Shipping confidence dips as trade wars intensify

Confidence in the shipping industry fell in the past three months to its lowest level for two and half years, according to the latest Shipping Confidence Survey from leading shipping adviser and accountant BDO. Yet owners, charterers and managers were more confident than they were at the time of the previous survey in May 2019.

The average confidence level recorded by the survey in the three months to end-August 2019 was 5.8 out of a possible maximum of 10.0. This compares to the figure of 6.1 recorded for the quarter ended May 2019.

Confidence was highest in the chartering sector (up from 6.2 to 7.0), while the increased ratings for owners and managers were from 6.3 to 6.4 and from 5.8 to 5.9, respectively. The rating for brokers, however, was down from 5.7 to 5.1.

Confidence was up in Asia from 6.0 to 6.8 – the highest figure for this region since the survey was launched in May 2008 with an overall rating for all respondents in all geographical areas of 6.8 out of 10.0. The rating for Europe, however, was down, from 6.1 to 5.7.

According to the BDO survey, the likelihood of respondents making a major investment or significant development over the coming year was up from 5.4 to 5.5 out of 10.0. Charterers’ confidence in this regard was up from 5.6 to 6.8, and owners’ from 6.3 to 6.5. The ratings for managers and brokers were also up, from 4.8 to 6.1 and from 3.9 to 4.4, respectively. Expectations were up in Asia (from 5.5 to 6.6) whilst in Europe they were unchanged at 5.4.

The number of respondents expecting finance costs to increase over the coming year was down from 48% to 25%. The figures for all major categories of respondent were down, and in the case of owners and managers to survey lows of 27% and 20%, respectively.

Demand trends were cited by 23% of respondents as the factor most likely to influence performance over the next 12 months. Competition (20%) and finance costs (16%) featured in second and third place respectively in this context.

In the freight markets, the number of respondents expecting higher tanker rates over the coming year was down by 12 percentage points to 43%, with the rating for charterers tumbling from 75% to just 25%. In the dry bulk sector, expectations of rate increases were down from 48% to 39%, with charterers again recording the most marked decrease, from 80% to 25%. The numbers expecting higher container ship rates, meanwhile, fell from 35% to 19%. Net rate sentiment was positive in the tanker and dry bulk sectors, but negative in the container ship market.

Responding to a stand-alone survey question, 26% of respondents said they expected the price differential between high-sulphur fuel oil and IMO-compliant low-sulphur fuel oil at 1 January 2020 to be between $175 and $249 per metric tonne. This compares to the 23% who thought likewise in November 2018. 24% put the figure at between $100 and $174, compared to 12% previously, while 17% estimated the cost at between $250 and $324 compared to 24% last time.

Richard Greiner, Partner, Shipping & Transport at BDO, says: “Geopolitical uncertainty contributed significantly to the decline in confidence recorded in our latest survey, with a number of respondents expressing concern about burgeoning trade wars and political tension in various parts of the world. Ongoing indecision surrounding Brexit was also a salient factor.

“But it was not all bad news. Confidence on the part of owners, charterers and managers was up in the last three months, as was the likelihood of imminent major investment – in the case of owners, to an all-time survey high.

“Indications from the freight markets were less encouraging, with a fall in expectations of higher rates in all three main tonnage categories. Indeed, net rate sentiment was negative in the container ship sector for the first time in almost four years. But shipping confidence must be weighed against the highly cyclical nature of the industry. Not every reversal in fortunes is a portent of significant decline.

“Major challenges lie ahead, some of which will be beyond the control of the industry itself. But there will always be a role for the shipping industry, and particularly for one that is technically inventive and environmentally compliant and thereby attractive to investors.”

The BDO (formerly Moore Stephens LLP) Shipping & Transport team has extensive experience delivering accountancy, tax and advisory services to the sector worldwide.

BDO delivers key information and insights to the shipping community, including the annual OpCost report, the quarterly Shipping Confidence Survey and a host of thought leadership on topical issues, such as regulatory developments and market conditions.

https://www.bdo.co.uk/en-gb/industries/shipping-and-transport


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Concern over trade wars impacts shipping confidence

Confidence in the shipping industry has fallen marginally over the past three months, largely as a result of ongoing concern over trade wars and increased regulation, according to the latest Shipping Confidence Survey from leading shipping adviser and accountant BDO.

The average confidence level in the three months to May 2019 was 6.1 out of a possible maximum of 10.0. This is slightly down on the figure of 6.2 recorded in February 2019.

Confidence was up in Asia, from 5.8 to 6.0, and in North America, from 5.6 to 6.4. In Europe, meanwhile, there was a drop in overall confidence levels from 6.3 to 6.1.

The chartering sector continues to be the most volatile in terms of respondent confidence, with ratings varying between 4.7 and 7.7 during the past two years. This time, the confidence level was up to 6.2 from 6.0 three months ago. The ratings for owners and managers, meanwhile, were unchanged at 6.3 and 5.8 respectively, while the rating for brokers was down from 5.9 to 5.7.

The survey was launched in May 2008 with an overall rating for all respondents of 6.8 out of 10.0.

According to the BDO quarterly survey, the likelihood of respondents making a major investment or significant development over the coming year was up from 5.3 to 5.4 out of 10.0. Owners’ confidence in this regard was up from 5.4 to 6.3, while the rating for charterers was 5.6 compared to the survey high of 7.3 recorded last time. The confidence of managers and brokers in this category was also down, from 5.6 to 4.8 and from 4.9 to 3.9 respectively. Expectations were up in Asia, from 5.2 to 5.5, and in Europe, from 5.3 to 5.4.

The number of respondents who expected finance costs to increase over the coming year was unchanged at 48%. The figures for owners and brokers were down, but up in the case of charterers and managers.

Demand trends were cited by 26% of respondents as the factor most likely to influence performance over the next 12 months. Competition (19%) and finance costs (13%) featured in second and third place respectively in this context.

The number of respondents expecting higher freight rates over the next 12 months in the tanker market was up by 4 percentage points on the previous survey to 55%, with charterers (75%) leading the way. In the dry bulk sector, expectations of rate increases were down overall from 52% to 48%, with charterers the only category recording an increase in expectation levels. The numbers expecting higher container ship rates, meanwhile, rose by 9 percentage points to 35%. Net rate sentiment was positive in all three tonnage categories and noticeably improved on the last quarter for container ships.

When asked to estimate the level they expected the Baltic Dry Index (BDI) to reach in 12 months’ time, 50% of respondents (compared to 36 % 12 months ago) anticipated a figure of between 1000 and 1499, while 22% (42% last time) put the likely level at between 1500 and 1999. “One could be more bullish about the BDI if there was less global tension around,” said one respondent.

Richard Greiner, Partner, Shipping & Transport at BDO, says, “A small dip in confidence is not surprising given the recent volatility generated by the US-China trade wars, the heightened tension in the Arabian Gulf, the failure to conclude Brexit negotiations, and general political instability in many parts of the world. Markets love volatility, but it can have an adverse effect on confidence.

“Trade wars certainly formed the over-arching theme for this quarter, but they are not the only recurring topic. The cost and technical implications of complying with existing and incipient regulation was referenced on a number of occasions, typified by the respondent who noted that the high level of regulation “makes it extremely difficult to make a profit”.

“Despite the challenges the industry is facing, there are a number of positive indicators. New technology is making shipping more attractive to investors, and will moreover act as a trigger to accelerate the pace and extent of recycling. Higher freight rates should logically follow, and those who hold their nerve will ultimately benefit.”

The BDO (formerly Moore Stephens LLP) Shipping & Transport team has extensive experience delivering accountancy, tax and advisory services to the sector worldwide.

BDO delivers key information and insights to the shipping community, including the annual OpCost report, the quarterly Shipping Confidence Survey and a host of thought leadership on topical issues, such as regulatory developments and market conditions.

https://www.bdo.co.uk/en-gb/industries/shipping-and-transport


BDO LLP
BDO LLP operates in 17 locations across the UK, employing nearly 5,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP has underlying revenues of £590m and is the UK member firm of the BDO international network.

BDO’s global network
The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.
Contacts Press office:
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Moore Stephens says UK Budget is neutral for shipping and good for offshore

International accountant and shipping adviser Moore Stephens says the UK Budget 2017 contained no unwelcome surprises for the shipping industry, and some good news for the offshore sector.

Moore Stephens tax partner Sue Bill says, “There are new rules, already announced, that will affect the deductions which a UK group can be claim for interest expenses. The new tax rules will restrict each group’s net deductions for interest to 30% of earnings before interest, tax, depreciation and amortisation (EBITDA) that are taxable in the UK. These rules should not affect tonnage tax companies, as those companies have no deduction for interest paid within the tonnage tax ring fence.

“There is also a reference to the government consulting later this year on legislative changes required following the announcement of the International Accounting Standard Board’s new leasing standard IRFS 16 Leases, which comes into effect from 1 January 2019. The government intends to maintain the current system of leased taxation by making legislative changes which enable the rules to continue to work as intended.

“HMRC has also confirmed that the new rules being introduced from April 2017 for non-UK domiciled individuals (‘non-doms’) will apply from 6 April 2017 for those who have been UK-resident for 15 out of the past 20 tax years.

“Improvements to the oil and gas regime, meanwhile, include an extension to investment and cluster area allowances, and tax for late-life oil and gas assets. These are aimed at improving the attractiveness of the North Sea as an area for investment.

“There have been no changes to the shipping rules, in particular those within the UK tonnage tax regime or in the taxation of non-resident shipping companies. Overall, this is probably a case of no news being good news for the shipping sector.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 of $2.7 billion. www.moorestephens.co.uk


For more information:
Sue Bill
Moore Stephens LLP, London
Tel: +44 (0)20 7334 9191
sue.bill@moorestephens.com

Moore Stephens reports fourth successive year of decline in operating costs

International accountant and shipping consultant Moore Stephens says total annual operating costs in the shipping industry fell by an average of 2.4% in 2015. This compares with the 0.8% average fall in costs recorded for 2014, and is the fourth successive overall year-on-year reduction in such costs. All categories of expenditure were down on those for the previous 12-month period. This suggests continued pragmatic management of costs by ship owners and operators, as well as a reduction in active trading for some owners as a result of the prolonged worldwide economic downturn.

The findings are set out in OpCost 2016 (www.opcostonline.com), Moore Stephens’ unique ship operating costs benchmarking tool, which reveals that that total operating costs for the tanker, bulker and container ship sectors were all down in 2015, the financial year covered by the study. On a year-on-year basis, the tanker index was down by 4 points, or 2.2%, while the bulker index fell by 6 points, or 3.6%. The container ship index, meanwhile, was also down by 6 points, or 3.7%. The corresponding figures in last year’s OpCost study showed falls of 2 points in both the tanker and container ship index, and of 1 point in the bulker index.

There was a 1.2% overall average fall in 2015 crew costs, compared to the 2014 figure, which itself was 0.1% down on 2013. By way of comparison, the 2008 report revealed a 21% increase in this category. Tankers overall experienced a fall in crew costs of 1.3% on average, compared to the 0.4% fall recorded in 2014. All categories of tankers reported a reduction in crew costs for 2015 with the exception of Panamaxes and VLCCs, which recorded increases of 1.4% and 1.2% respectively, compared to reductions for 2014 of 2.2% and 0.6%. The most significant reduction in tanker crew costs for 2015 was the 3.6% recorded by Product Tankers.

For bulkers, meanwhile, the overall average fall in crew costs in 2015 was 1.1%, having stabilised 12 months ago at 2013 levels. The operators of Handysize Bulkers paid 2.3% more on crew costs than in 2014, but the operators of other categories of bulker paid less, in the case of Panamax Bulkers to the tune of 3.2%.

Expenditure on crew costs was down 3.3% in the container ship sector, having stabilised in 2014 at the previous year’s level. The biggest fall in crew costs in this category was the 3.6% reduction recorded for vessels of between 2,000 and 6,000 teu.

Expenditure on stores was down by 4.3% overall, compared to the fall of 2.4% in 2014. The biggest fall in such costs was the 8.5% recorded by operators of Capesize Bulkers, with Panamax Bulkers (8.2%) not far behind. Other significant reductions included 2,000-6,000 teu Container Ships (8.0%) and Handymax Bulkers (7.5%). For bulk carriers overall, stores costs fell by an average of 7.7%, compared to a fall of 3.7% in 2014, while in the tanker and container ship sectors the overall reductions in stores costs were 4.3% and 5.5% respectively, compared to the corresponding figures of 0.7% and 3.0% for 2014. The only rise in stores expenditure by any category of vessel was the 1.5% increase recorded by Tankers 5,000 to 10,000 dwt.

There was an overall fall in repairs and maintenance costs of 4.3%, compared to the 0.6% reduction recorded for 2014. Only VLCCs and Container Ships of between 1,000 and 2,000 teu recorded increased expenditure on repairs and maintenance, of 0.1% and 1.3% respectively. Otherwise it was a case of reduced spending everywhere, the most significant example being the 7.9% fall recorded for Coastal Dry Cargo ships.

The overall drop in costs of 3.2% recorded for insurance compares to the 0.4% fall recorded for 2014. No vessels in the bulker category paid more for their insurance in 2015 than in 2014. Handysize Bulkers paid considerably less (5.7%) as did Panamax Bulkers (5.3%). Product Tankers and Tankers 5,000 to10,000 dwt were the only vessels in the tanker category to pay more for their insurance in 2015 than in the previous year, to the tune of 1.3% and 0.6% respectively. The biggest increase in insurance costs, however, was the 2.6% recorded by LPG carriers in the 10,000 to 40,000 cbm range. Perversely, gas carriers are historically regarded as among the safest vessels afloat, perhaps reflecting the effect on premium levels of the cost of potential claims rather than the legacy of claims records.

Richard Greiner, Moore Stephens Partner, Shipping & Transport, says: “This is the fourth successive year-on-year reduction in overall ship operating costs. The reduction is three times that recorded 12 months ago, and a reduction at this level had not been widely anticipated. The fall in operating costs is likely to be due in part to continuing good husbandry in a difficult operating environment for many, and partly to an extremely difficult market and wider economic climate.

“The biggest cost reductions were predictably those in the Stores and Repairs and Maintenance categories. Falling world oil prices continued to have a knock-on effect on lube oil costs in 2015, while increasing numbers of owners were looking to strategic short-term lay-up rather than spending on maintenance and repair.

“The fall in crew costs arguably came as more of a surprise to an industry which has over the years absorbed increases of this type in excess of 20% and lived to tell the tale, but it was doubtless largely a consequence of reduced levels of trading. The fall in insurance costs, meanwhile, will come as no surprise to anybody in the light of warnings from the London market that hull rates for many major fleets continue to reach new lows.

“Last year was a particularly difficult one for shipping. Confidence reached its lowest level for seven years, according to the Moore Shipping Confidence Survey. Operators were not overly optimistic about making new investments in the short-term, while finance costs were predicted to rise. Nobody was expecting good news on dry bulk freight rates, and the outlook for tanker and container ship earnings was little better. The Baltic Dry Index, meanwhile, was getting ready to plumb the depths. It was not an auspicious time to be planning new ventures; rather, it was a time for taking stock. In short, for many, it was a time for keeping operating costs to a minimum.

“Against a background of declining confidence in 2015, oil prices were on a steady downward trend, and the slowdown in the Chinese economy was becoming increasingly evident. Neither of these factors was wholly good news for shipping and both, in different ways, served as a brake on 2015 operating costs.

“A fall in operating costs is good news for shipping, particularly at a time when earnings from the freight market, for many, are so disappointing. But the portents are not so encouraging. Oil prices are predicted to start recovering significantly in the second half of 2017, while the price of steel, the bedrock of the shipbuilding industry, could increase much sooner. The cost of manpower, meanwhile, is only likely to move in an upward direction under the terms of the Maritime Labour Convention 2006.

“While the Ballast Water Management Convention still seemed a long way away from entering into force in 2015, it wasn’t! Now the convention has been ratified, the cost of trying to achieve compliance should become clearer over the next 12 months, as should the cost of making shipping safer and more secure against threats from the likes of cyber-attacks and fraud.

“In conclusion, shipping can draw some comfort from a fourth successive annual fall in operating costs. But it should remember that costs can move both ways. OpCost records that, at year-end 2001, for example, the average daily operating cost for a Handymax Bulk Carrier was US$3,578. In 2015, it was US$ 5,604. For a Suezmax Tanker, the comparable figures are US$4,916 and US$9,170.

“The indications from the freight markets are that shipping is still selling itself too cheaply. Inflationary pressures on operating costs will remain, so maintaining the status quo will not be a viable option. For many, the freight markets will remain challenging and so to remain competitive, shipowners need to continue to improve efficiency, innovate with new technology and harness the considerable benefits of ‘big’ data without delay.”

Bone fide journalists can request an electronic copy of OpCost 2016 by emailing chris@merlinco.com

OpCost, the Moore Stephens vessel operating cost benchmarking study, is now in its 16th year of publication. The 2016 edition is available online, on a new website, providing optimum reporting functionality and tools, creating an easier experience for users, wherever they may be. Running cost information is obtained on a confidential basis from clients of Moore Stephens, and from other shipowners and ship managers who submit data for inclusion. OpCost is widely used for benchmarking running costs, the preparation and ongoing monitoring of business plans and in forensic accounting. Access to OpCost 2016 is available free to owners who submit their data for inclusion, or can be purchased by contacting Richard Greiner at Moore Stephens.

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 of $2.7 billion. www.moorestephens.co.uk

For more information:
Richard Greiner
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
richard.greiner@moorestephens.com

Moore Stephens says shipping must monitor developments in wake of Greek government change

International accountant and shipping adviser Moore Stephens says it is too soon to say whether the Syriza party’s victory in the country’s elections could, as some fear, have a damaging effect on the country’s shipping industry. Rather, it says, Greek shipping interests will need to monitor how the change of government might affect them on both a business and personal level before reviewing any long-term plans.

Moore Stephens London partner Michael Kotsapas, a shipping specialist who has been advising Greek families for over fifteen years, says, “Any change of government, in any part of the world, is likely to have implications for the national shipping industry. This is particularly true of Greece, where shipping is a significant contributor to the country’s overall GDP and a major source of employment.”

Last year, the ruling government introduced a number of changes to Greece’s tax laws, including some specific to the shipping industry, such as repealing the law imposing mandatory triple tonnage tax on Greek-flag ships and foreign-flag vessels managed out of Greece, replacing it with the voluntary contribution of double tonnage tax payments for the next four years. Another measure with a potential impact on the shipping community included the introduction, for the first time in Greece, of Controlled Foreign Companies Rules covering the concept of effective management and criteria for determining same.

Michael Kotsapas concludes, “Before the election, the anti-austerity Syriza party called for a new agreement which would involve the shipping community making a greater contribution to the national economy than it already does. It remains to be seen whether that will be the case. Shipping is a key industry in Greece, and it would be surprising and disappointing if the new government’s policy, when announced, did not reflect that. In the meantime, the shipping community will be watching developments with keen interest.”

In 1963, Moore Stephens became the first international accounting firm to set up an office in Greece. It has enjoyed strong links with the Greek shipping community for more than seventy years, advising three generations of Greek shipping families and businesses.

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 of $2.7 billion.

www.moorestephens.co.uk



For more information:
Michael Kotsapas
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
michael.kotsapas@moorestephens.com

Scottish independence predicted to have negative impact on shipping and offshore maritime sector

A vote for independence from the UK would have a negative effect on the Scottish shipping and offshore maritime sector, according to a survey by leading international accountant and shipping adviser Moore Stephens.

The survey elicited the views of leading members of the international shipping community on the predicted impact on Scotland’s shipping and offshore maritime industry of the country voting for independence on 18 September 2014. More than half the number of respondents to the survey felt that a vote for independence would have a negative effect. Two-thirds of respondents thought that a move away from the Pound Sterling by an independent Scotland would have a negative effect on offshore continental shelf and related onshore activities. Meanwhile, more than 70% admitted they had no plan of action for a potential ‘Yes’ vote.

Overall, 55% of respondents felt that independence from the UK would have a negative effect on the Scottish shipping and offshore maritime sector. 45% of all respondents had an existing business relationship with Scotland, and it was they who were most pessimistic about a Yes vote for independence, with 69% believing it would have a negative impact. By comparison, 57 % of those respondents with no existing business relationships with Scotland thought that a Yes vote would have a positive effect. Meanwhile, 74% of respondents admitted they did not have an action plan for a potential Yes vote.

A number of respondents were extremely outspoken in their arguments against independence. One maintained, “We have no confidence that a Scottish government would properly take account of shipping’s needs,” while another emphasised, “Scotland does not have the necessary infrastructure to replace the UK Merchant Marine. We will change the home port of our vessels from Aberdeen to London.” Elsewhere it was noted, “This will be a total disaster that we are not prepared to handle,” and, “The concept of an independent Scotland is somewhere between madness and childishness.” Another respondent warned, “Unless there are practical implementation plans to include the shipping and oil and gas industries, independence will be disastrous for Scotland.”

A number of respondents feared that an independent Scotland would become isolated in the wider international community. One said, “The world is full of examples of the crippling effect on the whole economy and culture of a newly independent country. It may take decades to recover the ground which is lost, totally unnecessarily, by effectively trying to reinvent the wheel.” Another feared, “Protectionist legislation will be implemented, resulting in more isolationist policies which will severely impact on the Scottish economy. The Scottish people must live with the consequences of independence. All support must be withdrawn and cross-border trade should be restricted.”

Another still emphasised, “Scotland is too small to make any impact as an independent nation and would be generally ignored as a player in the maritime industry without the backing of a larger UK. Confidence would fall dramatically.” In the same vein, it was noted, “The isolation resulting from independence will impact negatively on the Scottish economy generally, and on the efficiency and cost of maintaining a shipping administration.”

A number of respondents were of the view that Scotland should leave well enough alone. “Shipping is a conservative industry,” said one, “and Scottish independence introduces unknown risks and change for change’s sake.”

The survey revealed misgivings about the policies likely to be followed by an independent Scottish government. “Confidence in government will be affected massively,” said one. “The SNP is perceived as a ‘one-issue’ party, and it is unclear how it plans to administer an independent country.” Another noted, “The Scottish government does not have anywhere near a high enough calibre of staff to run an independent nation,” while another still remarked, “Scotland will become like Bulgaria in the old days – a socialist administration trying to guide industry, but without a clue how to create wealth,” a view shared by the respondent who predicted that the result of a vote for independence would be “a very socialist agenda at odds with a very capitalist industry.”

“People will not take an independent Scotland seriously,” according to one respondent. “It will be self-imploding and will lack serious funding. There is no understanding of, or support for, non-subsidised shipping in Scotland. They simply don’t want to engage.” Another said, “There has been little or no debate on maritime issues. Policy needs to be developed and debated as part of a wider independence strategy, and we have no confidence that such will be the case.” Elsewhere it was noted, “We do not see independence as a viable option. The current semi-autonomous set-up already addresses Scotland’s concerns for self-governance, while taking significant advantage of the union. It would be amazing if the people decided to get rid of that, not to mention the flawed nature of the referendum, which does not take into account Scots resident in the UK but not presently residing in Scotland.”

Other respondents, meanwhile, saw positives for the maritime sector in a vote for independence. One said, “The shipping sector will develop more quickly if Scotland becomes independent,” while others believed that independence would “increase opportunities” and lead to “high confidence levels” in the maritime sector. Other comments emphasised the need for an independent Scotland to be perceived as “customer-friendly” and to “cut away the ballast and stay tuned to the needs of the shipping sector.”

“Scottish independence would concentrate the mind on how better to support the offshore oil and gas sector,” emphasised one respondent, “and help re-entry into the commercial and naval shipbuilding markets.” Another said, “A free Scotland is guaranteed to prosper and will have a significant impact on the European economy,” while another still observed, “Scotland has the necessary resources, the skilled people and the experience. And we look forward to continuing to trade with it and developing our business there in the likely event of independence.”

On a scale of 1 (low) to 10 (high), the likelihood of respondents, on average, making a major investment or significant development in and/or involving Scotland over the next 12 months was 3.7.Just over 37% of respondents rated the likelihood of making such an investment at 1. Almost 75% of respondents rated their likelihood of investing in Scotland over the coming year at 5 out of 10 or lower, although almost 8% returned the maximum rating of 10. One respondent said, “The entire industry investment is currently on hold pending the independence vote. Nobody is likely to take a gamble on an unknown factor.” Other comments referred to the need for investment from capital markets and other external sources.

Almost two- thirds (65%) of respondents felt that there would be a negative impact on the offshore continental shelf and related onshore activities if an independent Scotland moved away from the Pound Sterling. One respondent said that having a currency weaker than Sterling would have a negative effect on the willingness or ability of Scottish companies to invest in products and services from counties with stronger currencies. Another noted, however, that this would not be an issue if Scotland elected, and was allowed, to adopt the euro as its currency.

On a scale of 1 (low) to 10 (high), the average confidence level expressed by respondents in Scotland’s ability to provide security for Scottish-flagged ships was 5.1. 18% of respondents assessed their confidence in Scotland’s ability to provide such security at just 1, while 59% rated their confidence in this regard at 5 or lower. However, 12% rated their confidence levels at a maximum 10. “Scotland could be an alternative European flag,” said one respondent, while another observed, “As a flag state, Scotland would have to work hard to gain credibility and to develop the necessary working infrastructure.” Others, though, were less optimistic. “Scotland does not have the maritime voice or manpower to cope as a certificated authority or at IMO,” said one, while another predicted, “Ships would move away from the Scottish flag, and offshore business would become increasingly incorporated with European administrations.” Emphasising that Scotland has to offer cost savings and a reduction in bureaucracy to attract business, another respondent insisted, “Everyone is looking for customer-friendly places and flags to register their vessels.”

Respondents were asked to identify the top three factors which were most likely to influence the resilience of the Scottish shipping and offshore maritime industry over the next twelve months. Overall, currency emerged with the highest weighted percentage (25 %) across the three factors, followed closely by the tax system (24%), with the oil and gas industry in third place (16%). The remaining four factors were entry to Europe (14%), tonnage tax eligibility conditions in the UK and Scotland (11%), border control (6%) and security policy (4%).

One respondent warned, “An independent Scotland would need to offer tax advantages and concessions to keep owners in the country,” while another predicted, “If Scotland votes for independence, the oil majors will move south of the border, where taxes and capital would be much safer.” But another still argued, “If Scotland can join the dots linking the likes of taxation, finance, corporate structures and tonnage tax, then the independent nation can only benefit.”

Elsewhere it was noted, “Independence would lead to a further decline in UK Continental Shelf Exploration & Production due to the lack of a mid-to-long-term strategy and tax regime security,” and, “Scotland’s shipping and offshore maritime sector could ride out the industry peaks and troughs more smoothly with a larger tax-raising population.” One respondent, meanwhile, feared that post-independence taxation would “harm utilisation of oil resources.”

On the subject of tonnage tax, one respondent argued, “An independent Scotland could learn from the weaknesses in tonnage tax south of the border and use that to stimulate growth both from an ownership point of view and in terms of increasing the number of ships under management from Glasgow.”

Respondents were asked to rate, on a scale of 1 (low) to 10 (high), their confidence in the future of the shipping and offshore maritime markets in Scotland. The average confidence level expressed by respondents was 6.1. Almost two-thirds (63%) rated their confidence at 6 or higher, with 17% recording a rating of 8, while ratings of 6 and 7 each attracted 15% of the vote. Over ten per cent of respondents rated their confidence in this regard at 10.

Cassie Forman, Moore Stephens Director, Shipping and Offshore Maritime, says, “The survey revealed a high level of interest in the likely impact of Scottish independence on the shipping and offshore maritime sector. Unsurprisingly, issues such as currency, the taxation system, tonnage tax and the ability of Scotland to administer an efficient and cost-effective shipping administration dominated the comments from respondents.

“The survey was very international in its scope. This is important because, irrespective of the outcome of the vote on 18 September, Scotland will be looking to strengthen its position in what is arguably the world’s most international industry. It is worth bearing in mind the observation from one respondent that, ‘People in Latin America do not differentiate between Scotland and the rest of the UK.’ We shall soon know whether the rest of us will need to do so.”

The Moore Stephens Scottish independence survey includes responses from key players worldwide in the shipping industry to a targeted, web-based survey by the Moore Stephens Shipping Industry Group. It drew responses from 282 ship owners, managers, charterers, operators, brokers, professional advisers and others in Europe, Asia, the Americas, Africa and elsewhere, engaged in the shipping, offshore support, oil and gas, and other related sectors. 26% of the responses were from ship managers, followed by owners (22%) and professional advisers (21%). Some 66% of the responses were from Europe, 15% were from Asia and 12% from the Americas. Within Europe, just under 10% were from Scotland itself, while the rest of the UK accounted for 16%. Participants in mainstream shipping sectors such as the bulker, tanker, container ship and gas trades accounted for just under two-thirds of the responses, while over 12% were engaged in the offshore support vessel sector. Editors can apply for a copy of the survey by emailing chris@merlinco.com


Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 of $2.7 billion. www.moorestephens.co.uk


More information:
cassie.forman@moorestephens.com