SHIPPING: An Introduction to Scotland

The Scottish shipping sector remains vitally important in 2024, with numerous changes being seen in the past year. The impacts of Brexit are still being felt, particularly in crew employment. Furthermore, the economic situation across the UK has impacted the sector.

Immigration

The shipping industry is well known for its reliance on non-UK crew, both within and outside the UK territorial waters. Following immigration rule changes that have been implemented in recent years, it has become harder to legally employ crew on UK vessels who are not UK citizens.

For those seafarers who work outside the 12-mile UK territorial waters, the process for entering the country is by way of a Transit Visa, a restrictive visa which permits crew to enter the country wholly on the basis that they shall immediately board a vessel that shall leave UK territorial waters within a short period following boarding.

Although this visa is a necessary lifeline for the industry, it is a far from perfect solution. Following the change of law in 2023 and an update on seafarer guidance in June 2024, the industry has seen Border Force taking a more active role in reviewing crew permits, which can result in crew being repatriated, and heavy fines for vessel owners.

If seafarers are to be working at any point during their contract within the 12-mile limit, they must have the relevant “right to work” consents for the UK. The only current visa option that is suited to seafarers is the Skilled Worker Visa.

In April 2024, the minimum salary under the Skilled Worker Visa system increased from GBP26,200 to GBP38,700, a 47% increase.

According to the UK government, however, the going rate salary for deckhand crew is GBP23,200. Consequently, to obtain skilled workers, employers are often having to pay their non-UK crew well over the going rate. There is facility to reduce the salary paid to certain skilled workers to GBP30,960 (80% of the minimum requirement), but this is only applicable in respect of crew on fishing vessels, and not standard across the shipping industry.

Undoubtedly, the change in immigration rules has impacted the shipping sector, with difficulty sourcing crew putting many long-established businesses at risk. It is accepted throughout the industry that government and the industry as a whole need to work together to overcome this hurdle and protect the sector from a depleting workforce due to unrealistic salary and visa expectations.

Ship-Building and Finance

Ship-building continues to develop at a fast pace, with advancements in technology and capital investment. There is a desire to establish an integrated plan for commercially competitive ship-building in Scotland to expand exporting potential and generate jobs and economic growth in the country.

Loan finance is still the most common form of ship financing. Shipping, generally, is a capital-intensive industry where, subject to the type and size, a single income-producing ship can cost anything from hundreds of thousands to tens of millions of pounds. As ever, trends in the financial landscape of the country are often replicated in the finance and security that is available to those seeking to build vessels.

In this regard, it has not been completely smooth sailing in the world of ship-building and financing. For example, ship-builder Harland & Wolff recently looked destined to enter into administration and there have also been issues at other ship-yards such as Ferguson Marine’s in Glasgow where significant delay and overspending on the construction of two new-build ferries has been well documented. Perhaps with these difficulties in mind, in 2023, the UK Government Department for Business and Trade launched a Shipbuilding Credit Guarantee Scheme. Subject to certain criteria being met, the scheme provides a partial guarantee to a lender making a loan to a ship-buyer or operator, so that new vessels, or refits, retrofits or repairs of existing vessels, can be procured from UK ship-yards. This enables the ship-yard to receive payment as though it was a cash contract, while the buyer can access extended repayment terms. The loan is typically repaid over a period of two years or longer by the borrower, while the ship-yard receives payment via the credit facility as amounts fall due under the commercial contract. The Department for Business and Trade can provide partial guarantees covering up to 80% of the risk to lenders for a maximum repayment period of up to 12 years. It remains to be seen however how popular the scheme will prove to be.

Renewables

Ambitious net zero emission targets have been set in Scotland and further development of the renewable energy sector is central if they are to be achieved. Inverness and Cromarty Firth and Firth of Forth were announced as Scotland’s two winning bids for the opening of new Green Freeports. The Green Freeports are designed to contribute towards the transition to net-zero emissions, create new green jobs and deliver net-zero benefits. There is optimism in places such as Aberdeen where there is a strong desire to be selected as the base for Labour’s Great British Energy, a new publicly owned company focused on clean energy. Renewable energy targets mean there will be a large increase in the number of offshore wind turbines operating in Scottish waters.

There is, however, concern that the development of offshore wind turbines will lead to the crowding of marine space. It is feared that the expansion of offshore renewables will lead to fishermen losing access to important fishing grounds. This issue was brought to a head when the Scottish government proposed to ban fishing in at least 10% of Scottish waters through implementation of Highly Protected Marine Areas (HPMAs).

These plans were not universally welcomed and even inspired Angus MacPhail of Scottish music band Skipinnish to produce a song, “The Clearances Again”. Such was the song’s resonance in the fishing industry that it was awarded “initiative of the year” at the Fishing News Awards in May 2024.

As Mr MacPhail put it: “The fishing industry is in a vulnerable position at present from the threat of spatial squeeze. This is coming from multiple angles, foremost among them are areas closed due to environmental protections and increasingly the vast areas of sea earmarked for renewable energy development. Both these elements of area reduction already have had significant impacts. The fishing industry and coastal communities must have a seat at the table when marine policy is being set.”

Clearly, there needs to be collaborative working between the different industries operating in the marine space, and whilst there is acknowledgement that renewable energy is the way forward and is developing at a fast pace, such development must be carried out with consideration for other users. In the past year, there appear to have been positive steps taken in this regard, with the Scottish government’s Fisheries Minister and over 50 members of the Scottish Parliament signing the Scottish Fishermen’s Federation’s pledge “Pride in the Seas”.

Conclusion

It would be fair to say that the Scottish shipping industry has, again, dealt with its fair share of challenges over the last year. As one of Scotland’s traditional industries, it has been required to adapt in times of uncertainty and it is hoped that with resilience and a focus on collaborative working, there will continue to be encouraging developments within the industry.