Singapore vies for London’s shipping crown

Monday, 8 November 2010 06:00 -     - {{hitsCtrl.values.hits}}

  • Other locations aiming to steal maritime trade from UK

  • Singapore faces challenge from Shanghai

LONDON/SINGAPORE (Reuters) - London’s position as the world’s top shipping hub is being challenged by emerging contenders such as Singapore and possibly Shanghai as rising Asian economic powerhouses China and India suck in goods.

Chinese commodity demand is an increasingly pivotal factor driving freight market activity eastwards, while Asia dominates shipbuilding. Indian appetite for raw materials is also set to grow in the coming years, all enabling Singapore to set out its stall as a centre for the ship industry.

Meanwhile Shanghai is also vying to attract the maritime firms that are looking away from London and to the east.

“Encouraged by the assumption of an Asia-led economic recovery, companies are looking at setting up a presence in Asia,” said the government-run Maritime and Port Authority of Singapore.

Many in the shipping industry have begun to speculate whether London and the wider UK could start to see a drop in its position as the leading maritime services centre built up over centuries for ship insurance, finance and law.

“It is a credible threat,” said Michael Tamvakis, professor of commodity economics and finance at London’s Cass Business School.

“London has a weaker position — I don’t think it is going to be so dominant any more especially when you have places like Singapore which has a lot of advantages.”

Singapore’s growing attraction has led to new maritime set-ups in recent months including UK-based Shipowners’ P&I Club opening their first overseas Asian office in Singapore.

Global ship broker Clarksons relocated its Hong Kong dry cargo broking teams to Singapore, while Swiss Re moved its Hong Kong marine reinsurance operations to Singapore. Rolls Royce moved the global headquarters for its marine business to Singapore from London last year.

Earlier this year ship broker Howe Robinson moved its corporate headquarters to Singapore from London.

“Right now it (Singapore) has got both the physical shipping business alongside the maritime services. So that combination is inevitably very powerful,” said Jeremy Penn, vice chairman of Maritime UK, which represents the UK’s maritime industries.

Tax threat

A survey published this month by maritime recruitment firm Faststream, canvassed among shipbrokers and chartering managers, showed Singapore was the most favoured job location in the world to move to, slightly ahead of London and Geneva.

“Singapore is stable politically and has a legal system that is also strong and stable,” said Gervais Green, head of Asia shipping with law firm Norton Rose.

“In shipping, they provide government incentives for non-Singaporean businesses. Norway, London and the United States have suffered because of this.”

Company tax exemption schemes in Singapore have already benefited maritime businesses including groups such as Marco Polo Shipping and Mercator Lines, Green said.

Some in the shipping sector have argued that the UK government’s moves to raise corporation tax and other fiscal initiatives including higher personal tax could also push new business away from London. “All these things contribute to probably a decline in London over the longer term particularly as tax rates stay high,” said James Kidwell, finance director with UK group Braemar Shipping Services.

Global economic turmoil in 2008 has dented maritime earnings but the sector remains lucrative.

UK overseas earnings from overall maritime services fell some 10-15 percent to around 1.8 billion to 1.9 billion pounds ($3.07 billion) last year from 2.1 billion pounds in 2008, independent industry body TheCityUK said.

Business spending in Singapore from 120 tax-exempt global shipping groups, a fraction of the 7,000 maritime related firms there, reached S$2.8 billion ($2.18 billion) last year, down from S$3.3 billion in 2008, government figures showed.

But many players say the sheer strength of London, built up over centuries, as a maritime capital is unlikely to be matched.

“There is a huge residual body of knowledge and expertise not just in ship broking but in law, insurance, banking, ship registry and that is not going to go away over night,” said Kidwell, whose company has expanded its Asian operations.

Penn, who is also chief executive of the Baltic Exchange, said it had started to report some of its Asia route information in the Asian afternoon, the freight market still largely trades in the European day.

“For the time being at least the time zone does help,” he said. “The use of English law and therefore the prejudice in favour of London arbitration is a huge advantage. The adjacency of a major financial centre as well is also an advantage.”

Shipping officials have said while Singapore aims to woo companies it faces challenges itself especially from Shanghai.

“I believe Singapore will become a major shipping hub but I don’t think it will supplant London,” said Harry Theochari, global head of transport with Norton Rose in London. “The biggest problem Singapore faces is the development of Shanghai. If I were a betting man I would put my money on Shanghai.”