Security concerns raised as ownership of UK’s key strategic assets comes under the spotlight
By Rachel Millard 11 December 2020 www.telegraph.co.uk
At its height, the Peninsular and Oriental Steam Navigation Company had an empire spanning 100 countries, with ports, ships and property touching ground from the UK to Australia.
But at the turn of the 21st century restive and “short-termist” fund managers began demanding a payout – and the company founded in 1837 to take mail between Falmouth and Gibraltar started being broken up.
In 2002 its P&O Princess Cruises trading arm was sold off to rival Carnival, and then in 2006 its ports owner P&O Ports was traded to the UAE’s Dubai Ports World (DP World).
The £3.3 billion sale marked the end of its 168 years as a British firm, but was also one of the starkest moments in a decades-long drip-feed which has handed swathes of British ports to foreign investors.
As products fail to reach the shelves and millions of Christmas presents hang in the balance, the logistics crisis engulfing British docklands has thrown this foreign ownership into the spotlight after years of quiet deal making.
As a source of reliable income in a world running on global trade, British ports from Felixstowe to Grangemouth have long proven alluring for pension funds, state investment funds and billionaires seeking safety for their cash. The main groups that own the bulk of Britain’s ports are now overwhelmingly foreign owned.
Chaos at Felixstowe and other ports this week as the pandemic and Brexit rocks global supply chains throws a spotlight on their ownership at a time of heightened soul-searching and concern about foreign control of strategic UK assets, and nervousness about post-Brexit trade arrangements.
John Whittaker’s Peel Group, whose portfolio includes a controlling stake in the Port of Liverpool, is a rare example of a British owner in the UK ports sector. But even there, Peel Group is 25pc owned by Saudi conglomerate the Olayan Group, while Whittaker has recently sold a stake in the ports division to the pension fund Australian Super.
Associated British Ports and its 21 sites around the UK – including in Southampton, Immingham, Ipswich and Plymouth – was sold in 2006 to a consortium of funds including Canada’s Borealis Infrastructure and Singapore’s GIC.
Shareholders found a 50pc premium offered in a deal put together by Goldman Sachs, under the code name Project Admiral, too good to ignore.
Middlesborough-based PD Ports, which owns the large seaport of Teesport as well as the inland port of Keadby and others, can trace its roots back to a mining company in South Wales founded by the Welsh entrepreneur Thomas Powell. But it was sold in 2000 to the Japanese brokerage Nikko Cordial before being handed on again to Brookfield Asset Management, the real estate and infrastructure investor among many attracted to the UK as a source of stable income.
Southampton Port, owned by Associated British Ports which was sold to a consortium including Canada’s Borealis Infrastructure and Singapore’s GIC in 2006
In 2011, Forth Ports, owner of ports including Tilbury and Grangemouth, was sold to Arcus Infrastructure Partners, a European investment fund, and has since been sold onto Canada’s Public Sector Pension Investment Board.
One of the world’s largest port owners Hutchison Ports – a subsidiary of Hong Kong conglomerate CK Hutchison Holdings – has been in the UK for decades, buying Felixstowe, Britain’s largest container port, in June 1991 for £90 million, and adding Harwich in 1998. Britain prides itself on an open economy, but foreign control of UK ports has prompted questions given their importance to global trade, security and the country’s seafaring identity – as well as imports on which our reliance is growing.
The relative ease with which DP World took over P&O Ports stood in stark contrast to the reception to its attempt to buy P&O’s American ones. Rebel Republicans with concerns about security forced the UAE to abandon the deal, despite President George Bush wanting it to go through due to the two nations’ friendship.
The logistics chaos of the past few weeks affects an industry that is generally in decent health and key to the economy. UK ports handle more than 500 million tons of goods annually, and directly employ over 120,000 people.
Research by the Centre for Economics and Business Research found that in 2015 ports contributed about £1.5 billion in tax revenues and helped support a total 695,200 jobs.
DP World has invested £1.5 billion to develop the hi-tech London Gateway container port, where robots and cranes ceaselessly unstack goods arriving from around the world.
Research published in 2018 by the British Ports Association found that UK ports and terminals had an estimated £1.7 billion of infrastructure investment in the pipeline. Mark Simmonds, BPA policy manager, argued it showed that ports “are investing in new infrastructure to keep goods and people moving as efficiently as possible.”
He added: “The UK ports industry operates in a competitive and commercial environment, independently of Government, so this significant investment is at no cost to the taxpayer.”
Yet the sector is unlikely to avoid further scrutiny, as Brexit and the pandemic forces Government to think more carefully about logistics. The threat of empty supermarket shelves or the elderly unable to get vaccines looms too large.
Amid the latest problems, Logistics UK, a freight industry body, has urged Grant Schapps, the Transport Secretary, to “seize the opportunity to make acute freight congestion less likely in the future”. It called for investment in the road and rail network as well as “better recognition of the important and value of freight in planning and infrastructure decision making.”
The body added: “It is clear that whole sections of the economy are being reshaped at a speed beyond most forecasts in response to the Covid-19 pandemic, accelerating existing trends and introducing new disruptions.”
Britain’s ports will, as they have done for centuries, be called upon to do their bit in the national effort to recover from the pandemic. Whoever they are owned by, they will need to be ready.