Britain's £1 Billion Maritime Services Industry Under Threat

Britain's £1 billion maritime services industry will be threatened if the Government review ordered earlier this year by Chancellor of the Exchequer, Gordon Brown, leads to changes in the taxation of UK-based foreign shipowners, according to a study undertaken by Cambridge University.

The report - The Contribution of the Foreign Shipping Community to the UK Economy and the Economic Effects of a Change to the Taxation of the Foreign Shipping Community by Cliff Pratten, of the Department of Applied Economics at Cambridge, concludes that any changes to the UK's current tax regime will have a serious impact.

The report warns that if foreign shipowners were to be taxed on their overseas earnings they would be likely to relocate abroad and, in turn, this would lead to:

• A loss of 4,500 jobs in the City
• A reduction in tax revenue of £125 million
• The loss of £375 million of maritime service earnings
• The loss of more than a third of London's tanker chartering business and 40 per cent of its dry bulk carrier business

The government is presently undertaking a detailed review of the present tax regime which could lead to proposals to introduce a form of taxation whereby foreigners who are resident, but not domiciled in the UK, would be liable for tax on all their income. Under the existing regime, non-domiciled residents are taxed solely on their UK earnings.

Jim Buckley, chief executive of the Baltic Exchange commenting on the report today said: "London is currently a very attractive place for shipowners to do business. There are more than 1,100 ships owned by foreign interests based in the UK and this represents an important market not only for shipbrokers, but also maritime lawyers, insurers, bankers and countless other maritime professionals. If the long-standing benign arrangements for foreign shipowners were to be altered, then Maritime London in particular and the economy generally would face a very serious threat."

He added: "Shipowners, particularly the London Greek community, have the option of easily moving to countries where their operations would not be subject to tax. Subjecting the operations of the foreign shipping community to UK taxes is simply counter-productive."

The report, which was commissioned by the Baltic Exchange, updates an earlier study published in 1997. A copy of the report is freely available from the Exchange and can be downloaded by clicking here.