Anthony Hilton: London would suffer if shipping sailed off

When people list the significant business activities of the City, they rarely think of shipping but they should because it is hugely important.

And there is reason to believe that the Labour government of 10 years ago eventually understood this rather better perhaps than George Osborne and the Conservatives seem to do today.

The evidence for this is the decision by the then Chancellor, Gordon Brown, not to press home his planned attack on non-doms, after he had identified them as a potentially useful source of untapped revenues all those years ago.

He was responding to lobbying from the shipping industry: one of their number got to John Prescott — at that time one of the big hitters in the Labour Cabinet — and persuaded him to warn Brown of the unintended consequences of his plan.

Prescott had been a steward in the merchant navy before politics — as favoured early visitors to his flat were reminded of when he would personally serve up breakfast — so he took on board the point that the expatriate Greek shipping community in London were mostly living here as non- domiciled and, therefore, sheltering their worldwide income from UK tax.

This was the same for several of the leading shipowners from Scandinavia, Hong Kong and Taiwan. Collectively, they controlled a significant proportion of Europe’s — indeed the world’s — merchant fleet, the servicing of which was a crucial part of maritime London’s daily business.

Prescott told Brown it would be a bad tactic to make them feel unwelcome. They might just sail off somewhere else taking their business with them and the loss to the country would be far bigger than any boost to the tax revenues provided by those who chose to stay.

Brown, to his credit, listened and quietly let his plan gather dust.

The total value of all the ships in the world is something approaching $300 billion (£195 billion) and at present, about one in five of them is insured here which is why London accounts for 21% of the world’s marine premiums — even when half the world’s tonnage is controlled, as it now is, from Asia.

In addition, London is where shipping folk of all nationalities like to come when they have a dispute — it is the arbitration as well as the divorce capital of the world — because of the high regard in which the integrity and impartiality of the English judicial system is held overseas.

Indeed, English law governs the majority of shipping contracts and, given that more than 90% of world trade is still carried by sea, that is a lot of contracts and a major source of revenue.

Finally, though not much sails under the British flag any more — not even the cross-Channel ferries — London is still one of the biggest ship-broking centres.

So yesterday, as part of the City’s annual shipping week, there took place a staged debate on whether this pre-eminence would last. Would London still be the Number One centre a generation hence in 2050?

Inga Beale, chief executive of Lloyd’s of London, led the case for London staying on top; the opposition was led by Esben Poulsson, president of the Singapore Shipping Association.

Boris Johnson, by video link, delivered his usual pro-London commercial about time zones and the English language — both of which, in this context, seemed slightly off the subject.

In the initial vote before they had heard the arguments — or even Boris — only 10% of the audience thought London had a problem. But by the end of the debate that figure had soared to 34%.

So, London still won out but that surge in doubt is worrying if you first consider that most of the audience work in shipping in London, and then take into account the remark by inter-war US politician, Sinclair Upton, about “how difficult it is to get a man to understand something when his livelihood depends on his not understanding it.”

So what happened? Well, the case for London was driven by the fact that this is where the expertise is, and markets — which are clusters of expertise — are hard to dislodge.

History had shown London to be innovative, it had an unrivalled reputation — at least in the shipping world — for probity.

To sum up, it had faced many challenges in the past and still held onto the business.

All that is true, but so is the fact that Asia is where the shipping action is — all those vessels shipping raw materials out there and returning laden with goods for our shops.

Most of the new generation of owners are Asian and, as post-crisis British banks now no longer provide much shipping finance, that business is moving out there too.