29 Dec 2018

No-deal ferry contracts: What’s really happening?

Business Editor

News of no-deal ferry contracts slipped out by the government on Christmas Eve will come as no surprise to the shipping industry. Behind the scenes, under the strictures of government non-disclosure agreements, there has been fierce lobbying from ferry companies who were fearful that a government-run fleet would effectively undercut their businesses.

The announcement of three contracts worth more than £100m for Brittany Ferries, DFDS, and Seabourne Freight means those fears won’t be realised and instead those operators will be expected to increase sailings and capacity on routes they already operate.  But eyebrows may be raised at the choice of operators – two out of three Brittany Ferries (French) and DFDS (Danish) – foreign owned – getting almost 94 million of the £107.7 taxpayers money spent by government.

The aim according to the text of the contracts is stark, to relieve “severe congestion” at the Port of Dover – Britain’s crucial gateway with Europe which handles 17 per cent of the UK’s entire trade in goods.

But just how far these new contracts will relieve that congestion in the event of no-deal is open to question.  Last year 2.6 million lorries rolled through Dover – around 50,000 per week.  Channel 4 News understands that Brittany Ferries expects its extra capacity across Portsmouth, Poole and Plymouth to be “in the low thousands” per week.  Whilst the port of Immingham run by DFDS is geared for containers ships rather than the roll-on roll-off ships which serve Dover and which are favoured by much Britain’s just-in-time supply chain operators.

There will be questions too about the ability of other ports to handle the extra capacity.  John James, Chairman of Star Cargo – one of the countries leading customs and freight handling firms told Channel 4 News that a no-deal would be a “catastrophe” and “armageddon” and warned that delays caused by extra checks and red tape would gridlock overspill ports within days.  Channel 4 News understands that both Portsmouth and Immingham have earmarked extra areas of land to deal with the backlog of freight that could come with a no deal Brexit.  With sizeable sums of government money on the table those plans may well be being dusted off.

And that money –  or most of it is – will be pocketed by the shipping firms even if No-deal is avoided.  Brittany Ferries said: “There is considerable work involved in changing our schedules. The work begins now. We must negotiate with existing suppliers, including hauliers on schedule changes, roster crew, train them accordingly, revise bunkering contracts (refuelling), pay additional port dues etc  So the contract includes provision to compensate Brittany Ferries for the significant work that must be undertaken to prepare for a no deal scenario.”  A big win for a relatively small player in the shipping business.

As for the Port of Dover, it hasn’t commented on these no-deal plans as yet, but with a new Chief Executive due to start in the New Year – there’s no prizes for guessing what will be at the top of his in-tray.