas) Deck&engine
2010 2011 2016 2021 Officers 26,192 27,167 32,514 36,512 Ratings 22,772 23,620 28,269 31,745 Total 48,964 50,786 60,783 68,256

Other
Officers 8,572 8,891 10,641 11,950 Ratings 40,498 42,005 50,273 56,454

Overall total 98,034 101,682 121,697 136,660

Source:OEassumptionsandmodelling.

Thissimplemodellingdoesofcourseinvolvearangeofotherimplicitassumptions, namelythat: StructuralfactorspotentiallyaffectingtrendsintheUKsshareofglobal shippingactivityi.e.influencesoncompetitivenesssuchascomparativetax systems,regulations,relativewagesandotheremploymentcosts,training systemsandskills,infrastructurequality,securityfactors,etcareunchanged. Demandforpassengershipservicesmovesinlinewiththatforgoods transportation,asseemsreasonableonthegroundsthattradeingoodsand passengertransportdemandareultimatelybothdrivenbytrendsinglobal economicactivityandincome. Thepatternoftradeatthegloballeveldoesnotshiftinsuchawayastoalterthe assumedrelationshipbetweenglobaltradeandUKshippingactivity. Afullermodelwouldofcourseattempttoincorporatechangesinalloftheabovefactors, andpossiblysomeothers,basedinlargepartonrelationshipsfoundtohaveheldinthe past.However,inthisparticularcasesuchanapproachwouldbeunlikelytoyieldany betterresult. AconsistentsetofdataonUKshippingindustryemploymentisonlyavailable backto2002,whichisreallyaninsufficientrunoftimeforaccurateestimation. Inanycasetheshifttothenewtonnagetaxregimerendersthepast somewhatirrelevant.Itmeansthatthepre2000periodmaynotprovideagood modelfortheunderlyingrelationshipsthatexisttoday.Butneitherwouldthe

Onanunweightedbasis50percentofcommercialshippingfirmsgivingadefinitivereplysaidthat employmentwouldbeleftunchangedand50percentthatitwouldbeincreasedbylessthan10percent. Amongstallrespondentstothisquestionincludingsomewhosemainactivityisrecreationalboating54per centoftheunweightedsamplesaidthatemploymentwouldbeleftunchangedand46percentthatitwouldbe increasedbylessthan10percent.

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immediatepost2000period,asafairproportionofthestrongjobsgrowthseen inthateracouldinprinciplebeaoneoffincreaseinthelevelofemployment inresponsetothechangeinthetaxregime,ratherthanareflectionofthemore normalrelationshipbetweentheratesofchangeinemploymentandinthose ofitskeyongoingdrivers.

8.3

Seafarersupplyandtheshippingindustryskillsgap ForUKofficersofallkinds,anoutflowfromthelaboursupplyof6percentper annumuptoage61,withanoutflowof34percentabovethat,uptoan assumedcutoffpointatage70. ForUKratingsofallkinds,anoutflowfromthelaboursupplyof6percentper annumuptoage61,withanoutflowof26percentabovethat,uptoan assumedcutoffpointatage70. ForUKdeckandengineofficers,anassumptionthatsome800peryearwill commencetraining,withanannualdropoutrateof8percentduringthefour yeartrainingperiod,andasubsequentleavingratefromtheindustryof6per centperannum. AfewadditionalUKratingtoofficerconversionseachyear. Asplitinofficertraineesbetweenthedeckandenginecategoriesinlinewith thatinrecentyearsi.e.somewhatmoredeckthanengine. FurtherannualinflowsofUKnationalsasfollows:185technicalofficers,195 cateringofficers,200deckratings,10engineratings,45generalratingsand955 cateringratings. Annualgrowthinthesupply(i.e.stock)ofnonUKofficersandratingsof5per annumperannumacrossallcategories.

Onthesupplyside,thekeyassumptionsmadeinOEscentralprojectionareasfollows:

Muchgreaterdetailisincludedintheannexe,whileasummaryoftheresultingskills gapsispresentedfurtherbelow,afterconsiderationoftheemploymentofexseafarers bythewidermaritimesector. 8.4 ExseafarersacrossthewiderUKmaritimesector

OEestimatedthenumberofexseafarersdemandedandsuppliedacrossthewiderUK maritimesectorfortheperiod200811,bycombiningsomeofthefindingsofthestudy carriedoutbyGardneretalsevenyearsago63 withsomeresultsfromtheDeloitte/OE surveyasdescribedintheannex.Demandwasthenprojectedforwardonthebasisof theassociatedsectoremploymentforecastsfoundonOEsglobalmacroeconomicand industrymodels,withtheresultssummarisedinTable8.4aandalsosetoutinmoredetail intheannexe. Unlikeintheshippingsector,itisassumedthatsupplyshortageswerestillapparenteven intheaftermathoftherecession(althoughthesewerelessintensethantheywouldhave beenintheabsenceofthatdownturn),reflectingtheearlierfindingthatin2003some13 percentofexseafarerjobswerefilledbynonseafarers.Thus,actualemploymentin 2011istakenasthestartingpointforsupplyratherthandemand,withdemand somewhathigher.(Demandinthiscaseistakentobethenumberofjobsforwhichanex seafarerisregardedbytheemployeraspreferable,withsupplybeingthenumberofjobs actuallyfilledbyanexseafarerratherthananonseafarer.)

TheUKeconomysrequirementsforpeoplewithexperienceofworkingatsea,BMGardneretal,Cardiff University,fortheDfT,ChamberofShippingandMarineSociety,January2004.

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Table8.4a:ThedemandforexseafarersbytheUKmaritimecluster
Shipping, ports, towage Marine etc,ship engin brokers eering &agents 288 286 264 6,339 6,876 7,018 Consul tants, surveyors, lawyers, class ification societies 4,116 5,034 5,398

Oil& gas

Marine equipment &IT

Insurance &ship finance 497 515 517

Training providers &public bodies, etc 2,522 2,441 2,493

Total
17,275 18,254 18,418

2011 1,306 2,207 2016 1,132 1,970 2021 977 1,749

Source:OxfordEconomics

Developmentsinthesupplyofexseafarersmeanwhilearebasedon: AnassumptionthatUKdeckandengineofficersandratingsleavingactive seafarerroleswithshippingcompanies,uptotheageof50,becomeavailableto workinexseafarerpositionsintheUKexcludingthosewhohaveworkedfor fewerthanfouryears. AmodestallowanceforadditionalexRoyalNavyandcommercialfishing personnel. Acomparativelymodestoutflowratefromthesectorof4.5percentperannum (coveringbothretirementandpreretirementleavers). Anassumptionthattheinflowofforeignexseafarerstothesectormovesina constantproportion(17percent)tothatofUKexmerchantnavyseafarers(with theseindividualsassumedtohaveallservedintheUKshippingsector). Table8.4bshowsthatontheseassumptionsthesupplyofUKexseafarerstothe maritimesectordeclinesgraduallyovertheyearsahead.Eventakingintoaccountforeign exseafarers,skillsshortagesareduetopersistinthissectoroverthecomingdecade,as showninthenextsection. Table8.4b:Projecteddemandandsupplyofexseafarersgoingforward
Totaldemandforex seafarersbyUK industry 2011 2016 2021 17,275 18,254 18,418 14,090 14,181 14,586 2,140 2,145 2,206 SupplyofUKex seafarerstoUK industry Supplyofforeignexseafarers (fromUKshippingsector)toUK industry

Source:OxfordEconomics

RespondentstotheDeloitte/OEsurveysuggestedthattheyexpectedtorecruita numberofactiveseafarersequivalentto42percentoftheirexistingstockofexseafarers overthenextdecade,plusafurthernumberofexseafarersequivalentto19percentof thatstock64 .Ifrespondentsareinterpretingthisquestionasreferringtonewrecruitsin total,ratherthannetgrowthinemploymentafteraccountingforpeopleleaving,thenon

Estimates based on questions about total employment in maritime areas, the proportion of present employeeswhoareexseafarers,andplannedrecruitmentofactiveandexseafarersoverthenextdecade.Note that a quite significant proportion of exseafarer (as opposed to active seafarer) recruits would be from within theUKsector,ratherthanbeingnetadditionstoUKemploymentofexseafarers.

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thisbasisemploymentofexseafarerswouldedgedownslightlyoverthedecade broadlyinlinewithOEsexpectationofsupplyasestimatedabove,ratherthandemand asestimatedonthebasisofthewiderUKeconomicoutlook.Thisinturnwouldbe consistentwithemployersofexseafarersrecognisingthelikelyconstraintson employmentofthosepersonnelasaresultofpotentialongoingsupplyshortages. 8.5 Overviewofsupplyanddemand:centralforecast

Table8.5abringsallofthistogether,showingthat,overall,supplyanddemandshouldbe verybroadlyinbalancebetweennowand2021.However,inthecaseofUKdeckand engineofficersspecificallyi.e.thegroupforwhichmaritimetrainingismostpertinent ashortageisexpectedtodevelopovertheyearsaheadpeakingatover4,000in2019and remainingatabove3,500in2021.Thatlastfigureistheequivalentof10percentoftotal projecteddemandfordeckandengineofficersinthatyear. AshortageisalsoexpectedtobuildintheimmediatefuturethecaseofUKdeckand engineratings,peakingatover1,250in2016equivalentto5percentoftotaldemand inthatyearalthoughthisshortfallshouldsubsequentlyeasewiththegaphavingbeen eliminatedby2021.AndinthecaseofUKexseafarersemployedinthemaritimecluster, ashortageisalsoprojected,peakingin2017atalmost2,000(equivalentto11percentof totaldemandinthatyear)andremainingabove1,600(10percent)in2021. Table8.5a:Projectionsforseafarerandexseafarernumbers
Deckandengineofficersatsea Total demand 26,192 27,167 32,514 36,512 UKsupply 11,621 11,236 9,076 7,299 NonUK required 14,571 15,931 23,438 29,213 NonUK supply 14,998 15,748 20,099 25,652 Supply shortfall 428 182 3,339 3,561 Shortfallas %of demand 2 1 10 10

2010 2011 2016 2021

Deckandengineratingsatsea Total demand 22,772 23,620 28,269 31,745 UKsupply 6,292 5,911 4,600 3,968 NonUK required 16,481 17,708 23,669 27,777 NonUK supply 16,712 17,548 22,396 28,583 Supply shortfall 231 161 1,273 806 Shortfallas %of demand 1 1 5 3

2010 2011 2016 2021

Totaldeckandengineofficersandratingsatsea Total demand 48,964 50,786 60,783 68,256 UKsupply 17,913 17,147 13,676 11,266 NonUK required 31,051 33,639 47,107 56,990 NonUK supply 31,711 33,296 42,495 54,236 Supply shortfall 659 343 4,612 2,754 Shortfallas %of demand 1 1 8 4

2010 2011 2016 2021

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Table8.5b:Projectionsforseafarerandexseafarernumberscont.
Exseafarersinthewidermaritimesector Total demand 17,354 17,275 18,254 18,418 UKsupply 13,990 14,090 14,181 14,586 NonUK required 3,364 3,185 4,073 3,832 NonUK supply 2,125 2,140 2,145 2,206 Supply shortfall 1,239 1,045 1,929 1,626 Shortfallas %of demand 7 6 11 9

2010 2011 2016 2021

Otherofficersatsea Total demand 8,572 8,891 10,641 11,950 UKsupply 4,687 4,676 4,756 4,893 NonUK required 3,885 4,215 5,885 7,057 NonUK supply 4,058 4,261 5,438 6,940 Supply shortfall 172 45 447 117 Shortfallas %of demand 2 1 4 1

2010 2011 2016 2021

Otherratingsatsea Total demand 40,498 42,005 50,273 56,454 UKsupply 10,134 10,267 10,960 11,612 NonUK required 30,364 31,738 39,313 44,842 NonUK supply 30,737 32,274 41,190 52,570 Supply shortfall 373 535 1,877 7,728 Shortfallas %of demand 1 1 4 14

2010 2011 2016 2021

Source:OxfordEconomicsassumptionsandmodelling

Table8.5c:Projectionsforseafarerandexseafarernumberssummary
Overalltotal Total demand UKsupply 46,724 46,179 43,573 42,358 NonUK required 68,665 72,778 96,379 112,720 NonUK supply 68,630 71,970 91,268 115,952 Supply shortfall 35 808 5,111 3,231 Shortfallas%of demand 0 1 4 2

2010 115,389 2011 118,958 2016 139,952 2021 155,078

Source:OxfordEconomicsassumptionsandmodelling

8.6

Alternativedemandandsupplyassumptions

TheprojectionssetoutaboveareconsistentwithOxfordEconomicslatestcentral forecastthatis,theoutlookseenasthesinglemostlikelyscenariotodevelopoverthe yearsahead,recognisingthatthereisscopefortheseexpectationstobesurprisedon boththeupsideanddownside.Butaswellasproducingaregularlyupdatedcentral projection,OEalsoproducesalternativescenarioslookingoutoverafiveyearhorizon whichalthoughviewedasoutsiderisksarerecognisedasbeinggenuinepossibilities. Atpresentthesituationisratherunusualinthattherisksaroundthecentralforecastare verymuchskewedtothedownside.Atthetimeofwriting,thesituationisevenmore

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uncertainbecauseofdevelopmentssurroundingItalianandGreeksovereigndebt,and thewholefutureoftheEurozone,butatthetimethatthealternativescenarioswere finalisedinOctober,OEputtheprobabilitiesasfollows: OxfordEconomicscentralforecast:45percent. Eurozonefinancialcontagion(orEuropeandisorderlydefault),inwhich Greeksovereigndebtrestructuringoccurswithoutkeysafeguardssuchashow toprotectthebanksandthepositionofcountriessuchasPortugalandIreland withtheresultingintensificationofpressuretocutbudgetdeficitsataneven fasterpace,andamoregeneraltighteningincreditconditionsalsoaffectingthe privatesector:20percent. Chinahardlanding,inwhichacommercialpropertycrashandweaknessinthe countryskeyoverseasexportmarketsleadtobankingsectorstress,fallingshare andpropertypricesandinvestmentcutbackstherewithknockondepressing effectsthroughthewiderAsiansupplychainandbeyond:10percent. USrecession,inwhichpoliticaldeadlockleadstofiscalpolicyparalysisanda cautiousapproachbycompaniestoinvestment,withunemploymentinthe countrycontinuingtoriseandweakerdemandtrendsagainaffectinggrowth prospectstosomeextentaroundtheglobe:10percent. Corporatereawakening,theonlyupsidescenarioinwhichbusiness investmentexpenditureexceedspresentexpectations,helpedbythefactthat thenonfinancialcorporatesectorasawholeisinastronglypositivecash positioninmostpartsoftheglobe,drivingavirtuouscircleinwhichconsumer confidenceandspendingarealsodrivenupwards:10percent. Asallofthesescenarioshaveanimpactontradeatthegloballevel,withUKspecific tradealsosurprisinginthesamedirection,allofthemwouldhaveamaterialimpacton theoutlookforUKshippingemploymentoverthenexttwotofouryearsandtosome extentbeyondthat.Thisisillustratedinthechartsbelow,whichcoverthreegroupsof seafarersatseaonly(i.e.excludingemploymentofexseafarers):theoveralltotalfor officersandratings;officersandratingsinthedeckandenginecategories;anddeckand engineofficers. Figure8.6a:Alternativedemandscenarios:allofficersandratingsatsea
Demand for seafarers: total at sea
125,000 120,000 115,000 110,000 105,000 100,000 95,000 90,000 85,000 80,000 75,000 70,000 65,000 60,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Central case (45%) China hard landing (10%) Eurozone financial contagion (20%) US recession (10%) Corporate reawakening (10 % probability)

Seafarer supply (UK + non-UK)

Source: Oxford Economics modelling

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Figure8.6b:Alternativedemandscenarios:deckandengineofficersandratings
Demand for seafarers: deck & engine officers at sea
34,000 33,000 32,000 31,000 30,000 29,000 28,000 27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 19,000 18,000 17,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Central case (45%) Eurozone financial contagion (20%) US recession (10%) Seafarer supply (UK + non-UK) China hard landing (10%) Corporate reawakening (10 % probability)

Source: Oxford Economics modelling

Figure8.6c:Alternativedemandscenarios:deckandengineofficers
Demand for seafarers: all deck & engine at sea
64,000 60,000 56,000 52,000 48,000 44,000 40,000 36,000 32,000 28,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Central case (45%) China hard landing (10%) Eurozone financial contagion (20%) US recession (10%) Corporate reawakening (10 % probability)

Seafarer supply (UK + non-UK)

Source: Oxford Economics modelling

Itcanbeseenthat,althoughthedifferencesinthevariouspotentialpathsfordemand areclearlysignificant,mostdonotmuchalterthefundamentalpictureofafairly significantsupplyshortageinthecaseofdeckandengineseafarersandofficersin particularbythemiddleofthedecade.Inthemostextremecase,thatofEurozone financialcontagion,theimpactistocontainthegapthroughto2015,thoughonlyof courseaspartofacostlyscenarioofweakeconomicgrowth,risingunemploymentand intensifiedpublicfinancedifficulties. Lookingatdeckandengineofficersspecifically,by2016thesupplyshortagesin percentagetermsareprojectedasfollows:corporatereawakening13percent;central case11percent;USrecession10percent;Chinahardlanding9percent;Eurozone financialcontagion5percent. Ingeneral,thealternativescenariosconsideredaboveaffecttradearoundtheglobe,with comparativelymodestdifferencesinhowthepatternoftradedevelops notwithstandingthedifferentgeographicaloriginsofthevariousdownsidescenarios.Itis ofcoursepossibletoimaginefurtheralternativescenariosinwhichaclearerdegreeof
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decouplingtookplacebetweenregionsoftheglobe.Ifforexamplegrowthstalled acrosstheadvancedeconomieswhiletheemergingworldneverthelessmanaged somehowtoenjoythekindofrobustgrowthnowenvisagedonthecentralprojection, thenUKspecifictradeandtherefore,thoughtoalesserextent,UKseafarerdemand wouldbemoreadverselyaffectedthansuggestedbydevelopmentsinthepathofglobal tradealone.However,inthemorelikelyalternativescenariosdevelopedbyOxford Economics,adversedevelopmentsintheEurozonewouldhaveaclearlynegativeimpact oncountriessuchasChina;theknockonimpactwouldbynomeansbefocusedsolelyon countrieslocatedinthesameregionsuchastheUK. Itshouldalsobenotedthattheabovedeckandengineofficersupplyshortage projectionsarebasedonanassumptionthatthepathofseafarersupplyisunresponsive tothesealternativedevelopments.Butinpracticethatneednotbethecase.With demandweaknessatamacroeconomiclevelresultinginloweremploymentandhigher unemployment,thensomepastseafarersandpotentialseafarerswhomightotherwise choosetoworkelsewherecouldmakethemselvesavailabletotheshippingindustry. However,itisunlikelythatthiseffectwouldbesufficienttomakethetrainingof additionalnewofficersthatmuchlessnecessaryordesirable,especiallygiventhe likelihoodofanysuchrecessionaryconditionsgraduallyrecedingoverthesecondhalfof thedecadeifnotbefore. Itisalsoworthconsideringwhattheprojectionswouldlooklikeunderalternative assumptionsaboutseafarersupply.Thechartsbelowfocusontwopotentiallykey variables:therateatwhichthosebelowretirementageleavetheshippingsector;and rateofgrowthinthesupplyofnonUKseafarerstotheUKindustry. Figure8.6d:Alternativesupplyassumptions:industryexitrates
Supply of deck & engine officers at sea
37,000

35,000

Demand (central case)

Low UK exit rate (4% p.a. for those aged <62) Central case (6%)

33,000

31,000

High UK exit rate (10% )

29,000

27,000

Demand (Eurozone financial contagion scenario)

25,000

23,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: Oxford Economics modelling

Firstly,itcanbeseenthatthecentralprojectionisfairlyrobusttodifferentassumptions abouttherateatwhichUKseafarersleavetheindustry:thepicturevariesclearlybutnot dramaticallyifacomparativelyhighrateof10percentperannumisassumed,ora comparativelylowrateof4percentperannum,ratherthanthe6percentassumedin thecentralcase(forofficersagedbelow62).Specifically,thesupplyshortfallfordeckand engineofficersis14percentinthefirstcaseand7percentinthesecond,ratherthanthe central10percent. Bycontrast,theheadlinesupplyshortfallismuchmoredramaticallyaffectedby variationsintheassumptionaboutthesupplyofnonUKofficers.The2021shortfallfigure of10percentoftotalfordeckandengineofficersatseareflectstheassumptionthatthe supplyofnonUKofficerstotheUKshippingindustrygrowsatasteadyrateof5percent perannum,aboveothersprojectionsoftheoverallsupplyofseafarersatthegloballevel butstillwellbelowtherateofgrowthachievedinrecentyears.However,ifthatsupply

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weretogrowbyonly2percentovertheperiod,inlinewithglobalsupplyoverall,the shortagewouldreach29percent.Bycontrast,iftherateofgrowthinthissupplywere steppedupto7percentperannum,thenbroadbalancewouldbemaintained throughoutthenextdecade,withadegreeofexcesssupplyseenafteraround2020. Figure8.6e:Alternativesupplyassumptions:nonUKnationals

Supply of deck & engine officers at sea
40,000

High non-UK supply growth (7% pa)

37,500

35,000

Demand (central case)

32,500

Central case (5%)

30,000

27,500

Demand (Eurozone financial contagion scenario)

Low non-UK supply growth (2%)

25,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: Oxford Economics modelling

8.7

Thepotentialroleforforeignseafarers

Giventheabovefindings,onepolicyoptionsuggestingitselfatfirstsightwouldbetoseek tostepuptherateofgrowthinsupplybymakingtheUKindustryevenmoreattractiveto seafarerstrainedoverseas,asanalternativetomaintainingorincreasingtheresources spentonthetrainingofUKofficers.However,assuggestedelsewhereinthisreport,such apolicywouldhavedistinctdownsides.UKshippingcompaniesdoappeartohavea preferenceforUKnationals,with73percentofrespondentstotheDeloitte/OEsurveyin thissectorsayingthattheywouldprefertorecruitanofficerwithaCertificateof CompetenceoveronewithaCertificateofEquivalentCompetency,andsignificant proportionscitingqualifications,experienceandeaseofemploymentasmakingthem inclinedtowishtoemployaBritishseafarer. AsTable8.7ashows,theproportionofdeckandengineofficersatseawhoarenonUK nationalshasincreasedfromjustunder30percentin2004tojustover57percentin 2010,andonthecentralscenariowouldreachalmost78percentby2021.Evenonthe lownonUKsupplygrowthassumptionof2percentperannumthisratiowouldriseover thenextdecadetoreachalmost72percent,whileonthehighsupplygrowthscenario(7 percentperannum)itwouldreachatleast80percentquitepossiblymore,dependent onthedistributionoftheexcesssupplythatwouldexistinthatcase. Table8.7a:TheproportionofnonUKofficersunderalternativescenarios
Employmentofdeckandengineofficersatsea 2004 2010 Total 16,827 26,192 UK 11,788 11,193 NonUK 5,039 14,998 NonUK% 29.9 57.3

Centralscenario(5%nonUKsupplygrowth) 2021 32,951 7,299 25,652 77.9

Lowscenario(2%nonUKsupplygrowth) 2021 25,947 7,299 18,649 71.9

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Employmentofdeckandengineofficersatsea Highscenario(7%supplygrowth) 2021supply Ofwhich:excess 2021employment :
1 1

38,868 2,356 36,512

7,299 7,299

31,570 2,356 29,213

81.2 80.0

AssumingthatexcesssupplyisborneentirelybynonUKofficers.Attheotherextremethenon UKproportioncouldbeashighas86.5%.

8.8 AssumingSMarTdiscontinuation

Forcomparisontable8.8ashowsthedifferencebetweenthecentralscenario,assuminga continuationofSMarTandasituationwhereSMarTisdiscontinuedandaminimum200 cadetsgothroughthesystem. Table8.8a:ThedifferencebetweencentralscenarioandSMaRTdiscontinuationfordeck andengineofficersandexseafarers.

Totaldemandfor deckandengine officersatsea Supplyofforeignex SupplyofUKdeck seafarers(fromUK andengineofficers ImpliedGap shippingsector)to toUKindustry UKindustry 7,300 5,400 1,900 25,700 25,700 3,500 5,400 1,900

2021 SMART 2021NO SMART

36,500 36,500

Difference

2021 SMART 2021NO SMART

Totaldemandforex SupplyofUKex seafarersbyUK seafarerstoUK industry industry

Supplyofforeignex seafarers(fromUK ImpliedGap shippingsector)to UKindustry 2,100 2,100 1,700 2,400 700

18,400 18,400

14,600 13,900 700

Difference

Underthisextremescenarioitcanbeseenthatthetraininggapsarehigherthanthe centralcase.By2021byanother1,900inthecaseofdeckandengineofficersand700ex seafarersaboveandbeyondthesignificantdemandgapsinthecentralscenario. 8.9 Conclusion

ThischapterhassetoutOEsprojectionsforthedemandandsupplyofUKseafarersand exseafarers.Themostpertinentfindingsarethat: InthecaseofUKdeckandengineofficers,ashortageisexpectedtodevelop overtheyearsaheadpeakingatover4,000in2019andremainingatabove 3,500in2021.Thatlastfigureistheequivalentof10percentoftotalprojected demandfordeckandengineofficersinthatyear.

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ShortagesarealsoexpectedinthecaseofUKdeckandengineratingsinthe yearsimmediatelyahead,andthroughoutthenextdecadeinthesupplyofUK exseafarerstothemaritimecluster. Ashortageofdeckandengineofficersatseawouldexistevenonalternative economicscenariosinwhichglobaltrade,andthereforeUKseafarerdemand, growmoreslowly,exceptthatintheworstcasescenarioofEurozone financialcontagiontheemergenceofthegapisdelayeduntil2016. TheseshortageswouldbeevengreaterifSMarTwerediscontinuedandnot replaced.

TheprojectedshortfallinUKdeckandengineofficersishoweverdependentonkey modellingassumptions,namelythatrelativewagesremainunchangedandthatthe supplyofnonUKlabourrisesby5percentperannum.Inpractice,marketforcescould beexpectedtoresultinthegapbeingfilledonewayoranotherthroughrelativewages beingpushedupwards,orbyafasterrateofgrowthinthesupplyofnonUKlabour,or somecombinationofthetwo. Theexistenceofthepotentialgapneverthelesssuggeststhatthesectorissettoface difficultiesinfuturedifficultieswhichwouldbemadeworseiftheflowofnewUK officercadetsintrainingwerenotmaintainedatitsrecentpace.Itisimportanttonote herethatifthegapwerefilledbyanevengreaterincreaseinthesupplyofnonUK officers,thenthoseofficerswouldby2021accountforatleast80percentoftotaldeck andengineofficersemployedbytheUKshippingsector.Yettheevidencesuggeststhat UKshippingcompanieshaveapreferenceforUKofficers,onobjectivegroundssuchas qualifications,experienceandeaseofemployment.

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Therationaleforcontinued supportforseafarertrainingin theUK

Thischaptersynthesisespreviouschapterstoanalysewhetherthereisacontinuingneed tosupportseafarertrainingintheUK.Itbeginsbyoutliningthehistoricrationaleforwhy supportforseafarertrainingwasrequiredintheUKandwhetherSMarThasmetthis requirement. Thechapterthenconsiders,usingtheforecastsfromthepreviouschapter,whetherthere willbeacontinuedneedforpolicysupportforseafarertrainingoverthenextdecade.The nextchaptersetsoutanumberofoptionsforseafarertrainingandasetofcriteriato considerthemagainst.Theseoptionsareinformedbycomparisonsfromothersectors supportmechanismsfortraining. Theprocessfollowedissummarisedbelow: Figure9.0a:Decisiontreeforrecommendedseafarertrainingoptions

ItshouldbenotedthatafullevaluationofSMarTisbeyondthescopeofthisreview. However,inordertoconsiderwhatoptionsmightbeappropriatetosupportseafarer traininginthefuture(ifnecessary),itisimportanttounderstand,inbroadterms,the performanceofSMarTtodate,inordertoinformfuturepolicyoptions. ThereviewsfinalrecommendationsareplacedinChapter10. 9.1 Theoriginalrationaleforthepolicyintervention

Theoriginalrationaleforthepolicyintervention,assetoutinChartinganewcoursein 1998,wastoarrestthedeclineintheUKmaritimeskillsbase(manifestedindeclining numbersofnewcadets)whichwasconsequentlyhavinganegativeimpactonthe

77

maritimecluster.ThedeclineinthenumberofUKseafarershadthepotentialto ultimatelyreducetheoverallcompetitivenessoftheUKmaritimecluster,negatively affectingemploymentandeconomicactivity.Giventhestrategicimportanceofthesector (duetotheUKsdependenceonseatrade),increasingtheskillsbase,encouraging employmentandincreasingtheUKsattractivenesstoshippingcompanieswereallseen askeypolicyaimstomaintainthesector. Economictheory Thesepolicyobjectivescanalsobeexplainedintermsofeconomictheory.Economic theorysetsoutcertainconditionswherebyitisefficientforthegovernmenttointervene inamarkettoproduceamoreoptimaloutcomethanmarketforcesalonewouldhave reachedinstancesofwhatareknownasmarketfailures.Thetermmarketfailure referstoasituationwheretheoperationofafreemarketdoesnotresultinanoptimal allocationofresources.Ineconomicsthereareanumberofinstancesofmarketfailure, withthesocalledfreeriderissuebeingthemostrelevantinthecaseofseafarer trainingtoday. Thus,therationaleforgovernmentinterventioninseafarertrainingcanbeexplainedby thenatureofseafarertraining.TheUKseafarertrainingmodelcontainsbothclassroom basedlearningandanatseaelement.Thislatterelementnecessitatestheparticipation ofshippingcompaniesinthetrainingofcadetstheymustaccommodatecadetsina supernumerarycapacityonboardaspartoftheirofficertraining.Hence,shipping companieswillincurthecostofaccommodatingcadetsonboardforaspecifiedperiod, duringwhichtheywillalsohavetodedicateresourcetotrainingthem,withoutany associatedmonetaryreturn(atleastintheshortterm).Accommodatingcadetsina supernumerarycapacitywillonlybeworthwhileforshippingcompaniesiftheyareableto subsequentlyretainthesecadetsforaperiodafterwardstorecouptheirinvestment throughthevaluegeneratedbythecadetsastheyworkfortheshippingcompany However,afreeridermarketfailureoccursinseafarertrainingintheUKbecausecadets arenotobligatedtoworkfortheshippingcompanythatsponsoredtheiroriginaltraining neitheraretheyobligatedtoworkinthemaritimesectoratall.Itshouldalsobenoted thatneitheristheshippingcompanyobligatedtoprovideemploymentattheendofthe training. Ifthenewlyqualifiedofficercadetschoosenottoworkfortheshippingcompanythey trainedwith,thecompanythatdoesrecruitthemwillbeabletoenjoythebenefitofthe increasedskillsandknowledgewithouthavingtocontributetheirfairsharetothecostof thiscommonresourceinessence,theywillfreerideonshippingcompanies contributions. Thus,ifthereisasignificantprobabilitythatcadetswillnotworkforthesponsoring shippingcompany(eitherbygoingtoarivalcompany,movingtothemaritimeclusteror leavingthesectorentirely),theoriginalshippingcompanyitselfwillnothaveany incentivetotrainthecadet(atleastintheabsenceoffinancialorotherassistance). Thiscanultimatelycreateaviciouscircle,wherebyshippingcompaniesaredis incentivisedtotakeonnewtraineesforfearoflosingthemtorivals,whichinturnmeans cadetswillfindithardertocompletetheirtrainingifthenumberofshippingcompanies willingtoaccommodatethemonboardinasupernumerarycapacitydeclines.

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Theultimateeffectsofthefreeriderissueinthemaritimesectorareshownbelow. Figure9.1.a:Thefreeriderissueinthemaritimesector

Economictheorypositsanumberofsolutionstoaddressthefreeriderproblem.Some examplesofmarketbasedandgovernmentpolicyinterventionsinclude: changingtheincentivesofthepartiesdirectlyinvolvedinshippinginorderto modifytheirbehaviourtoperformanactionvoluntarily(perhapsbycreatinga mechanismthatallowsthemtocapturethefullbenefitsoftheirinvestment); changingtheincentivesofthefreeriderstosothattheybecomemoreinclined tocontributetothecostofthecommonresource(perhapsthroughexcluding themfromotherservicesunlesstheycontributetothecost); creatingregulatoryorcontractualobligationsonallpartiestoperformcertain actionsandcontributetocostsoftraining(perhapsthroughanindustrywide levy); creatingnewsocialnormsthatcauseallpartiestocontributetothecostofthe commonresource(perhapsriskingadversepublicityiftheydonotcontribute); and theGovernmentimposingataxorraisingfundstoprovidetheunderprovided serviceitself(eitherthroughdirectlyprovidingtrainingfacilitiesorsubsidising privateproviders). Inthecaseofseafarertraining,intheUKthefreeriderissuehasbeenaddressedthrough SMarTGovernmentsubsidisingthetrainingofcadetsbyprovidingfinancialsupportto trainingproviders(mainlyshippingcompanies).Thistherebycreatesincentivesfor shippingcompaniestocontinuetotakeoncadetsastheirexposuretofinancialloss fromcadetsnotworkingforthemuponcompletionoftrainingisreducedthrough Governmentsupport65 .

65

Itcouldalsobearguethatthereisalsoasecondmarketfailurethatof,alackofsupplyofnewcadets.As discussedabove,theliteraturenotesthesupplyofyoungpeopleintoseafaringhasnotbeensufficientduetoan 79

 9.2 Wasthepolicyinterventioneffective?

Wherepossiblequantitativeandqualitativedatahavebeencollectedinordertoassess theperformanceofSMarTtodateinmeetingitsobjectives. Whilstthisdoesnotrepresentafullpolicyevaluation,itisimportant,inordertoconsider whatoptionsmightbeappropriatetosupportseafarertraininginthefuture(if necessary),tounderstandtheperformanceofSMarTtodate. Counterfactual Torecall,theprincipleobjectiveofSMarTwastosupportmerchantnavytrainingto facilitateanadequatesupplyofUKmaritimeexpertisetomeetthenationseconomicand strategicrequirements,byassistingorganisationsprovidingmerchantnavytraining.Thus, theprinciplemetricforevaluatingSMarTisthenumberofBritishseafarerstrainedand whetherthenumberstrainedhavebeenadequateinsupportingeconomicandstrategic requirements. ThepolicywillhavebeendeemedsuccessfulifithasincreasedthenumbersofBritish seafarers,whointurnhavecontributed(andwillcontinuetocontributeincomingyears) totheUKshippingindustry,widermaritimesector,andbyassociationtheUKseconomic wellbeing. Inevaluatinganypolicy,onemustconsiderthecounterfactual,i.e.whatwouldhave happenedintheabsenceofthepolicy.Figure9.2abelowconsiderswhatastylised counterfactualmightlooklikeforSMarT(finalcolumn). Figure9.2.a:PotentialcounterfactualforSMarTTheDifferencebetweenSMarT& TonnageTaxInducedSupply

Source:DfT,Deloitteanalysis

TheactualimpactofSMarTin2009isnotthesimpledifferencebetweenthe450cadet traineesin1998and925cadettraineesin2009(beforeandaftertheintroductionof SMarT).ThisisbecauseitishighlylikelythatintheabsenceofSMarT,thenumberofnew cadetsbeingtrainedwouldnothaveremainedstaticat450eachyear. Thenumberofcadetswillhavebeeninfluencedgreatlybyotherfactorsincludingthe introductionofthetonnagetaxin2000whichitselfincludesanobligationthat

unawarenessoftheprofessionanditbeingrelativelyunattractive.Thisparticularmarketfailurehasbeen tackledbyinitiativesbytheindustrytoimproveperceptionsoftheprofessionandmakeitamoreattractive careerforyoungpeople.Suchinitiativesareoutsidethescopeofthisreview. 80

participatingcompaniesmusttrainatleastoneofficertraineeforeach15officerpostsin existenceonthevesselsthatitoperates. OurconsultationsshowthattheindustryfirmlybelievesthatSMarThasbeeneffectivein increasingthenumberofcadetsandthereforetrainedUKseafarersfrom2000levels. Ourbestestimateisthatin2010c.200additionalcadetswereintroducedintothe industryasaresultofSMarTfundingbeyondthe650fundedbySMarTbutasaresultof tonnagetaxrequirements. Further,dataisnotreadilyavailableonthenumberofnewcadetsstartingthatare attributabletoothersupportschemesfundedbyTrinityHouse,MaritimeLondonand others.TheimpactofthesewillalsomeanthegapbetweenSMarTandthe counterfactualissmaller. ValueforMoney With200additionalseafarersenteringserviceeachyearthereturnstoUKplcintermsof theproductivitydifferentialwiththewiderUKeconomy(c.14,500perannumintodays prices)over20yearsisoftheorderof58million.AgainstcoststoGovernmentof12 millionperannumthisrepresentsacost:benefitratioof4.8.Whenaccountingorthe18 millioncontributionofshippingcompanies,atotalcostof30millionperannumreduces thisbenefit:costratioto1.9. ValueforMoneycalculationsareoutlinedinmoredetailsinsection10.3,wherecurrent SMarTiscontrastedwithfutureoptionsfortrainingfundingforseafarersintheUK. Qualitativediscussion StakeholdersprovidedanumberofqualitativeobservationsastothebenefitsofSMarT relativetothecounterfactualoftherebeingnogovernmentsupportforseafarertraining. Theseobservationsincluded: theexistenceofgovernmentfinanceforseafarertraininghadactedasasignal globallythattheUKwascommittedtosupportingitsmaritimesectorand attractedmorecompaniestotheshippingsectorandmaritimecluster; hadcreatedincentivesforshippingcompaniestopaygreaterattentionto humancapital,therebyincreasingproductivityoverallandeconomicactivity; hadprovidedasteadystreamofcadetsfornavytrainingcollegesallowingthem toexpandandattractnonUKstudents,whichinturnraisedexportearnings;and increasedtheUKtechnicalskillsbase. Anumberofstakeholdersarguedthatatapproximately12million,SMarTrepresented verygoodvalueformoney,giventheoverallcontributionofthemaritimesector exceeding26billionannually.Asnotedabove,DeloitteandOEhavenotmadeany attempttoverifythecausallinkagesbetweenSMarTandoveralllevelsofeconomic activity.

81

Figure9.2bbelowsummarisesthebenefitsofSMarTasreportedbystakeholdersandthe literature. Figure9.2.b:SMarTlinkagesacrossthemaritimesector

Source:Deloitteanalysis

Asthefigureillustrates,theimpactofSMarTisfeltnotonlyintheshippingsector,but alsotheadjacentmaritimeclusterand,ultimately,thewidereconomy.Stakeholders arguedthatthesizeoftheimpactwassignificant. Summary Insummary,whileitisnotpossibletoreachadefinitiveconclusiononSMarTsoutputs andeffectivenessrelativetothecounterfactual,areviewoftheavailableevidencedoes suggestithashadapositiveimpact,oftheorderof200cadetsperannum. 9.3 Isthereacontinuingrationaleforpolicyintervention?

Chapter8setoutprojectionsforthedemandandsupplyofUKandnonUKseafarersand exseafarersoverthedecadeahead.Thisshowedhowashortageisexpectedtodevelop inthesupplyofUKdeckandengineofficers,peakingatover4,000in2019andremaining atabove3,500in2021thislastfigurebeingtheequivalentof10percentoftotal projecteddemandfordeckandengineofficersinthatyear. Inaddition,shortagesareexpectedinthecaseofUKdeckandengineratingsintheyears immediatelyahead,peakingatover1,250in2016equivalentto5percentoftotal demandbutwiththisgapsubsequentlyeliminatedby2021.ThesupplyofUKex seafarerstothemaritimeclustermeanwhileisexpectedtofallshortofdemand throughoutthenextdecade,peakingatalmost2,000in2017andremainingabove1,600 equivalentto9percentoftotaldemandin2021. Theareathatwillsuffermostfromthisshortfallultimatelywillbethemaritimecluster whichreliesonaconstantstreamoftrainedexseafarers. Theprojectedshortageofdeckandengineofficersatseaexistsevenonalternative economicscenariosinwhichglobaltrade,andthereforeUKseafarerdemand,growmore slowlysuchasunderOEsChinahardlandingorUSrecessionalternativescenarios. OnlyintheworstcasescenarioofEurozonefinancialcontagionisthegapkeptatbay forawhilethougheventhennotbeyond2015.TheprojectedshortfallinUKdeckand
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engineofficersishoweverdependentonkeymodellingassumptions,namelythatrelative wagesremainunchangedandthatthesupplyofnonUKlabourrisesby5percentper annum.Inpractice,marketforcescouldbeexpectedtoresultinthegapbeingfilledone wayoranother. Inparticular,itmightinprinciplebepossibletofillthegapthroughanevenfasterrateof growthinthesupplyofforeignofficersinfactarateof7percentperannumwouldbe sufficienttoachieveasmalldegreeofexcesssupplyby2015.However,inthatcasenon UKofficerswouldby2021accountforatleast80percentoftotaldeckandengine officersemployedbytheUKshippingsector.Thatwouldalmostcertainlybeasecond bestsolutionasUKandforeignofficersarenotseenasperfectsubstitutes:evidence fromtheDeloitte/OEsurveysuggeststhatUKshippingcompanieshaveapreferencefor UKofficersonobjectivegroundssuchasqualifications,experienceandeaseof employment. Table9.3a:Projectionsforseafarerandexseafarernumbers
Deckandengineofficersatsea Total demand 27,167 UKsupply 11,236 7,942 7,299 NonUK required 15,931 27,307 29,213 NonUK supply 15,748 23,238 25,652 Supply shortfall 182 4,040 3,561 Shortfallas %of demand 1 11 10

2011
1

2019 35,249 2021 36,512

Deckandengineratingsatsea Total demand 23,620 UKsupply 5,911 4,600 3,968 NonUK required 17,708 23,669 27,777 NonUK supply 17,548 22,396 28,583 Supply shortfall 161 1,273 806 Shortfallas %of demand 1 5 3

2011
1

2016 28,269 2021 31,745

Exseafarersinthewidermaritimesector Total demand 17,275 UKsupply 14,090 14,254 14,586 NonUK required 3,185 4,116 3,832 NonUK supply 2,140 2,155 2,206 Supply shortfall 1,045 1,961 1,626 Shortfallas %of demand 6 11 9

2011

20171 18,370 2021

1

18,418

Theseyearsmarkthepeakintheprojectedsupplyshortageineachcase.

Source:OxfordEconomicsassumptionsandmodelling

Assessmentofongoingrequirementtosupportseafarertraining TheforecastsconstructedbyOEsuggestthattherewillbeagapbetweenthedemandfor andsupplyofcertaintypesoftrainedseafarerandexseafarerbytheUKshipping industryandmaritimeclusteroverthedecadeahead.Inthecaseofdeckandengine officers,thenontheassumptionthatthesupplyofnonUKofficersgrewat5percentper annum,thesupplyofUKofficerswouldfallshortofdemandbyjustover4,000by2019, withthatshortfallremainingover3,500in2021thislastfigurebeingtheequivalentof 10percentoftotaldemandfordeckandengineofficersinthatyear.Shortagesarealso projectedinthesupplyofexseafarerstothemaritimecluster,and,priorto2020,inthe supplyofdeckandengineratings.
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InprinciplethisgapcouldsimplybefilledbyseekingtoattractextranonUKlabour. However,thisstudyhasalsofoundthatUKandnonUKofficersarenotperfect substitutes,andthatconsequentlytheshortagesidentifiedoughttoberegardednotjust asshortagesofofficersintotal,butasshortagesofUKofficers. Inothermarkets,economictheorywouldpredictthatthegapwould,overtime,closeas higherdemandwillleadtoincreasedwagesforseafarersandexseafarers,whichinturn wouldincentivisemorestudentstotrainasseafarers,increasingsupply. However,asdiscussedabove,thismaynotoccurinthecaseofseafaringduetothe natureoftheUKtrainingprogramme.Theatseacomponentoftrainingwillmeanthat evenifthereisanincreaseinthenumberofstudentswishingtocompletecadettraining, unlessshippingcompaniesarepreparedtoaccommodatetheseincreasednumbersthe totalsupplyoftrainedseafarerswillnotincrease.Themarketfailurewillpersist. Indeed,whilstshippingcompaniesmaycontinuetoholdapreferenceforUKseafarers, increasinglytheymaybewillingtoturntosecondbestsolutionsthroughrecruiting overseas.ThefallinthenumberoftrainedUKseafarer/exseafarersasaproportionof thetotalworkforcecouldhavewiderdetrimentaleffectsontheproductivityand competitivenessoftheUKmaritimesector. Onthisbasis,itispossibletoconclude: agapissettodevelopbetweendemandandsupplyfortrainedUKseafarers, peakinginthe20162019periodbutby2021remainingatover3,500inthecase ofdeckandengineofficersatseaandatover1,600inthecaseofexseafarers (mainlyexofficers)inthemaritimecluster.Thoseshortfallsareequivalentto10 percentand9percent,respectively,oftotalprojecteddemandinthosesectors; thewholegapforUKseafarersisunlikelytobefilledbymarketforcesalone; rather,shippingcompaniesarelikelytoreacttoashortfallinsupplyofUK seafarersbyturningtosecondbestsolutionsintheformofnonUKofficersand technicalratings; accordingly,themarketfailurefortrainedUKseafarerspersistsandrequires policyattention. Incontrast,theOEforecastssuggesttherewillnotbeanequivalentmismatchbetween demandandsupplyforUKgeneralrating.Thisislikelytobeduetotherebeingfewer differencesinqualitybetweenUKratingsandnonUKratings.Incontrast,therewill remainalesserdegreeofsubstitutabilitybetweenUKofficersandnonUKofficers. 9.4 Comparisonfromothersectors

Beforediscussingoptionstoaddressthefreeriderissueinseafarertraining,itis instructivetoconsiderhowtrainingisprovidedinothersectors.Thefreeriderissue associatedwithtrainingisnotconfinedtothemaritimesector.Itoccursinanumberof otherindustrieswherethereisaminimumgeneralskillsrequirementforworkers.Priorto mappingoutpotentialoptionsforaddressingtheaforementionedmarketfailurein seafarertraining,itisinstructivetoconsiderhowothersuchindustriesaddressthe trainingneedsoftheiremployees. Itshouldbenotedthatthisinformationistakenfrompublicsourcesandiscurrentatthe timeofwriting.Givenwidermacroeconomictrends,currenttrainingarrangementsin manysectorsmaynolongerbeviableinitscurrentformandmayberevisedinthe future. Theconstructionsector Theconstructionsectorisanexampleofanindustrywidesolutiontothefreeriderissue, underwhichthecostsofthecommonresourcearemoreequallysharedbyallwho benefit.

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TheSectorSkillsCouncil(SCC)andConstructionIndustryTrainingBoard(CITB)workwith theconstructionindustry,todeliverasafe,professionalandfullyqualifiedUK constructionworkforce.Together,thepartieshaveestablishedCITBConstructionSkills,an organisationthatisresponsibleforprovidingtrainingandapprenticeshipschemeswhich otherscannotprovide.Theapprenticeshipschemeintheindustryishighlyrated,with completionratesexceedingthenationalaverageforapprenticeshipcompletionratesby around10percentlastyear,77percentofconstructionapprenticescompletedtheir framework 66 . CITBConstructionSkillsprovidesacombinationofcollegeeducationandhandson experience(throughanapprenticeshiporworkexperience)toover30,000individuals 67 . Tooffertheseservices,itsetuptheNationalConstructionCollege(agroupofeight collegesacrossGreatBritain)todeliverhighqualityspecialisttrainingtoapprentices togetherwithconsolidatinganddevelopingtheskillsofpeoplealreadyemployedinthe industry.TheNationalConstructionCollegeofferstwotypesofapprenticeshipsto students;atraditionalapprenticeshipandaspecialistapprenticeship. Traditionalapprenticeshipscombinestudyatcollegewithexperienceonsiteoveratwo tothreeyearperiod.Aspartoftheapprenticeship,studentswillachieveaNVQorSVQ qualification.EmployersareabletoclaimaCITBConstructionSkillsgrantofupto9,000 tosupportastudentthroughathreeyearapprenticeship. Specialistapprenticeshipshavebeendesignedinconjunctionwithtradeassociationsand independenttraininggroupsinordertoservethosesectorsandemployersthatcannot accessapprenticeshipsthroughlocalcollegesortrainingproviders.Accesstothe programmeisopentolearnersofallagesand,whereinscopeandeligible,the apprenticeshipsattractaCITBConstructionSkillsgrant.Typicallythedurationofthe specialistapprenticeshipsis24monthswithcontentdeliveredbyindustryexpertsand supportedbyCITBConstructionSkillsownstaff. Therearenoformalentryrequirementsneededforcandidatestoenrolontoan apprenticeshipcourseattheNationalConstructionCollege.Although,accordingto bconstructive.com(partofCITBConstructionSkills),ItwouldbehelpfultohaveStandard GradesinMathsandEnglish,technologysubjectsoraSkillsforWorkConstructionCrafts qualificationsothatyoucandothenecessarycalculations,measurementsandtheory68 . TheNationalConstructionCollegereceivesfundingsupportfromapoolofagovernment bodies(bothnationalandEuropean),tradeassociationsandcorporatesources.CITB ConstructionSkillscollectanannuallevyfromallliablecompaniesintheindustryand distributegrantstoemployers. Allemployerswhoareregisteredwithandinscopeto,CITBConstructionSkillscanclaim grants,eventhosewhodonotpaythelevy.Asageneralruleitisthesmallerfirmswho trainmostnewentrants.Thelargercompaniescanthenbenefitbyhiringtheseskilled workerslaterintheircareer.Withoutthesegrants,itisarguedthatthesesmallfirms wouldbeunabletoaffordtotrainanyoperativesandtheindustryasawholewould suffer. InadditiontotheNationalConstructionCollege,CITBConstructionSkillsfoundedthe NationalSkillsAcademyforConstruction,aconceptthatistailoredtohelpingcompanies andcontractorstogettherightskillsonsite.Thisisanemployerledinitiativebutworks closelywithlocalcouncilstomatchjobopportunitieswithavailableworkers.

66 67

Source:CITBConstructionSkills

Source:The2012NationalConstructionCollegeCourseProgramme,NationalConstructionCollege, www.cskills.org/uploads/NCC_Course_Programme_2012_tcm1727536.pdf Source:Bconstructive.com 85

68

AstheNationalSkillsAcademyforConstructionprogrammeexpands,regional partnershipshavebeenestablishedinallnineEnglishregions,theprogrammeworks acrossarangeofconstructionprojectssuchasmajorregenerationanddevelopment projects,refurbishmentandmaintenanceprojects,civilengineeringandhousebuilding.A recentaccomplishmentoftheNationalSkillsAcademyforConstructionwasthe developmentofthe2012OlympicGamesPark 69 .Thisprojectincludedcommitments acrossthreemainskillsareasnewentrants,existingconstructionworkersandlifelong learning,therebyexhibitingtraininganddevelopmentopportunitiestotheentire workforcepopulationoftheconstructionindustry. Theaccountancyprofession Theaccountancysectorisanexampleofaprofessionwhereboththeemployeeandthe employerbenefitfromtrainingfromdayone.Unlikecadets,traineeaccountantsare directlyemployedbyaccountancyfirmsanddonotserveinasupernumerarycapacity. Whilsttheaccountancyfirmtypicallypaysforthetrainingofnewentrantstoreceivean industrywidequalification,thereisonlyalimitedfreeriderissueinthatthefirmisable torecoupitsinvestmentassoonasthetrainingcommencesandoftenthereare contractualrequirementsthatmeannewlyqualifiedaccountantsmustremainatthefirm foraspecifiedperiodorrepaythecostoftraining. Theaccountancyprofessionremainsapopulargraduatecareerwithestimatessuggesting thataround10percentofallgraduatesentertheprofession 70 .InTheTimesTop100 GraduateEmployers,201112,thetopfouraccountancyfirmswererankedwithinthetop 10graduateemployers 71 . TherearethreeorganisationsofCharteredAccountantsintheUK;theInstituteof CharteredAccountantsinEngland&Wales(ICAERorACA),theInstituteofChartered AccountantsofScotland(ICAS)andCharteredAccountantsofIreland(CAI). TobecomeaCharteredAccountant,studentsmustcompleteatrainingagreementwith oneofmanyauthorisedemployers.Thetrainingagreementlastsforthreetofiveyears (althoughmoststudentscompletewithinthreeyears)andconsistsofanumberof examinationsandaperiodoftechnicalworkexperience.E.g.,tobecomeACAqualified,a studentmustpass15exams(acrosstwolevels;professionalandadvanced)andcomplete thetechnicalworkexperiencerequirementof450days. Duringastudentsthreeyearsoftraining,theirauthorisedemployerpaysboththe teachingandexaminationfeesaswellasacoresalaryforeachstudent(c23,000 72 ). Althoughnotexplicitlyacknowledgeditislikelythatmostfirmspayareducedwage duringthetrainingcontracttoreflectthecostoftrainingandinthisrespectthecostof thetrainingisbornebysomecombinationofthefirminquestionandtheemployee. Thearmy Thearmyisanexampleofanexceptionwhereemployees(soldiers)areunlikelyto spendtheirentireworkinglifeinthesectorandrequiregeneraltrainingtoallowthemto continueaprofessionalcareerafterleavingthearmy.Inthiscase,thearmyfundsthecost ofthetrainingmeaningthatthefreeriderpersistsasotheremployersbenefitfrom soldiersbeingtrainedwithouthavingtocontributetothecost.However,therearea numberofwidersocialreasonswhythearmycontinuestofundthistraining. Inordertobecomeaprofessionalsolider,ayoungpersonmustcompletebasictraining. OnjoiningtheArmedForces,allpersonnelimmediatelyenrolontoafullyfundedtraining

2012OlympicGamesParkCaseStudycanbefoundontheNationalSkillsAcademyforConstructionwebsite, http://construction.nsacademy.co.uk/
70 71 72

69

Source:GraduateRecruitmentBureau,www.grb.uk.com/industry_profiles.0.html Source: www.prospects.ac.uk/assets/assets/documents/wdgd_2010.pdf 86

Source:TheTimesTop100GradauteEmployers,201112,http://top100graduateemployers.com/employers

schemedependingontheirentryroute.AllStandardEntry(soldiersover17)infantry trainingisconductedbytheInitialTrainingGroup(ITG).TheSchoolofInfantryatthe InfantryTrainingCentre(ITC)CatterickconductsPhaseOnetrainingforallinfanteerson thesixmonthCombatInfantryman'sCourse(CIC).TheremainderoftheStandardEntry soldiersaretrainedatthevariouslocationsthatmakeuptheITG.Juniorsoldiers (between16and17)aretrainedateithertheArmyFoundationCollegeinHarrogateor theArmyTechnicalFoundationCollegeinWinchester. PhasesTwoandThreeofsoldiertrainingaremoregeneral,inthesensetheskillslearnt areapplicablebeyondthearmy.Thistrainingcancomeinmanyformsfromfixingattack helicopterstobuildingbridges.Thesephasesoftrainingareimplementedatdifferent locationsacrosstheUKthatofferfullaccommodationandtrainingresourcestothe soldiers. Further,duringarmytraining,thereisanopportunityforsoldierstoenrolontoafully fundedapprenticeshipscheme.Thearmyisreportedtohavethelargestapprenticeship programmeinthecountry,withabout75percentofnewsoldierstakingpartandover 5,500completingtheirtrainingeachyear73 .Eachapprenticeshipfitsinwithmilitary trainingandiscloselyrelatedtoasoldiersarmyrole,soaswellasbecomingabetter soldier,theyareworkingtowardsaqualificationthatwillbevaluedbycivilianemployers. Ondeparturefromthearmy,soldiersandofficerscanreceivearesettlementpackageto help,includingadvicetohelpthemtopreparefor,andfind,suitablecivilianemployment. Theycanalsostudyforcivilianqualificationswhilstinthearmy,withtheopportunityto claim80percentofthefeesfromeithertheStandardLearningCredit(SLC)Schemeor theEnhancedLearningCredit(ELC)Schemedependingonthequalification. Theteachingprofession Theteachingprofessionisanexampleofaprofessionthatyieldssignificantsocial benefits,butthecostoftrainingislargelybornebystudents,exceptincertaincases wherethereareshortages. ToworkasateacherinstatemaintainedschoolsinEnglandandWales,prospective teachersmusthaveprofessionalqualifiedteacherstatus(QTS).TobeawardedQTSbythe GeneralTeachingCouncilforEngland(GTC)astudentmustundertakeatwoyeartraining period. Firstly,prospectiveteachersmustcompleteaperiodoftraining,suchasaoneyear professionalorPostgraduateCertificateinEducation(PGCE)course,whichrecommends youforQTS.Thisisknownasinitialteachertraining(ITT).MostUKuniversitiesofferPGCE courseswithintheirprospectus.WithinaPGCEcourse,studentspassQTSskillstestsin literacy,numeracyandinformationandcommunicationstechnology(ICT)whichare mandatorytobeawardedQTS. OnceastudenthascompletedtheirPGCEcourse,theymustcompleteaperiodof induction,knownasthenewlyqualifiedteacher(NQT)year.Thisisanindividualsfirst yearofemploymentasateacherinaschool.NQTsareencouragedtostarttheir inductionassoonaspossibleaftergainingQTS,butthereisnosettimelimitfor completinginduction. WhilststudyingonaPGCEcourse,likealluniversitycourses,allstudentsareeligibleto receivefinancialsupportfromthegovernmentthroughaloan.Studentloanscancoveran individualstuitionfeesandmaintenance(living)costs.Theindividualhassayoverthe sizeoftheirloan,butitcouldrangeanywherebetween3,375(tuitionfees)to8,325

73

Source:MinistryofDefence,www.army.mod.uk/training_education/education/22344.aspx 87

(tuitionfeeloanandmaintenanceloan) 74 .Thefeeloanandloanforlivingcostswillnot havetoberepaiduntilastudentisinemploymentandearningover15,000ayear. Nonrepayablebursariesareavailablefortraineeteachersonfullandparttimeprimary andsecondaryPGCEcourses,however,thesupplyofthesebursariesarelimitedto certainsubjectareasorfinanciallydisadvantagedstudents. 9.5 Criteriaforassessingalternatives

Inordertoevaluatealternativeremediesfortheongoingmarketfailureinseafarer training,DeloitteandOEhavegeneratedanarbitraryscoringmethodologytorankeach oftheremedies.Collectively,thecriteriadeterminewhethereachoptionrepresents valueformoneyinboththeshortandlongterm.Thisaresummarisedoverleaf. Figure9.6a:Evaluationcriteria Criteria Description Scoring (5=best, 1=worst)
1 Thecostofthe remedyto Government 2 Effectiveness Thefinancialcostoftheremedy 15 25%

Weighting

Theextenttowhichremediesare effectiveineliminatingthemarket failure Whetherthisremedyisviablein thelongrun(10years) Whobearsthefinancialcostofthe remedyandwhetheritwill commandindustrywidesupport Howquicklytheremedycanbe implementedandtheextentto whichitdoesnotdisruptexisting schemes Whetherthisremedyrepresents thebestuseofresources

15

25%

3 Longrun sustainability 4 Acceptability

15 15

15% 15%

5 Easeof implementation

15

15%

6 Efficiency

15

5%

Giventhecurrentfiscalclimate,akeycriterionwillbethefinancialcostofanyparticular remedy.Thiswillincludenotjustthecostofanysubsidy/supportmechanism(intermsof governmentsupport)orthecostofestablishingnewinfrastructure/systems(fora marketbasedsolution),butalsoongoingcostssuchasadministrationanddispute resolution.Forexample,itmaybethecasethataparticularremedyhaslongstartup costs,buthighvariablecostsmeaningthatthemoresuccessfultheschemebecomesthe greaterthecostimplication. Thesecondkeycriterionrelatestoeffectiveness.Whilstintheorythereareanumberof solutionstothefreeriderissues,inpracticethesecanfallshortduetomarketconditions orunintendedconsequences.Itisthusimportanttoconsiderhoweachpotentialremedy willbeappliedinpracticeandwhethertheyareapplicabletoseafarertraininggiventhe uniquefeaturesofthemaritimesectordiscussedearlier.

74

Source:WarwickUniversity,www2.warwick.ac.uk/services/academicoffice/funding/postgrad/ftpgce 2011/#Fees 88

RelatedtothequestionofeffectivenessiswhetherornottheremedywillsupporttheUK maritimeclusterthroughensuringasteadysupplyofhighlytrainedUKexseafarers. Longrunsustainabilityorviabilityreferstowhethertheremedywillcontinuetobe effectivebeyonditsinitialimplementation.Itmaybethecasethattheremedyadoptsa bigbangapproach,resolvingthefreeriderissueonceandforalluponimplementation. However,ifthisisnotthecase,thenitisimportanttoconsideritslongterm effectiveness. Theacceptabilityofeachremedytostakeholdersisimportantaswithouttheirsupport, theremedymaynotbesuccessfullyimplementedorincentivesmightbemisaligned leadingtotheremedybeingineffective.Onekeyfeatureaffectingacceptabilityiswhere thecostoftheremedyfalls.Asdiscussedabove,participantsinthemaritimesectorare highlyfootloose,meaningthatanillthoughtoutremedymightdetercompaniesfrom residingintheUK. Easeofimplementationreferstohowquicklyandeffectivelytheremedycanbeputinto practicethiswillhaveanimpactontheexistingSMarT.Forexample,iftheremedy requiressignificantleadintime,itmaynecessarytohavetransitionalarrangementsfrom SMarTtothenewscheme.Incontrast,ifthenewremedyiseasytoimplement, transitionalarrangementsmaynotbenecessary. Efficiencyconsiderstheremedyforseafarertraininginthecontextofotherpolicy programmes.Givenconstrainedresources,theopportunitycostofaddressingthefree riderissueinseafarertrainingmaymeananothermarketfailureisleftunaddressed.Afull analysisoftheopportunitycostisoutsidethescopeofthisreview,andtheweightinghas beenadjustedaccordingly. 9.6 Conclusion

ThischapterhasreviewedtheongoingmarketfailureinseafarertrainingintheUK.The freeriderissue,wherebyshippingcompaniesareunabletoretainthebenefitsoftheir investmentincadettraining,willcontinuetopersist.Coupledwithforecaststhatsuggest thattherewillbeagapbetweendemandandsupplyforUKofficers,thisimpliesthere maybeanongoingneedtointerveneinthismarketbygovernmentunlessviablemarket basedsolutionscanbefound. Insummary,thisreviewsuggeststhatSMarThasbeeneffectiveinencouragingan increaseinthesupplyofUKmaritimeexpertisetomeetthenationseconomicand strategyrequirements,byassistingorganisationsprovidingmerchantnavytraining.Thisis basedonbothqualitativeandquantitativeevidence. Inconsideringoptionsforthefuture,criteriahavebeenestablishedthatultimately considerswhethereachoptionrepresentsvalueformoney.Thefollowingchapter presentsarangeofoptionstoaddressthemarketfailureandreachesafinal recommendation.

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10 Recommendations
ThischapterpresentsDeloittesandOEsfinalrecommendationsonoptionsforseafarer trainingintheUK. Itshouldbenotedthatinpresentingtheserecommendations,ithasbeenassumedthat nodecisionhasyetbeentakenastotheformandnatureofanyfuturesupportforUK seafarertrainingandthatalloptionsremainunderconsideration,includingthe continuationofSMarTineitherinpresent,oramodified,form. 10.1 Options

Eachoftheoptionsoutlinedbelowarepredicatedonthefollowingassumptionswhich havebeenmadetakingintoaccounttheevidencereceivedandanalysisconducted. ShippingcompanieshaveapreferenceforUKtrainedseafarers. CompaniesinthemaritimeclusterhaveanevenstrongerpreferenceforUK trainedexseafarers. By2021,therewillbegapbetweendemandforandsupplyofUKtrained seafarersthat,ifleftunfilled,willleadtoadeclineinavailablenumberofex seafarersforthemaritimeclusterreducingitscompetitivenessandcontribution toUKPLC. Onthebasistherewouldappeartobethreecategoriesofoptions.Thesearesummarised below. Figure10.1a:Optiontree

Basedonareviewoftheprimaryandsecondaryevidence,DeloitteandOEhave identifiedthefollowingpotentialremediesfortheongoingfreeriderissueinseafarer training: Marketbasedsolutions:focusingonwaystocreateincentivesforshipping companiestocontinuetofinancetrainingintheabsenceofGovernment support; Alternativepolicymeasures:establishingnewmechanismstosupportand stimulateseafarertrainingintheUK Statusquo:retainingSMarTineitheritsoriginalformoramodifiedform;and Notalloftheseoptionsaremutuallyexclusiveandsomecanbecombined.

90

DeloitteandOEhavenotconsideredanytransitionalarrangementsthatmightbe necessaryinmovingfromtheexistingSMarTarrangementstonewarrangementsthese wereoutsidethescopeofthisreview. Whatfollowsisapreliminaryassessmentofeachoftheseoptionsagainstthespecified criteriainordertoidentifythemosteffectiveoption(s)toaddressthemarketfailure.The recommendationsmadewithoutadetailedfinancialcostbenefitanalysisofeachoption beingconsideredinlightofoneinoneoutregulatoryassessmentsandcompliancewith Stateaidguidelines. Marketbasedsolutions MarketbasedsolutionsentailthecompleteremovalofGovernmentsupportforseafarer trainingintheUKviaSMarT.Asdiscussedinearlierchapters,simplyleavingtheissueto marketforcesisunlikelytoaddressthemarketfailureunlesscertainchangestocompany incentivesandmarketstructuresaremade.Suchchangestoincentivesandmarket structuresmightinclude: creatingarequirementforcadetstoworkfortheshippingcompanytheyserved inasupernumerarycapacitywith; greaterrelianceonotherexistingfundingschemesfortraining;or requiringindividualstudentstobearthefullcostoftraining. Asdiscussedinearlierchapters,thesourceofthefreeriderissueisshippingcompanies beingunabletorecovertheirinvestmentoncadettrainingifthecadetschoosenotto workforthem.Onepotentialoptionmightthereforebetocreatearequirementthat cadetsmustserveaminimumperiodofemploymentwiththeshippingcompanythey servedinsupernumerarycapacitywithuponcompletionoftheirfirstCoC,subjecttothe shippingcompanywishingtoemploythem.Indoingso,theshippingcompanynowhasa greaterincentivetotrainnewcadets,intheknowledgetheywillbeabletorecovertheir investment. Forthisoptiontobeeffective,requiresshippingcompaniestohaveapreferenceforUK seafarersandbewillingtotakeoncadets.Ifshippingcompaniesarenotinclinedtotake onnewtrainees,preferringinsteadtorecruitexperiencedseafarersfromtheUKor elsewhere,arequirementforcadetstoworkforshippingcompaniesmayonlyhavea marginalimpact.Indeed,thenetimpactmaybeclosetozeroifalargeproportionof cadetsalreadygoontoworkfortheshippingcompanytheyservedwithina supernumerarycapacity73percentofshippingcompaniesrespondingtotheonline surveyreportedthatmorethan75percentoftraineeswhocompletedtheirfirstCoC withthemalsowentontoemploymentwiththeirorganisationuponcompletion AnothermarketbasedoptionmaybetorelymoreonexistingnonSMarTfunding schemesforUKseafarertraining.AsdiscussedinChapter4,thereexistotherfunding schemesforUKseafarertraining,suchasTrinityHouseandMaritimeLondon.While theseschemescannotbereliedupontocompletelyfillthegapleftbytheendofSMarT,if theyareabletoraiseadditionalfundstheymaybeabletomitigatethedemand/supply gaporassistinmanagingthetransitiontoanewscheme.Additionalfundscould theoreticallyberaisedbyvoluntaryindustrycontributions. Realistically,basedontheliteraturereviewandstakeholderconsultation,thelongterm viabilityofreplacingSMarTwithincreasedfundingfromthesealternativesponsorsis thoughttobeunlikelygivencurrentfiscalconstraints.TomaintainSMarTatitsoriginal levelswouldrequireatleast12milliontoberaisedonanannualbasis. Athirdmarketbasedoptionwouldbetobringsupportforseafarertrainingintolinewith otherformsoftertiaryfunding.Currentlythecostofseafarertrainingissplitbetweenthe Governmentandshippingcompanies.Onepotentialwayofaddressingthefreerider issuewouldbetoshifttheentireburdenoffundingtrainingcostsontostudents,sothat studentsareresponsibleforfundingbothclassroombasedlearningandatsealearning.
91

Thismaybejustifiedifitcanbedemonstratedthat,overthecourseofaworkinglifetime, thetotalprivatebenefitsofseafarertraining,measuredintermsofincreasedearning potential,outweighthecostoftraining. Suchashiftcouldbefacilitatedbygivingcadetsaccesstostudentloansandgrants.The extentofthefeeschargedcouldbemeanstestedandgrantscouldbemadeavailableto selectedstudents. However,astherecentchangestofeesforEnglishundergraduateshasshown,sucha moveislikelytobecontroversialandmayacttodissuadeprospectivestudentswhoare debtaverse,especiallyinanuncertainenvironment.Further,theupfrontcostof financinganyloanschemewouldneedtobebornebytaxpayersandmayneverfullybe recoveredifcadetsfailtoearnenoughoveraworkinglifeormoveoverseas/becomenon domiciles. AlternativepolicymeasuresbyGovernment OutsideofSMarT,thereareanumberofotherpotentialmechanismsthatGovernment couldimplementtocontinuetosupportseafarertrainingand/oraddressingthefree riderissue: imposinganobligationonshippingcompaniestotrainUKseafarers; introducinganindustrywidelevyandgrantsystemtofundseafarertraining; introducingtaxbreaksfortraining; movingtowardsanapprenticeshipbasedmodelforUKseafarertraining;and fundamentallyrevisingthestructureofUKseafarertraining. AnobligationtoforceshippingcompaniestorecruitandtrainBritishandEEAcadets couldbeimposedbynewlegislationornewregulationsorbyamendingexisting legislation.Forexample,thetonnagetaxcurrentlyrequiresshippingcompaniestorecruit onecadetforevery15officerpostsonthevesselstheyoperateormakeacash contributiontotheMaritimeTrainingTrustinrespectofeachtrainingplacewhichitis unabletooffer.Oneoptiontoincreasecadetnumberscouldbetoincreasethetraining requirementinthetonnagetax,perhapstotwoorthreeofficerposts.Theexactnumber woulddependonamoredetailedanalysisofhowmanycadetsarecurrentlybeing trainedduetotonnagetaxobligations. However,suchlegislativechangesmayhaveunintendedconsequencessuchascreating newdisincentivestolocateintheUK.Further,anynewlegislativerequirementswould needtobeconsistentwithwiderpolicy(e.g.oneinoneout),thecostofanynew administrativeburdensandneedtobeconstantlyrevisedtoensureshippingcompanies werenotbeingforcedtotraincadetsinexcessofdemand. Asecondpolicyalternativeistheintroductionofanindustrywidelevythatisapplicable toallcompaniesthatbenefitfromseafarersandexseafarers.Thiswouldmeanall companiesthatbenefitfromseafarertrainingintheUKmakeacontributiontoitscost. Whetherornotthisiseffectivewoulddependon: itsbeingabletoidentifyallcompaniesthatbenefitfromUKseafarertraining; thelevyhavingwidespreadindustryacceptance,i.e.companiesdonotleavethe UKinresponsetothelevy;and thecostofadministratingthelevybeingproportionate.

92

Asaguide,CITBConstructionSkillsreportsthatthelevyintheconstructionindustry raisedaround80millionin2009withthecostofadministration(collectionandgrant processing)beinglessthan2percent 75 . Anotherwayofpotentiallyaddressingthemarketfailureistoincentiviseshipping companiestocontinuetotraincadetsthroughgivingthemtaxbreaks(inadditiontotax concessionsunderthetonnagetax)iftheytrainacertainnumberofcadetseachyear. However,thefeasibilityofsuchtaxbreakswilldependonwhetherthepolicycanbe showntobetaxneutral,i.e.thelostrevenueisrecoveredelsewhere.Further,sucha policywouldneedtoconformtoStateaidguidelines. CurrentlyUKseafarertrainingcomprisesofclassroombasedlearningandanatsea component.Thefreeriderissuearisesfromtheatseacomponentwhichnecessitatesthe involvementofshippingcompaniesgivingcadetsberths.Thus,oneoptiontoaddressthe freeriderissuecouldbetoremovethecompulsoryatseatrainingcomponent,whichin turnremovesthefreeriderissueforshippingcompanies.ThiswouldmakeUKseafarer trainingakintotheDutchscheme.However,onenegativeconsequencewouldalmost certainlybeareductioninqualityandareductionintheUKscompetitiveadvantage. Alternatively,theUKseafarertrainingprogrammecouldberevisedtobecomefully vocational(atsea).Bybecomingfullyvocationalwouldallowseafarertrainingtobeina positiontoaccessfundingforapprenticeships(assumingtherewasenoughfunding availableforthis).Again,whetherornotthisisdesirablewilldependontheimpacton overallseafarertrainingquality. Itmayalsobethecasethatthecurrentseafarertrainingprogrammecouldbere classifiedsoastoqualifyasanapprenticeship.Thiscouldpotentiallygiveshipping companiesaccesstootherfundingsourcesthoughthesesourcesarefiniteandthereis noguaranteethattheshortfallarisingfromthecancellationofSMarTcouldbemadeup fromapprenticeshipfunding.Further,themovetoanapprenticeshipmodelwillonlybe successfulfromapolicyperspectiveifshippingcompaniesdochoosetorecruitBritish traineesratherthanexperiencedUKandnonUKseafarers.DeloitteandOEareaware thatwhetherornotseafarertrainingcanbeclassifiedasanapprenticeshipisunder ongoingdiscussion. Thestatusquoandvariants Ononereading,maintainingthestatusquoentailscontinuingSMarTinitsoriginalform, i.e.havingall5levelsofSMarTandfundinginexcessof12millionp.a.Forthistobea viableoption,thisformofSMarTwouldneedtodemonstrateongoingvalueformoney. Onanotherreading,inthecurrentfiscalclimate,maintainingSMarTinitscurrentform andleveloffundingmaynotbetenable.ArevisedformofSMarTcouldinvolve: targetingfinancialsupportforseafarertraininginthoseareaswherethe economicneedisgreatest,e.g.officertraining; greatercooperationwithotherUKinstitutionsinvolvedintraining(seafarerand otherwise)toexploitsynergiesandeconomiesofscale; shiftingthecostburdenofcertainelementsofseafarertrainingawayfrom Government,forexampleonlysupportingshippingcompaniestocoverthecost ofsupernumerarycadetsbutnotsupportingcadetstuitionfeesandliving expenses;or reducingorcappingtheamountoffundingavailableunderSMarT. Forthepurposesofevaluation,allvariantsareconsidered.

75

SeeCITBConstructionSkillsAnnualReportandAccounts2010,www.cskills.org/uploads/citbcskillsreport accounts2010_tcm1725723.pdf 93

 10.2 LonglistOptionevaluation

Thematrixoverleafevaluateseachoptionfromthelonglist(andoptionvariant)against thefollowingcriteria: ThecostoftheremedytoGovernment:The(broadbrush)financialcostofthe remedy. Effectiveness:Theextenttowhichremediesarelikelytobeeffectivein eliminatingthemarketfailure. Longrunsustainability: Whetherthisremedyislikelytobeviableinthelongrun (10years) Acceptability:Whobearsthefinancialcostoftheremedyandwhetheritwill commandindustrywidesupport. Easeofimplementation:Howquicklytheremedycouldbeimplementedandthe extenttowhichitdoesnotdisruptexistingschemes. Efficiency:Whetherthisremedymightrepresentthebestuseofresources. Whilethisscoringissubjective,itisbasedonDeloittesandOEsunderstandingofthe sector,widermacroeconomicissuesandexperienceinothersectorsandactsasauseful diagnostictoolratherthanadefinitiveconclusiononeachoption. Thisallowsthefilteringforadeeperanalysisonmorerealisticoptionsinsection10.3.

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Table10.2.a:Optionevaluation

Option

Comments

Scoring
Costof remedyto Govt Effectiveness Longrun sustainability Acceptability Easeof implementation Efficiency

Overall (max score=5)

1 1a.

Marketbasedsolutions Creatingarequirementfor cadetstoworkfortheshipping companytheyservedina supernumerarycapacitywith Netimpactmaybelowiffewshipping companiesrespondbyincreasingcadet recruitment.

2.0

1b. Greaterrelianceonotherexisting fundingschemesfortraining

Sizeofotherschemesunlikelytobelarge enoughtocompensateforlossofSMarT. 3 Thecosttoindividualstudentsofseafarer trainingmaybemuchlargerthan alternativedegreecoursesduetoits lengthandcomplexity. Mayworsenimageofseafaringasa potentialcareerforyoungpeople. Seatimetrainingstillrequired. 2 2

1.9

1c.

Requiringindividualstudentsto bearthefullcostoftraining

2.2

2 2a.

AlternativepolicymeasuresbyGovernment Imposinganobligationon shippingcompaniestotrainUK seafarers Mayhaveunintendedconsequencesof deterringshippingcompanies. 2 2 2 1 1 2 1.7

95

Option

Comments

Scoring
Costof remedyto Govt Effectiveness Longrun sustainability Acceptability Easeof implementation Efficiency

Overall (max score=5)

2.4

2b. Introducinganindustrywidelevy andgrantsystemtofund seafarertraining 2c. Introducingtaxbreaksfor training

Maycausecertaincompaniestorelocate. 2 Maybeadministrativecomplex. Unlikelytobeviableincurrentfiscal environment. 0

2 3

2 3

4 3

2 2

2 3

1.8 2.6

2d. Movingtowardsan apprenticeshipbasedmodelfor UKseafarertraining 2e. Fundamentallyrevisingthe structureofUKseafarertraining

Whilemayopenaccesstonewfunding 2 schemes,unlikelytofullyreplaceSMarT. Changingthetrainingprogrammetofocus 2 oneitherclassroomlearningonatsea learningislikelytoreduceoverallquality oftraining.

1.4

3 3a.

RevisedsupportforUKseafarertraining 2010SMarT Unlikelytobesustainableundercurrent fiscalconstraints. Uncertaintyastohowgoodvaluefor moneythecurrentschemeoffers. 1 2 1 4 3 2 2.1

3b. 2011SMarT

Wouldrequireconstantdialoguewith industrytoensureSMarTfocuseson thoseareaswhereneedisgreatest. AnychangestoSMarT,suchasonly financingcertaincomponentsoftraining, wouldneedtobecarefullyconsideredfor

2.9

96

Option

Comments

Scoring
Costof remedyto Govt Effectiveness Longrun sustainability Acceptability Easeof implementation Efficiency

Overall (max score=5)

widereffectsandunintended consequences.
Source:Deloitteanalysis

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 10.3 OptionsAnalysis

TheLongListSummary Thefigurebelowsummarisesthedifferentoptionsalongthesimplifiedaxesof effectiveness(includinglongtermsustainability)anddeliverability(intermsofcost,ease ofimplementationandacceptability). Figure10.3a:SummaryofoptionsLongList

Key: 1acreatingarequirementforcadetstoworkfortheshippingcompanytheyservedwithinasupernumerary capacitywith 1bgreaterrelianceonotherexistingfundingschemesfortraining 1crequiringindividualstudentstobearthefullcostoftraining 2aimposinganobligationonshippingcompaniestotrainUKseafarers 2bintroducinganindustrywidelevyandgrantsystemtofundseafarertraining 2cintroducingtaxbreaksfortraining 2dmovingtowardsanapprenticeshipbasedmodelforUKseafarertraining 2efundamentallyrevisingthestructureofUKseafarertraining 3a2010SMarT 3b2011SMarT Note:thepositioningoftheoptionbubblesisapproximateandillustrative

BasedonDeloittesandOEsunderstandingofthesector,individually,noneofthe identifiedoptionsisclearlyintheupperrightquadrantandscoreshighlyonboth effectivenessanddeliverability. Nonetheless,theclosestoptionstothisare2011SMarT(i.e.thecurrentprovision),an industrywidelevyandgrantsystem,anapprenticeshipbasedmodel,2010SMarT,and requiringstudentstofundthecostoftraining. Thesefiveoptionshavebeenshortlistedandareanalysedingreaterdepthbelow,with respecttobenefits,costsandvalueformoney. Attheoppositeendofthescale,giventhecurrentfiscalsituationandHMTreasurys positionontaxreceipts,changestothetaxregimefortrainingpurposesareunlikelytobe deliverableinpractice.

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 TheShortList

Theanalysisbelowconsiderseachofthefiveoptionsintermsoftotalcosts,coststo Government,benefitsandthusbenefit:costratiosasameansofcomparingeachoption. Benefitassumptions Asimplemeansofcalculatingtheeconomicbenefitofaseafarer,andalsoexseafarers, trainedthroughSMarTistoassesstheproductivitydifferentialbetweentheaverage workerinthemaritimesectorandtheUKproductivityaverageforallworkers. Bythismethod,foreachyearinworkaSMarTbeneficiarygeneratesapproximately 14,500inadditionaloutputrelativetotheoutputofaUKworkerdisplayingaverage productivity(seefootnotethreeintableoverleafforfurtherdetails). ByisolatingtheneteffectsofSMarTintermsofnumbersofcadetstrained,itispossible tocalculatethenetbenefitstotheUKeconomyoveraworkinglife(assumingthatthis productivitydifferentialholdsandaworkinglifeinthisrespectaverages20yearsabove the810yearsspentatseabutlessthanastandardworkinglifeofover40years) TheseareusedtogiveanindicationofbenefitsarisingfromSMarTand,inconjunction withcosts,andindicationofValueforMoneyfortheindependentpanelandShipping Ministertobasesubsequentanalysisanddecisionson. Resultsarepresentedoverleaf.

99

 Figure10.3b:Analysisofshortlistedoptions

Source:Deloitteanalysis

100

Studentbearingfullcostoftraining Thecostsofthisoptionarelikelytobesignificant,bothintermsofwhatstudentsare requiredtopayaswellaspotentialcoststoGovernmentarisingfromnoncollectionas manyseafarersareatseaand,asresultnondomiciled,forextendedperiods,theyarenot subjecttothetaxsystemandcollectionthroughPAYEmightnotbefeasible. However,themainissuerelatingtothisfundingoptionisthemovefromapositionof zerocosttostudents(adjustmentstosubsequentwagepaymentsnotwithstanding)to fullcoststostudents.Thisislikelytomakeacareerasaseafarermuchlessenticingand assuch,relativetotheotherpolicyoptionsavailable,thebenefittocostratioislikelyto besignificantlylowerthanotheroptions.Thisapproachisthereforelikelytoexacerbate thedemandandsupplygapofUKseafarersdiscussedinchaptereight. Levyandgrantsystem Thiswouldinvolvetheidentificationofparticipantsandcollectionofgrantcontributions thatwouldthenbepaidtoshippingcompaniesandotherorganisationsproviding seafarertraining.Ascostsaresharedmorewidelythaninthestatusquo,thebenefitto costratioforGovernmentsinitialoutlayishigh. AmodifiedSMarTandanindustrylevyarenotmutuallyexclusive.Aswellasalevyand grantsysteminisolation,itwouldbeentirelyfeasibletomodifythecomponentsof SMarTandintroduceanelementofindustryfundingalongsideGovernmentfunding. However,itshouldbenotedthatresearchsuggeststhattheintroductionofanewlevy (regardlessofsizeandpurpose)couldworktodetershippingcompaniesandother maritimecompaniesfromlocatingintheUK.Further,insomeinstancesalevycould offsetbenefitsfromthetonnagetaxandcouldnotbeintroducedinisolation. Insummary,alevywouldlikelymakeforamoreagreeabledistributionofcostsacrossthe widermaritimesectorandsolvethefreeriderissue,althoughwenoteitmaynotbea popularchoiceamongststakeholdersandidentification,monitoringandcollectioncosts couldbehigh. SMarT ThebenefitsfromcurrentSMarTprovisionhasbeenestimatedat58millionagainsta costof30million(12millionofwhichcomesfromGovernment).Accordinglythe benefit:costratioforGovernmentinputsishigherthanthetotalbenefit:costratio. Increasedprovision(perthe2010originalSMarTfunding)wouldleadtogreaterbenefits andhigherbenefit:costratios.Thisisbecausethecalculatedbenefitstoeachadditional UKtrainedseafareraregreaterthantheassociatedcosts.Withoutconsideringthefiscal environment,theoptimalpolicysolutionwouldbetrainUKseafarerstothepointwhere totaldemandforUKseafarersisfulfilledandgapsarezero. Apprenticeshipscheme Wehavenotconsideredthisoptionaspartofourstudy,butnotethatitisalsolikelyto beafeasibleoption. Discussionsoverapprenticeshipprogrammesfor(i)ratings;and(ii)cadetsareongoing betweenthesector,DfTandBIS.Progresshasbeenmadebutseveralissuesstillneedto beresolved.Atthisstage,noclarificationoverthefundsavailableforsuchprogrammes hasbeenmade. 10.4 Conclusionandnextsteps

TheanalysisinthisreporthasshownthatthereisademandforUKtrainedseafarersat officerlevelandforexseafarers(mainlyofficers)inonshorerolesinthewidereconomy. Theanalysisalsoshowsthat,ifcurrentconditionspersist,thatthereislikelytobe significantgapbetweenthesupplyofanddemandforUKtrainedseafarersby2021.

101

GiventhatseafarerscontributesignificantlytotheUKeconomy,andthatSMarThashad apositiveupwardeffectonthenumberoftrainedcadets(c.200perannumabove tonnagetaxinducedtraining),additionaltrainingislikelytobebeneficialtotheUK economy. Moreover,jobsthatcouldotherwisebetakenbycompetentoverseaslabouraremore likelytobetakenbyUKcitizensanimportantconsiderationintermsofgenerating employmentgrowthintheUKpercurrentpolicyimperatives. Ifthecurrentfiscalsituationwasstronger,theargumentforincreasedGovernment fundingofSMarT(orsimilar)wouldalsobestrongereachseafarertrainedislikelytobe netbeneficialtotheUKeconomy. However,giventhecurrentsituation,andtheanalysisabove,DeloitteandOxford EconomicsfeelthatthethreemainoptionsopentoGovernmentare:

AcontinuationofSMarTwhichcouldfeatureanincreaseinfundingback to2010levelsoramoretargetedprogrammetowardsofficers(given substitutabilityatratingslevel)basedon2011fundinglevelseachwould helpfillsomeofthegapoutlinedinthisstudy. Theintroductionofalevyandgrantsystemunderwhichshipping companies,Governmentandthirdpartybeneficiariesallpayamore equitableshareoftrainingcosts,presumingassociatedissuescanbe overcome;and AnapprenticeshipmodelifseparatediscussionsonthiswithBISandUK Government,apprenticeshipscouldbeusedtoprovidethetraining requiredforUKseafarers.
TheseviewsrepresentDeloitteandOxfordEconomicsconclusionsonthebasisofthe availableevidenceandwithintheremitofthestudy. Werecognisethatopinionmaydifferamongststakeholdersandthepanelreviewingthis document,butunderstandthattheywillbringtheirownexperiencetobearonthe recommendationtotheMinisterofShipping.

102

AnnexeABibliography
Anexhaustiveanalysisofemploymenttrendsinallsectorsrelatedtoseaorusingsea resources(2006),SummaryreportfortheEC,DGFisheriesandMaritimeAffair. TheCommissionofEuropeanCommunities(2001),CommunicationfromtheCommission totheCouncilandtheEuropeanParliamentonseafarertrainingandrecruitment.Found athttp://europa.eu/legislation_summaries/transport/waterborne_transport/l24252_en.htm TheCommissionofEuropeanCommunities(2009),CommunicationfromtheCommission totheEuropeanParliament,theCouncil,theEuropeanEconomicandSocialCommittee andtheCommitteeoftheRegions,AnnualPolicyStrategyfor2010.Foundat
http://ec.europa.eu/atwork/synthesis/doc/aps_2010_en.pdf

Gardner,B.M.,Marlow,P.B.,Naim,M.M.,Nair,R.V.andPettit,S.J.(2003),TheUK economysrequirementsforpeoplewithexperienceofworkingatsea.Commissionedby theDepartmentforTransport,theChamberofShippingandtheMarineSociety Gekara(2007),IncreasingshippingskillsintheUK:burstingtheindustrymythof diminishinginterest Gekara(2008),Aretherejobsforallintheshippingindustry?,TheSIRCcolumn, Gekara(2008),Globalisation,StateStrategiesandtheShippingLabourMarket.TheUKs ResponsetoDecliningSeafaringSkills Gekara(2009),UnderstandingattritioninUKmaritimeeducationandtraining Glen,D.(2008),Whatdoweknowaboutthelabourmarketforseafarers?Aviewfromthe UK,CentreforInternationalTransportManagement,LondonMetropolitanUniversity Gould,E.(2011), Personalities,Policies,andtheTrainingofOfficerCadets, SIRC Symposium,CardiffUniversity Lewarn,B.(2009),Areviewofsomesolutionstotheshortageofmaritimeskills,Maritime TransportPolicyCentre,AMC ObandoRojas,GardnerandNaim(1998),Asystemdynamicanalysisofofficermanpower inthemerchantmarine,MaritimePolicy&Management SelkouandRoe(2002),UKtonnagetax:subsidyorspecialcase? TheTaskForceonmaritimeemploymentandcompetitiveness(2011),ReportoftheTask ForceonMaritimeEmploymentandCompetitivenessandPolicy.Foundat http://ec.europa.eu/transport/maritime/seafarers/seafarers_en.htm UKGovernment(1998),BritishShipping:Chartinganewcourse Watson,Farley&Williams,SummaryofUKTonnageTaxLegislation.Foundat
http://www.wfw.com/Publications/Publication224/$File/UK%20Tonnage%20Tax%20Legislation.pdf

103

AnnexeBDetailofthedemandand supplyforecasts
12.1 EstimatingUKshippingindustryemploymentintherecentpast Asafirststep,OEsoughttoestablishthepresentnumberofofficersandratingsworking intheUKshippingindustrythatis,theshippingsectorbroadlycomprisingthosefirms whoseactivitiesarecountedascontributingtoUKGDPandrecenttrends. ThekeysourcefortheseestimatesistheannualsurveycarriedoutbytheUKChamberof Shipping,allowingseparateidentificationofemployeesofthecompaniescoveredin termsofofficerorratingstatus,workcategory,andwhethertheyareUKornonUK nationals.ThefiguressetoutinTable12.1aaretakenstraightfromthesurveydataset, exceptthatthesmallnumberofindividualscategorisedin2010asnationalityunknown havebeenallocatedbetweenUKandnonUKinproportiontotheknown nationalities. Table12.1a:EmploymentintheUKChamberofShippingmanpowersurveys
UKofficers NONUKofficers UKratings NONUKratings Total
Deck Engine Technical Catering/hotel/other Deck Engine Technical Catering/hotel/other Deck Engine Technical/genpurpose Catering/hotel/other Deck Engine Technical/genpurpose Catering/hotel/other

2004
3,640 3,294 886 1,388 1,564 1,400 434 2,251 3,479 989 184 4,425 2,052 1,444 172 10,004 37,606

2005
3,868 3,870 676 1,651 2,597 2,301 254 1,058 3,614 818 224 4,149 3,535 1,832 143 10,856 41,446

2006
3,683 3,415 749 1,713 3,733 3,474 540 1,168 3,459 832 276 5,185 4,952 3,206 519 13,383 50,287

2007
3,642 3,313 765 993 4,150 3,670 820 1,275 3,206 699 291 4,119 4,929 3,122 1,065 14,859 50,918

2008
3,810 3,292 890 1,870 5,015 4,950 955 1,073 3,273 731 447 4,876 5,968 3,743 430 14,188 55,511

2009
4,192 3,738 1,103 2,048 4,768 4,597 1,159 1,120 3,914 769 338 5,379 6,125 3,651 347 19,601 62,849

2010
4,457 3,883 1,466 1,898 5,938 5,237 1,388 1,635 3,494 700 321 7,273 7,809 3,986 657 22,901 73,043

Source:UKChamberofShippingManpowerSurveys.(2010unknownnationalityreallocatedbyOE.)

However,theChambersmanpowersurveysarenotfullycomprehensive,andcoverage mayvaryfromoneyeartothenext.Inparticular,itappearshighlylikelythatthesurvey hasbecomingprogressivelymorerepresentativeoftheUKshippingsectorasawholein themostrecentyears.ThatissuggestedbythefactthatnumbersofUKdeckandengine officersinthesurveyincreasedby20percentbetween2007and2010,whereastheDfTs estimatesofUKcertificatedofficersactiveatsea 76 showa7percentfalloverthesame period.

ThesedataarebasedonnumbersofUKofficersholdingvalidcertificatesofcompetency,plusassumptionsmade aboutretirementagesandtheproportionnotcurrentlyatsea.TheDfTseriescoversUKnationalsworkingoutside 104

76

InpreviousworkontheUKshippingindustry,OxfordEconomicsscaledupthefigures foundintheChamberssurveybyafixedfactorof1.7,basedonthefactorsusedbythe NationalStatisticsOfficetoderivesectorturnoverfromotherChamberofShippingsurvey results.However,whilethatscalingupfactorhasbeenretainedinthisexerciseforthe years200407,for20082010aprogressivelysmallerscalingupfactorisused,calculated toensurethattheseriesforUKcertificatedofficersworkingintheUKindustryfallsinthe mostrecentyearsbyalmostasmuchastheDfTactiveatseaseries 77 .Asthisprocedure reflectsaviewthattheChamberssurveyhasbecomeprogressivelymorerepresentative, thesame,progressivelylowerscalingupfactorsareappliedtoallcategoriesofseafarer, notjusttoUKcertified(deckandengine)officers. Morespecifically,thegrossingupfactorsusedare1.58for2008,1.42for2009and1.34 for2010.Table12.1bsetsouttheresultingestimatesforofficersandratingsworkingin theUKshippingindustry.Itcanbeseenthatevenconstrainingtheestimatesintheway describedabove,thetotalnumberofseafarersintheUKshippingindustry(excluding trainees)amountedtosome98,000in2010markinga10percentannualincrease followingthreeyearsofcomparativelysubduedgrowthastheglobalrecessiontookits toll.Onaverage,thisemploymentisshowntohavegrownatanannualrateof7.4per centbetween2004and2010.Overthesameperiodthevolume 78 ofglobaltradeingoods grewby4.7percentayearandthatofUKtradeingoodsby1.9percentperannum. Table12.1b:EstimatedofficersandratingsemployedintheUKshippingindustry
UKofficers NONUKofficers UKratings NONUKratings Total
Deck Engine Technical Catering/hotel/other Deck Engine Technical Catering/hotel/other Deck Engine Technical/genpurpose Catering/hotel/other Deck Engine Technical/genpurpose Catering/hotel/other

2004
6,189 5,600 1,506 2,360 2,659 2,380 738 3,827 5,914 1,681 313 7,522 3,488 2,455 292 17,007 63,930

2005
6,576 6,579 1,149 2,806 4,415 3,912 432 1,799 6,144 1,391 381 7,054 6,010 3,114 243 18,455 70,458

2006
6,261 5,806 1,273 2,912 6,346 5,906 918 1,986 5,880 1,414 469 8,815 8,418 5,450 882 22,751 85,488

2007
6,191 5,632 1,301 1,688 7,055 6,239 1,394 2,168 5,450 1,188 495 7,002 8,379 5,307 1,811 25,260 86,561

2008
6,011 5,194 1,404 2,950 7,913 7,810 1,507 1,693 5,164 1,153 705 7,693 9,416 5,906 678 22,386 87,585

2009
5,943 5,299 1,564 2,903 6,760 6,517 1,643 1,588 5,549 1,090 479 7,626 8,683 5,176 492 27,788 89,101

2010
5,982 5,211 1,967 2,548 7,969 7,029 1,864 2,194 4,689 940 431 9,761 10,481 5,350 881 30,737 98,034

Source:OEestimatesbasedonUKChamberofShippingandDfTdata

oftheUKindustryaswellasthoseinit,butitishighlyunlikelythatthiscouldexplaintheapparentdivergence betweentrendsintheChambersandDFTseries. TheOEestimatefallsbyslightlylessthantheDfTseriesonthegroundsthattheaverageretirementageis likelytohavebeenonamildlyupwardtrend,inlinewiththewiderUKpatternofincreasedlabourmarket participationamongstolderworkers.AfurtherimplicitassumptionisthattheproportionofUKofficersactiveat seabutoutsideoftheUKindustryhasremainedconstant.

78 77

Volumeheremeanstheinflationadjustedmoneyvalue. 105

12.2

Estimatingthestartingpointfordemandandsupplyprojections

Fivepiecesofevidencecometogethertosuggestalbeittentativelythattherehas recentlybeenasmalldegreeofexcesssupplyintermsofUKseafarers: RespondentstotheDeloitte/OxfordEconomicssurveyreportjoblossesinthe wakeoftherecentrecession,assummarisedinTable12.2a.Whilethemajority ofcompaniesavoidedjoblosses,aminoritywereforcedtomakesignificantjob cuts.Overall,theresultsappearconsistentwithjoblossesintheshippingsector of67percentofprerecessionlevels.Thatinturnissuggestiveofatleastsome redundanciesamongstseafarersincludingUKseafarersdespiteindications fromtheChamberofShippingmanpowersurveysthatoverallseafarer employmenthascontinuedtoexpandonanetbasis. Inaddition,supplyconditionsfacingshippingcompaniesmightbefurtherhelped temporarily,inprinciple,byjoblossesinotherpartsofthemaritimesector possiblyintheorderof5percentofprerecessionlevelsbasedontheDeloitte/ OEsurvey.Theseredundantindividualswouldprobablyincludeanumberwith pastseafaringexperiencecapableofreturningtotheshippingindustry. TheONSAnnualSurveyofHoursandearnings(ASHE)pointstoa4.7percent dropinaveragehoursworkedperemployeeinthewatertransportservices industry 79 between2009and2010. TheONSLabourForceSurvey(LFS) 80 showsthat,ofthoseindividualsreportingin 2010thattheyhadbeenworkinginthewatertransportservicesindustryayear earlier,around4percentwerenowunemployedandavailableforwork.Thatis upfromcorrespondingfiguresof2.5percentand2.8percentrespectivelyinthe 2008and2009surveys. ThesameLFSalsopointstoacomparativelyhighproportionofindividuals becomingeconomicallyinactive(e.g.becomingretiredorstudents),havingleft thewatertransportservicesindustrywithinthepreviousyear.Here,thefigure of9.2percentcompareswithzeroin2008and3.4percentin2009.Although thoseindividualswerebydefinitionthenunavailableforworkintheimmediate future,somemightstillbeconsideredpartofthepotentiallyavailablepoolof industryworkers. Table12.2a:Estimatedmaritimejoblossesinthewakeoftherecession
%oftotalrespondents,excludingblanksand unknown
Noreduction Reducedby010% Reducedby1020% Reducedbymorethan20% Total Estimatedjobslostas%ofinitiallevel
1 2

Totalsample
64 27 3 5 100 5.8

Shipping companies
69 19 6 6 100 6.5

Othersectors employingex seafarers

64 29 2 5 100 5.0

Totalincludescommercialfishingbusinesseswhichareexcludedfromtheshippingandexseafarercategories.

Basedonthemidpointineachrangeandweightedbyapproximatenumbersemployedinmaritimerelatedactivitiesin eachbusiness

79

Thisincludesemployeesofalltypes,notjustseafarers,andextendstoincludeinlandwatertransportservices aswellasseaandcoastalwatertransportservices.

TheLFSfiguresshouldbetreatedwithaparticularlylargedegreeofcautionduetothecomparativelylow samplesizeinthecaseofthisindustry.

80

106

Source:Deloitte/OEsurveyandOEderivedestimates

Table12.2b:Positionofpeopleworkinginthewatertransportindustryayearago
%ofthoseworkinginwatertransportservicesayearago
Stillworkinginthesectortoday Seekingworkorlikelytoseekworksoon Notseekingworkbutnotretired Workinginotherindustries Retired

2008
90.1 2.5 0.0 7.4 0.0

2009
87.9 4.0 3.4 4.7 0.0

2010
82.8 4.0 6.2 4.1 3.0

1 ILOunemployed,studentsseekingworkbutnotavailablejustyet,otherslikelytoseekworksoon.2Otherstudentsbut alsosomeothers(e.g.thosenotavailableforworkduetofamilycommitments).

Source:ONSLabourForceSurveys

Reflectingthis,itisassumedthatactualemploymentin2010wasequaltodemand,and thatadegreeofexcesssupplyexisted.Morespecifically,thelevelofexcesssupplyisput forthesepurposesatsome3.8percentof2010actualemploymentofUKnationals derivedfromthe4.0percentofUKresidentsworkinginthewatertransportindustrya yearearlierbutsubsequentlybecomingunemployedandavailableforwork.Thatequates tosome1.2percentofallUKandnonUKofficersandratingsworkingintheUKindustry. 12.3 Projectingdemandoverthecomingdecade

Table12.3abelowsetsoutdetailedyearbyyearprojectionsforseafarerdemand. ToestimatethesupplyofUKseafarerstotheUKshippingindustry,thestartingpointwas againtheUKChamberofShippingmanpowersurvey,whichprovidesdataontheofficers andratingsinthedifferentcategoriesbyage.Takingthedatafor2010,grossingthisupto industrywidesupply(employedplusassumedunemployed),andprojectingforwardyear byyearthroughto2021onthebasisofassumptionsaboutoutflowsfromtheshipping sector,developmentsovertimeintheexistingstockofemployees(i.e.thosealreadyin theindustryasof2010)canbetracked.

107

Table12.3a:Projecteddemandforofficersandratings(UKandoverseas)
Overall demand 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Deck Officer
13,952 14,471 14,853 15,517 16,168 16,766 17,319 17,829 18,314 18,776 19,181 19,449

Engine Rating
15,170 15,735 16,151 16,872 17,580 18,231 18,832 19,386 19,913 20,416 20,856 21,147

General Rating
6,289 6,523 6,696 6,995 7,288 7,558 7,807 8,037 8,256 8,464 8,647 8,767

Officer
12,240 12,696 13,031 13,614 14,185 14,710 15,195 15,642 16,067 16,473 16,828 17,063

Rating
1,313 1,361 1,397 1,460 1,521 1,577 1,629 1,677 1,723 1,767 1,805 1,830

Alldeck& engine
48,964 50,786 52,128 54,457 56,741 58,843 60,783 62,571 64,273 65,895 67,316 68,256

Technical Officer
3,830 3,973 4,078 4,260 4,439 4,603 4,755 4,895 5,028 5,155 5,266 5,340

Hotel/catering/other Officer
4,742 4,918 5,048 5,274 5,495 5,698 5,886 6,060 6,224 6,381 6,519 6,610

Allother Rating
40,498 42,005 43,115 45,041 46,930 48,669 50,273 51,752 53,160 54,502 55,677 56,454 49,070 50,896 52,241 54,575 56,864 58,970 60,915 62,707 64,412 66,038 67,462 68,404

Total
98,034 101,682 104,370 109,032 113,606 117,813 121,697 125,278 128,686 131,933 134,778 136,660

Source:OEassumptionsandmodelling

108

Table12.3b:Estimatesofindustryleaversandjoinersbetween2007and2008
UKofficersin sample
Agegroup 62+ 5061 3549 2034 Total 2049 2061

Totalin 2007
91 1,134 861 635 2,721 1,496 2,630

Moversin nextyear
31 246 203 188 668 391 637

O/wwithin sample
0 16 18 15 49 33 49

Estimated within shipping

0 91 102 85 278 187 278

Industry leavers

Leaversas %

31 155 101 103 390 204 359

34.1 13.7 11.7 16.2 14.3 13.6 13.6

UKratingsin sample
Agegroup 62+ 5061 3549 1734 Total 1749 1761

Totalin 2007
119 1,079 1,511 1,107 3,816 2,618 3,697

Moversin nextyear
31 186 200 307 724 507 693

O/wwithin sample
0 3 12 17 32 29 32

Estimated within shipping

0 12 47 67 126 115 126

Industry leavers

Leaversas %

31 174 153 240 598 392 567

26.1 16.1 10.1 21.7 15.7 15.0 15.3

Source:OEanalysisoftheUKChamberofShipping2007and2008Manpowersurveys

Table12.3baboveprovidesoneguidetooutflowsfromtheindustry.Onaverageover thethreeyearsshown,6.4percentofindividualsworkingintheindustryayearearlier hadretiredorwereworkinginanothersector,withafurther3.2percentinactivebut notretiredthislastgroupincludinge.g.studentsandthosewithfamilycommitments, whomightormightnothaveleftthesectoronapermanentbasis.However,thesefigures arenotspecifictoseafaringofficersandratings,andareinanycasederivedfromavery lowsamplesize. AfurtherclueisprovidedbythedetailoftheChamberofShippingmanpowersurveys. OxfordEconomicswasabletomatchupasampleof20companiesrespondingtoboth the2007and2008surveys,coveringsome2,700UKofficersand3,700ratings, representingaroundafifthoftheentireindustry.Usinginformationondatesofbirth enablesanestimatethenumberofindividualsleavingcompaniesinthesamplebetween mid2007andmid2008,aswellasthosestayinginthesamecompanyandthosejoining theindustry.Furthermatchingofdatesofbirththenenablesanestimateofthenumber movingfromonefirmtoanotherwithinthesample.Andfromthereitispossibletoscale uptogetanestimateofthosemovingwithintheUKshippingasawhole,inturnenabling anestimateofthoseassumedtohavelefttheindustry. Theresultsareshowninthetablesbelow.Inthecaseofthosebelowthestandard industryretirementageof62,some13.6percentofofficersand15.3percentofratings areestimatedtohavelefttheindustryduringthat12monthperiod(aperiodinwhich globaltradewasstillgrowingatareasonablepace),whileaboveretirementage34per centofofficersand26percentofratingsleaveeachyear. Thefiguresforthosebelowretirementage,however,willincludemanywiththepotential toreturntotheshippingindustryinfuture,ratherthanthoseleavingtoretireorwork permanentlyinanothersector.

109

Lookingatthosejoiningcompaniesinthesamplemeanwhile,excludingthoseassumedto havemovedwithintheUKshippingsectorandscalinguptothesectorasawhole,itcan beestimatedthatsome1,650UKofficersjoinedtheindustrybetweenmid2007andmid 2008.However,DfTdatasourcesshowthatonly600orsoofficercadetsperannumhad startedtraininginthefewyearspriorto2008,whichisbelievedtobeconsistentwith some450completingtheircourseseachyearandbecomingnewlyavailabletothe industry.Scalingupthatflowtoincludenoncertificatedofficerscominginfromother walksoflife,inproportiontotheofficerstock,issuggestiveofsome550officersintotal beingnewtotheindustryatthattime.Thatisconsistentwithsome1,100officersjoining theindustryin2008havingpreviousexperience,equivalentto7.4percentofthetotal stockofofficers,or7.7percentofthestockofofficersofpreretirementage. Takingthetruepreretirementoutflowfromtheindustryasthedifferencebetweenthe 13.6percentestimatedtoleaveemploymenttheindustryinagivenyear,andthis7.7per centestimateofindustryrejoiners,yieldsapreretirementoutflowforofficersof6per centperannum.Scalingtheproportionsforratingsonthesamebasissuggestsa6per centperannumpreretirementoutflowrateforthatgroup. Consequentlythefollowingassumptionsareemployed,whicharenotthatfardifferent fromthoseusedinpreviousstudies. ForUKofficers,anoutflowfromthelaboursupplyof6percentperannumupto age61,withanoutflowof34percentabovethat,uptoanassumedcutoff pointatage70. ForUKratings,anoutflowfromthelaboursupplyof6percentperannumup toage61,withanoutflowof26percentabovethat,uptoanassumedcutoff pointatage70. ThetablebelowshowstheresultingsupplyofUKofficersandratingsbeforetakinginto accountnewrecruitscomingonstream. Table12.3c:SupplyofUKofficersandratingsbeforeanynewrecruits
Deck 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Engine General All deck & engine
17,913 16,216 14,672 13,263 11,979 10,814 9,757 8,789 7,903 7,093 6,354 5,681

Tech

Hotel/catering/other All other Total

Officer
6,211 5,645 5,134 4,665 4,234 3,839 3,473 3,136 2,824 2,539 2,278 2,041

Rating
4,868 4,370 3,911 3,501 3,137 2,818 2,540 2,292 2,066 1,859 1,668 1,495

Officer
5,410 4,915 4,465 4,049 3,664 3,308 2,978 2,673 2,393 2,139 1,908 1,699

Rating
976 877 787 706 633 569 511 459 413 371 332 296

Rating
448 410 375 342 311 282 255 230 207 186 168 150

Officer
2,042 1,869 1,711 1,565 1,430 1,305 1,189 1,081 980 885 798 719

Officer
2,645 2,427 2,228 2,049 1,887 1,739 1,604 1,479 1,360 1,248 1,144 1,048

Rating
10,134 9,312 8,555 7,860 7,223 6,643 6,114 5,630 5,182 4,767 4,382 4,023 14,821 13,607 12,494 11,474 10,539 9,687 8,906 8,189 7,521 6,900 6,324 5,789 32,734 29,823 27,166 24,736 22,519 20,501 18,663 16,979 15,424 13,994 12,678 11,471

Source:DfTTransportStatisticsBulletin2010,OEassumptionsandmodelling

Havingestimatedtherateatwhichtheexistingstockofseafarerswouldgradually dwindleovertimeintheabsenceofanynewrecruits,thenextstepistolookatadditions. Inthecaseofdeckandengineofficers,thisisbasedonactualnumbersofofficercadets startingtraininginrecentyears,togetherwithanassumptionthatgoingforwardsome 800peryearwillcommencetrainingslightlybelowtheaverageofrecentyearsandin linewiththeassumptionmadebytheDfTinitsprojectionsforcertifiedUKofficer

110

numbers.Furtherassumptionsareadropoutrateof8percentduringthefouryear trainingperiod,andasubsequentleavingratefromtheindustryof6percentperannum inlinewiththatfortheexistingstockofUKofficersunderretirementage.Afew additionalratingtoofficerconversionsareallowedforonthebasisofnumbersavailable forsomerecentyears.Thesplitinofficertraineesbetweenthedeckandengine categoriesisassumedtobeinlinewiththatinrecentyearsi.e.somewhatmoredeck thanengine.SomedetailsoftheresultingworkingsaresetoutinTable12.3dandTable 12.3e. Table12.3d:Traineeofficernumbers

Officercadets Deck Training starts (financial year) 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 Year finish training (four years) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Engine(including dualpurpose) Finish(8% pa dropout) 340 374 292 319 319 319 319 319 319 319 319 Finish(8% pa dropout) 289 262 229 254 254 254 254 254 254 254 254 Officerconversions Deck Engine(including dualpurpose) Finish (8%total dropout) 32 22 21 20 20 20 20 20 20 20 20 Finish(8% total dropout) 14 9 9 9 9 9 9 9 9 9 9

Start

Start

Start

Start

475 522 407 445 445 445 445 445 445 445 445

404 366 320 355 355 355 355 355 355 355 355

35 24 23 22 22 22 22 22 22 22 22

20 13 13 12 12 12 12 12 12 12 12

Source:OEassumptionsandmodelling

Table12.3e:SupplyofUKdeckandengineofficers
Stockofofficers beforenewrecruits post2010 Deck officers Engine officers 5,410 4,915 4,465 4,049 3,664 3,308 2,978 2,673 2,393 2,139 1,908 1,699 Annualadditionto supply Deck officers 372 396 313 339 339 339 339 339 339 339 339 Engine officers 304 272 239 263 263 263 263 263 263 263 263 Netcumulative additiontosupply with6%pawastage rate Deck officers 372 718 933 1,145 1,328 1,487 1,624 1,742 1,844 1,932 2,008 Engine officers 304 534 700 868 1,013 1,138 1,246 1,339 1,420 1,490 1,550 OverallUKsupply

Deck officers 6,211 6,018 5,852 5,598 5,379 5,167 4,960 4,759 4,566 4,383 4,210 4,049

Engine officers 5,410 5,218 4,999 4,748 4,531 4,320 4,116 3,919 3,733 3,559 3,398 3,249

2010 6,211 2011 5,645 2012 5,134 2013 4,665 2014 4,234 2015 3,839 2016 3,473 2017 3,136 2018 2,824 2019 2,539 2020 2,278 2021 2,041

111


Source:OEassumptionsandmodelling

EstimatingnewindustryUKrecruitsinthenoncertifiedofficerandratingscategories requiresmoreassumptionsastheydonottypicallygothroughformalandwellrecorded trainingsystemsalongthelinesforcertifiedofficerssetoutabove.Forthesepurposes estimatesoftheannualnumberofnewrecruitsofUKnationalsovertheperiod200410 weremadeonthebasisoftheassumptionsaboutoutflowsduetoretirementandother industryleaversreportedabove. Forallcategoriesexceptone,theseassumptionsyieldedsensiblelookingresults.Theone exceptionwasthecomparativelysmallengineratingsgroup,whereitisassumedthat thataminimalnumberof10perannumcomeonstream,inlinewiththeaveragenumber oftraineeengineratingsin200407 81 . Table12.3f:UKnoncertifiedofficersandratings:assumedannualadditions
Officers Tech
185

Ratings Catering
195

Deck
200

Engine
10

General
45

Catering
955

Source:OEassumptions,basedpartlyontrendsinsupplyintherecentpast

Thetablebelowsetsouttheoverallimpactonsupply,wherenetnewrecruitsare calculatedonthebasisofasubsequent6percentperannumdropoutrateforofficers and6percentforratings(i.e.itisassumedthatonlyanegligiblenumberofnew recruitswithinthedecadeaheadreachretirementageby2021). Table12.3g:ProjectedsupplyofUKnoncertificatedofficersandratings

UKsupplywithoutnewrecruits Officers
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Ratings Catering
2,645 2,427 2,228 2,049 1,887 1,739 1,604 1,479 1,360 1,248 1,144 1,048

Tech
2,042 1,869 1,711 1,565 1,430 1,305 1,189 1,081 980 885 798 719

Deck
4,868 4,370 3,911 3,501 3,137 2,818 2,540 2,292 2,066 1,859 1,668 1,495

Engine
976 877 787 706 633 569 511 459 413 371 332 296

General
448 410 375 342 311 282 255 230 207 186 168 150

Catering
10,134 9,312 8,555 7,860 7,223 6,643 6,114 5,630 5,182 4,767 4,382 4,023

Source:DfTTransportStatisticsBulletin.Moregenerally,onlylimiteddataisavailableonnumbersoftrainee ratingsasopposedtoofficercadets.

81

112

Table12.3g:ProjectedsupplyofUKnoncertificatedofficersandratingscont.
NetnewUKrecruits Officers
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Ratings Catering
195 378 551 713 865 1,008 1,142 1,269 1,388 1,500 1,605

Tech
185 359 522 676 820 956 1,084 1,204 1,317 1,423 1,522

Deck
200 387 560 723 874 1,015 1,146 1,269 1,383 1,490 1,589

Engine
10 19 28 36 44 51 57 63 69 74 79

General
45 87 126 163 197 228 258 286 311 335 358

Catering
955 1,846 2,676 3,450 4,172 4,846 5,474 6,059 6,605 7,114 7,589

OverallUKsupply Officers
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Ratings Catering
2,645 2,622 2,606 2,600 2,600 2,604 2,612 2,621 2,628 2,636 2,643 2,652

Tech
2,042 2,054 2,070 2,087 2,106 2,125 2,145 2,165 2,183 2,202 2,221 2,241

Deck
4,868 4,570 4,297 4,061 3,860 3,691 3,555 3,438 3,335 3,242 3,158 3,085

Engine
976 887 807 734 669 612 562 517 476 440 407 376

General
448 455 462 468 474 478 483 487 492 498 503 508

Catering
10,134 10,267 10,400 10,536 10,673 10,815 10,960 11,104 11,241 11,373 11,497 11,612

Source:OEassumptionsandmodelling

12.4

AddingnonUKsupplytoarriveattheshippingindustryskillsgap

Finally,tocloseoutthemodelinthecaseoftheshippingindustryanassumptionabout thesupplyofnonUKseafarerstotheUKindustryisneeded.Attheworldwidelevel,the totalsupplyofseafarersatisprojectedbyindustryexpertstogrowatarateofbroadly2 percentperannumoverthedecadeahead 82 .However,intherecentpastemploymentof foreignseafarersintheUKindustryhasgrownataveryrapidpacebyaround12per centperannumoverall,withbothofficersandratingrankssharinginthisgrowth. OEdoesnotseesuchratesofgrowthbeingsustainablegoingforward,butgiventhis recenthistoryitseemsreasonabletoassumethatnonUKsupplyofseafarerstotheUK industrywillcontinuetogrowbymorethanoverallsupplyatthegloballevel,andhave assumedanannualrateof5percentgrowthforthepurposesofthecentralestimates.

82

Manpower2020Update,BIMCO/ISF/DMU/WarwickInstituteforEmploymentResearch.

113

Thefinalnumbersaresetoutintablesfurtherbelow,afteraconsiderationofexseafarer employmentacrossthewidermaritimesector. 12.5 EmploymentofexseafarersacrossthewiderUKmaritimesector

Thebeststartingpointforestimatesofthepresentandfutureemploymentofex seafarersacrossthewiderUKmaritimesectorremainsthestudycarriedoutbyGardner etalsevenyearsago 83 .However,inthisreportaslightlywiderviewofmaritime employmentistaken,mostnotablytoincludetheoilandgasindustryandagreater numberoftrainingproviders. Estimatesofnumbersofexseafarersdemandedandactuallyemployedinthewider maritimesectorinrecentyears,basedoncombiningtheGardnerstudywithresponsesto theDeloitte/OEsurvey,aresetoutinthetablesbelow.Theseestimateshavebeen producedby: SplittingtheGardneretalprojectionsforthedemandforexseafarersin2008 and2013intosixsectorsalignedwiththoseofrespondentstothenewDeloitte/ OEsurvey,interpolatingprojecteddemandintheinterimyearswiththe assumptionofconstantgrowthrates,andestimatingassociatedsupplyineach categorybasedona13.5percentsupplyshortfallthroughout.Thatisbasedon theGardnerfindingthat,in2003,13.5percentofjobsthatemployerswould havepreferredtohavefilledwithanexseafarerwereinfactfilledbynon seafarer,andthatstudysexpectationthatsupplyshortfallsalongthoselines wouldpersistthroughoutthefollowingdecadeifdemanddevelopmentsturned outasthenexpected. Table12.5a:DemandandsupplybasedonGardneretal's2003study

Projecteddemand Oil&gas Trainingproviders Portsandrelatedservices Miscellaneous3&insurance Shippingcompanies4 Other Total Projectedsupply Oil&gas Trainingproviders Portsandrelatedservices Miscellaneous&insurance Shippingcompanies Other Total
5 2 1

2008
300 2,690 1,758 3,552 7,789 16,089 259 2,326 1,520 3,071 6,735 13,911

2009
294 2,715 1,767 3,595 7,858 16,229 254 2,347 1,528 3,108 6,794 14,032

2010
288 2,740 1,776 3,638 7,927 16,370 249 2,369 1,535 3,146 6,854 14,154

2011
282 2,765 1,785 3,682 7,997 16,513 244 2,391 1,543 3,184 6,915 14,278

2012
277 2,791 1,794 3,727 8,068 16,657 239 2,413 1,551 3,222 6,976 14,402

2013
271 2,817 1,803 3,772 8,139 16,802 234 2,436 1,559 3,261 7,037 14,527

1Figuresfor2008and2013arestraightfromtheGardneretalstudy;thoseforinterimyearsareinterpolated basedonconstantgrowthrates.2Portservices,terminaloperatorsandports.3Publicbodies,trade associationsandsimilar.4Federatedandnonfedshipownersandshipandcrewmanagement.5Based onaconstant13.5%supplyshortfallrelativetodemand,inlinewiththepercentageofrelevantjobsfoundby Gardneretaltobefilledbynonseafarersin2003.

TheUKeconomysrequirementsforpeoplewithexperienceofworkingatsea,BMGardneretal,Cardiff University,fortheDfT,ChamberofShippingandMarineSociety,January2004.

83

114

Source:TheUKeconomy'srequirementforpeoplewithexperienceofworkingatsea2003,BMGardneretal, CardiffUniversity,fortheDfT,ChamberofShippingandMarineSociety,January2004;OxfordEconomics assumptionsandmodelling.

Makingtheassumptionthatexseafareremploymentin2011isstillconstrained byashortageofsupply,sothatexseafarerjobnumbersstillindicatesupply ratherthandemand.Thisreflectsajudgmentthatthefalloffindemandduring andfollowingtherecessionwouldnothavebeensufficienttocompletely eliminatetheprevious13.5percentsupplyshortfall,evenif(asisalsoassumed) supplyhadcontinuedtogrowinlinewithpriorexpectations. Reestimatingsupplyin2011bycombiningthefiguresderivedfromtheGardner studywithsomenewestimatesofexseafareremploymentbasedonthe Deloitte/OEsurvey.ThesupplyfiguresderivedfromGardneretalaretakento becorrectinthecaseoffouroutofthesixsectors,butthoseforoilandgas andtrainingprovidersarescaledupfromthesurveyfindings,basedonthe scalingupfactorfoundtoapplyinthecaseofportsandrelatedservices. Reestimatingsupplyfor200810onthebasisofthenewestimatedlevelsfor 2011andthepreviouslyestimatedsupplygrowthpaths.Andreestimating wouldbedemandfor200811i.e.howdemandwouldhavedevelopedinthe absenceoftherecessionsimplybyrescalingthesupplyfigurestoreflectthe assumedwouldbesupplyshortfallof13.5percentthroughout. Table12.5b:The2003demandandsupplyprojectionsrescaled
Exseafarerjobs ofrespondentsto theDeloitte/OE 1 survey 2011
818 739 1,694 82 3,332

Supplyreestimated

Oil&gas Trainingproviders Ports&relatedservices Miscellaneous&insurance Shippingcompanies Other Total Oil&gas Trainingproviders Ports&relatedservices Miscellaneous&insurance Shippingcompanies Other Total
1

2008
1,131 1,108 2,326 1,520 3,071 6,735 15,890

2009
1,139 1,086 2,347 1,528 3,108 6,794 16,002

2010
1,147 1,064 2,369 1,535 3,146 6,854 16,115

2011
1,155 1,042 2,391 1,543 3,184 6,915 16,230

Wouldbedemandreestimated3 2008 1,308 1,281 2,690 1,758 3,552 7,789 18,378 2009 1,317 1,256 2,715 1,767 3,595 7,858 18,507 2010 1,326 1,230 2,740 1,776 3,638 7,927 18,638 2011 1,336 1,206 2,765 1,785 3,682 7,997 18,771
2

Estimatesbasedonquestionsconcerningtotalemploymentandthepercentageofjobsfilledbyexseafarers. SectorsinlinewithsupplyasderivedfromGardneretal,exceptforoil&gasandtrainingproviderswhich arescaledupfromthesurveyrespondents'figuresinlinewith'ports&relatedservices'.For200810thefigures for'trainingprovidersarescaledupfromtheGardnerderivedfigureinlinewiththeimplicitfactorfor2011, 3 whilethoseforoil&gasarebasedongrowthinlinewiththetotaloftheothersectors. I.e.anassumption aboutwhatdemandwouldhavebeenintheabsenceoftheglobalrecession,arrivedatsimplybyscalingup eachsectortoreflecttheassumedwouldbe13.5%supplyshortfall.Source:OxfordEconomicsestimates basedontheDeloitte/OEsurveyandtheGardneretal2003study.

115

Producingestimatesforactualdemandin2011,byassumingthatdemandfor exseafarerswasequaltoestimatedwouldbedemandin2008,buthassince falleninlinewithtotalemploymentamongstemployersofexseafarers.Foreach sectorthedeclineindemandbetween2008and2011isbasedonareweighted averageofthepercentageoftotaljobslostintherecession,basedonresults fromtheDeloitte/OEsurvey,withtheweightsusedforthispurposereflecting employmentofexseafarersonly(exceptforshippingwheretheweightsused relatetoestimatedtotalemployment). Interpolatingdemandin2009and2010usingtheyearbyyearpatternof employmentacrosstheUKeconomyasawhole. Assumingthattheproportionofforeignexseafarersremainedataround13per centofallemployedexseafarers,asfoundbyGardneretaltoapplyin2003.

Table12.5c:Therecentevolutionofactualdemandandsupplyforexseafarers
Reweighted %changein alljobsdue tothe 1 recession 2011
0.1 1.1 13.5 1.3 6.5
4

Demandreestimated

Oil&gas Trainingproviders Ports&relatedservices Miscellaneous&insurance Shippingcompanies Other Totaldemand Jobsfilledbynonseafarers Supply Ofwhich:foreignexseafarers UKexseafarers Supplyshortfallas%demand
1
3

2008
1,308 1,281 2,690 1,758 3,552 7,789 18,378 2,488 15,890 2,095 13,795 13.5

2009
1,307 1,272 2,448 1,742 3,398 7,478 17,645 1,644 16,002 2,110 13,892 9.3

2010
1,306 1,269 2,352 1,736 3,336 7,355 17,354 1,239 16,115 2,125 13,990 7.1

2011
1,306 1,268 2,326 1,734 3,320 7,322 17,275 1,045 16,230 2,140 14,090 6.0

EstimatesbasedonresponsestotheDeloitte/OEsurvey,butwiththeresultsineachsectorreweighted accordingtothenumberofexseafarersemployedineachfirm(exceptforshippingwheretheresultsaresimply 2 weightedtogetheraccordingtototalemployment). 2008figuresetequaltowouldbedemandinprevious table.2011figureappliesthereweighted%changeinjobstothe2008level.2009and2010interpolatedbased 3 ontheyearbyyearpatternofjobslossesacrosstheUKeconomyasawhole. Inlinewiththepriorexpectation, 4 i.e.assumednottohavebeenaffectedbytherecession. Assumedtohavebeenaconstant13%oftotalex seafareremployment.Source:OxfordEconomicsestimatesbasedontheDeloitte/OEsurveyandtheGardner etal2003study.

12.6

Projectingdemandandsupplyforexseafarersthroughto2021

Goingforward,thedemandforexseafarersisprojectedbyusingasectorbased weightedaverageofOEsmacroeconomicandindustrylevelforecastsforemployment, theresultsofwhicharesetoutinTable12.6a. DevelopmentsinUKsupplymeanwhilearebasedanassumptionthatUKdeckandengine officersandratingsleavingactiveseafarerroleswithshippingcompanies,uptotheageof 50,becomeavailabletoworkinexseafarerpositionsintheUK.However,anadjustment ismadetoexcludethoseworkinginactiveseafaringrolesforfewerthanfouryears,with afurtheradjustmentmadetoallowforexRoyalNavyandcommercialfishingpersonnel. Asthetableshows,evenusingacomparativelymodestoutflowrateof4.5percent (coveringbothretirementandpreretirementleavers,inlinewiththefindingusedin
116

Gardneretal),thisisinsufficienttopreventthesupplyofUKexseafarersdeclining graduallyovertheyearsahead. Table12.6a:ProjecteddemandforUKexseafarersgoingforward

Consul tants, surveyors, lawyers, class ification societies
4,116 4,201 4,412 4,644 4,867 5,034 5,152 5,236 5,286 5,340 5,398

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Oil & gas

1,306 1,264 1,232 1,199 1,165 1,132 1,100 1,069 1,041 1,010 977

Marine equipment &IT

2,207 2,156 2,112 2,067 2,018 1,970 1,923 1,878 1,834 1,791 1,749

Marine engin eering

288 289 292 292 290 286 282 277 273 268 264

Shipping, ports, towage etc,ship brokers &agents

6,339 6,395 6,491 6,628 6,766 6,876 6,951 6,991 7,005 7,013 7,018

Insurance &ship finance

497 498 506 512 515 515 515 516 517 517 517

Training providers &public bodies, etc

2,522 2,480 2,449 2,436 2,437 2,441 2,447 2,457 2,471 2,483 2,493

Total
17,275 17,284 17,494 17,779 18,059 18,254 18,370 18,424 18,425 18,423 18,418

Annual % change
0.0 1.2 1.6 1.6 1.1 0.6 0.3 0.0 0.0 0.0

Source:OxfordEconomics

Table12.6b:ProjecteddemandandsupplyofUKexseafarersgoingforward
UKdeck&engineofficers&ratingsage<50leavingthe shippingsector EmployedinUK shippingsectorin 2010 Subsequent recruits Total Officers
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
1

Ratings

Officers

Ratings

Adjusted 1 total (= inflowof UKex seafarers toUK sector)

590 624 657 686 700 711 720 728 734 738

Outflow from sector

Supply ofUKex seafarers toUK industry

Total demand forex seafarers byUK industry

267 251 236 222 200 180 162 145 130 116

135 126 117 109 98 87 78 69 62 55

170 222 274 318 357 390 419 444 465 484

30 43 56 68 79 90 100 109 118 126

603 642 683 717 734 748 759 768 775 781

634 632 632 633 635 638 641 645 649 652

13,990 14,090 14,046 14,038 14,063 14,116 14,181 14,254 14,332 14,415 14,500 14,586

17,354 17,275 17,284 17,494 17,779 18,059 18,254 18,370 18,424 18,425 18,423 18,418

Reducedby17%toallowforthoseleavingseafaringroleswithinthreeyears,thenincreasedby90per annumtoallowforrecruitmentofexRoyalnavyandexcommercialfishingpersonnel.

Source:OxfordEconomicsassumptionsandmodelling.

117

Finally,itisassumedthatthesupplyofforeignexseafarerstoUKindustryissimilarly determinedbydeckandratingsleavingtheUKshippingindustry,withtheinflowat around17percentoftheinflowofUKnonRoyalNavyexseafarersinlinewiththeex seafarerstockinrecentyearsandtheoutflowat4.5percentperannum. Table12.6c:ProjectedsupplyofnonUKexseafarers

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Inflow
86 92 98 103 105 107 109 110 111 112

Outflow
96 96 96 96 96 97 97 98 98 99

Supply
2,125 2,140 2,130 2,126 2,129 2,136 2,145 2,155 2,167 2,179 2,192 2,206

Source:OxfordEconomicsassumptionsandmodelling.

12.7

Overviewofsupplyanddemand:centralforecast

Finally,Table12.7asetsoutOxfordEconomicscentralprojectionsfordemandandsupply andtheresultingsupplyshortfallsandexcessesindetail.

118

Table12.7a:Projectionsforseafarerandexseafarernumbers:detail
Deck Officers Totaldemand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 13,952 14,471 14,853 15,517 16,168 16,766 17,319 17,829 18,314 18,776 19,181 19,449 6,211 6,018 5,852 5,598 5,379 5,167 4,960 4,759 4,566 4,383 4,210 4,049

Ratings UKsupply NonUK required

7,741 8,453 9,002 9,919 10,788 11,599 12,359 13,069 13,748 14,393 14,971 15,399

NonUK supply
7,969 8,368 8,786 9,225 9,687 10,171 10,680 11,214 11,774 12,363 12,981 13,630

Supply shortfall
229 85 216 694 1,102 1,428 1,680 1,856 1,973 2,030 1,990 1,769

Shortfallas %ofdemand
2 1 1 4 7 9 10 10 11 11 10 9

Total demand
15,170 15,735 16,151 16,872 17,580 18,231 18,832 19,386 19,913 20,416 20,856 21,147

UKsupply
4,868 4,570 4,297 4,061 3,860 3,691 3,555 3,438 3,335 3,242 3,158 3,085

NonUK required
10,302 11,165 11,853 12,811 13,720 14,540 15,277 15,948 16,578 17,174 17,698 18,063

NonUK supply
10,481 11,005 11,555 12,133 12,740 13,377 14,046 14,748 15,485 16,260 17,073 17,926

Supply shortfall
179 160 298 678 980 1,163 1,231 1,200 1,093 914 626 137

Shortfallas% ofdemand
1 1 2 4 6 6 7 6 5 4 3 1

119

Engine Officers Totaldemand

Ratings UKsupply
5,410 5,218 4,999 4,748 4,531 4,320 4,116 3,919 3,733 3,559 3,398 3,249

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 12,240 12,696 13,031 13,614 14,185 14,710 15,195 15,642 16,067 16,473 16,828 17,063

NonUK required
6,830 7,478 8,032 8,865 9,653 10,389 11,079 11,723 12,335 12,914 13,430 13,814

NonUK supply
7,029 7,381 7,750 8,137 8,544 8,971 9,420 9,891 10,385 10,905 11,450 12,022

Supply shortfall
199 97 283 728 1,109 1,418 1,659 1,832 1,949 2,009 1,980 1,792

Shortfallas% ofdemand
2 1 2 5 8 10 11 12 12 12 12 11

Total demand
6,289 6,523 6,696 6,995 7,288 7,558 7,807 8,037 8,256 8,464 8,647 8,767

UKsupply
976 887 807 734 669 612 562 517 476 440 407 376

NonUK required
5,314 5,637 5,889 6,261 6,619 6,946 7,246 7,520 7,780 8,024 8,240 8,392

NonUK supply
5,350 5,617 5,898 6,193 6,502 6,828 7,169 7,527 7,904 8,299 8,714 9,150

Supply shortfall
36 20 9 68 116 118 77 7 124 275 474 758

Shortfallas% ofdemand
1 0 0 1 2 2 1 0 2 3 5 9

120

Generalpurpose Ratings Totaldemand

Totaldeckandengine:seafarersactiveatsea

UKsupply
448 455 462 468 474 478 483 487 492 498 503 508

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1,313 1,361 1,397 1,460 1,521 1,577 1,629 1,677 1,723 1,767 1,805 1,830

NonUK required
865 907 935 991 1,048 1,099 1,147 1,190 1,231 1,269 1,302 1,322

NonUK supply
881 925 972 1,020 1,071 1,125 1,181 1,240 1,302 1,367 1,436 1,508

Supply shortfall
16 19 37 29 24 26 35 50 72 99 134 185

Shortfallas %ofdemand
1 1 3 2 2 2 2 3 4 6 7 10

Total demand
48,964 50,786 52,128 54,457 56,741 58,843 60,783 62,571 64,273 65,895 67,316 68,256

UKsupply
17,913 17,147 16,417 15,610 14,913 14,269 13,676 13,120 12,603 12,121 11,676 11,266

NonUK required
31,051 33,639 35,712 38,847 41,828 44,573 47,107 49,451 51,671 53,774 55,641 56,990

NonUK supply
31,711 33,296 34,961 36,709 38,544 40,472 42,495 44,620 46,851 49,193 51,653 54,236

Supply shortfall
659 343 751 2,138 3,284 4,102 4,612 4,831 4,820 4,581 3,988 2,754

Shortfallas% ofdemand
1 1 1 4 6 7 8 8 7 7 6 4

121

Maritimerelatedemploymentofexseafarers

Totaldeckandengine:allmaritimeemploymentofseafarersandexseafarers

Totaldemand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 17,354 17,275 17,284 17,494 17,779 18,059 18,254 18,370 18,424 18,425 18,423 18,418

UKsupply
13,990 14,090 14,046 14,038 14,063 14,116 14,181 14,254 14,332 14,415 14,500 14,586

NonUK required
3,364 3,185 3,237 3,456 3,716 3,943 4,073 4,116 4,092 4,010 3,923 3,832

NonUK supply
2,125 2,140 2,130 2,126 2,129 2,136 2,145 2,155 2,167 2,179 2,192 2,206

Supply shortfall
1,239 1,045 1,107 1,329 1,587 1,807 1,929 1,961 1,925 1,831 1,731 1,626

Shortfallas% ofdemand
7 6 6 8 9 10 11 11 10 10 9 9

Total demand
66,319 68,061 69,412 71,951 74,521 76,902 79,037 80,941 82,697 84,321 85,739 86,674

UKsupply
31,903 31,237 30,463 29,648 28,977 28,386 27,856 27,374 26,935 26,536 26,175 25,852

NonUK required
34,416 36,824 38,949 42,303 45,544 48,516 51,181 53,567 55,763 57,785 59,564 60,822

NonUK supply
33,836 35,436 37,091 38,835 40,673 42,607 44,640 46,775 49,018 51,373 53,845 56,441

Supply shortfall
580 1,388 1,858 3,468 4,871 5,909 6,541 6,792 6,745 6,412 5,718 4,380

Shortfallas% ofdemand
1 2 3 5 7 8 8 8 8 8 7 5

122

Hotel,cateringandother Officers NonUK required

2,097 2,297 2,442 2,674 2,895 3,094 3,275 3,439 3,596 3,746 3,876 3,958

Ratings NonUK supply

2,194 2,304 2,419 2,540 2,667 2,800 2,940 3,087 3,242 3,404 3,574 3,753

Totaldemand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 4,742 4,918 5,048 5,274 5,495 5,698 5,886 6,060 6,224 6,381 6,519 6,610

UKsupply

Supply shortfall
97 7 23 134 228 294 334 351 354 342 302 205

Shortfallas% ofdemand
2 0 0 3 4 5 6 6 6 5 5 3

Total demand
40,498 42,005 43,115 45,041 46,930 48,669 50,273 51,752 53,160 54,502 55,677 56,454

UKsupply

NonUK required
30,364 31,738 32,715 34,505 36,257 37,854 39,313 40,648 41,919 43,129 44,180 44,842

NonUK supply
30,737 32,274 33,887 35,582 37,361 39,229 41,190 43,250 45,412 47,683 50,067 52,570

Supply shortfall
373 535 1,173 1,076 1,103 1,375 1,877 2,601 3,493 4,554 5,887 7,728

Shortfallas% ofdemand
1 1 3 2 2 3 4 5 7 8 11 14

2,645 2,622 2,606 2,600 2,600 2,604 2,612 2,621 2,628 2,636 2,643 2,652

10,134 10,267 10,400 10,536 10,673 10,815 10,960 11,104 11,241 11,373 11,497 11,612

123

Technical Officers

Totalnondeckandengineactiveatsea

Totaldemand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 3,830 3,973 4,078 4,260 4,439 4,603 4,755 4,895 5,028 5,155 5,266 5,340

UKsupply

NonUK required
1,788 1,919 2,008 2,173 2,333 2,478 2,610 2,730 2,845 2,953 3,045 3,099

NonUK supply
1,864 1,957 2,055 2,157 2,265 2,378 2,497 2,622 2,753 2,891 3,035 3,187

Supply shortfall
75 38 47 16 68 100 113 108 91 62 10 88

Shortfallas% ofdemand
2 1 1 0 2 2 2 2 2 1 0 2

Total demand
49,070 50,896 52,241 54,575 56,864 58,970 60,915 62,707 64,412 66,038 67,462 68,404

UKsupply

NonUK required
34,249 35,954 37,165 39,352 41,486 43,426 45,198 46,817 48,360 49,828 51,101 51,899

NonUK supply
34,794 36,534 38,361 40,279 42,293 44,407 46,628 48,959 51,407 53,978 56,676 59,510

Supply shortfall
545 580 1,196 926 807 981 1,430 2,142 3,048 4,150 5,575 7,612

Shortfallas% ofdemand
1 1 2 2 1 2 2 3 5 6 8 11

2,042 2,054 2,070 2,087 2,106 2,125 2,145 2,165 2,183 2,202 2,221 2,241

14,821 14,942 15,077 15,223 15,378 15,544 15,716 15,890 16,053 16,210 16,361 16,505

124

Overalltotal:seafarersactiveatsea

Overalltotal:allmaritimeemploymentofseafarersandexseafarers

Totaldemand
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 98,034 101,682 104,370 109,032 113,606 117,813 121,697 125,278 128,686 131,933 134,778 136,660

UKsupply

NonUK required
65,301 69,593 72,876 78,199 83,314 88,000 92,306 96,268 100,030 103,602 106,742 108,889

NonUK supply
66,505 69,830 73,322 76,988 80,837 84,879 89,123 93,579 98,258 103,171 108,330 113,746

Supply shortfall
1,204 237 445 1,212 2,477 3,121 3,183 2,689 1,772 431 1,588 4,857

Shortfallas% ofdemand
1 0 0 1 2 3 3 2 1 0 1 4

Total demand
115,389 118,958 121,654 126,526 131,385 135,873 139,952 143,647 147,110 150,359 153,201 155,078

UKsupply

NonUK required
68,665 72,778 76,114 81,655 87,030 91,943 96,379 100,384 104,122 107,613 110,665 112,720

NonUK supply
68,630 71,970 75,452 79,114 82,966 87,015 91,268 95,734 100,425 105,350 110,522 115,952

Supply shortfall
35 808 662 2,541 4,064 4,928 5,111 4,650 3,697 2,262 143 3,231

Shortfallas% ofdemand
0 1 1 2 3 4 4 3 3 2 0 2

32,734 32,090 31,494 30,833 30,292 29,814 29,392 29,010 28,655 28,331 28,036 27,772

46,724 46,179 45,540 44,870 44,355 43,930 43,573 43,263 42,988 42,746 42,536 42,358

125