PORT OF SOUTHAMPTON PORT OF SOUTHAMPTON ECONOMIC IM PACT OF THE. Final Report. August 2011

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1 Associated British Ports Respondent Number 350 Issue 5 : Statement Appendix 3 : Information on the Economic Importance of the Port of Southampton PORT OF SOUTHAMPTON ECONOMIC IM PACT OF THE PORT OF SOUTHAMPTON Final Report August 2011 Plan Design Enable 1 3

2 Contents Executive Summary 1 About this Study 1 M ethodology 1 T he Role of the Port 2 Economic Impact 2 Investment and Future Growth 3 1. Introduction 5 2. Policy Context 7 Introduction 7 Solent Waterfront Strategy 7 Port of Southampton M aster Plan Df T s Interim Report on the Ports Policy Review 8 Solent Local Enterprise Partnership 8 3. The Role of the Port of Southampton 9 Introduction 9 Cruise sector 9 Freight and cargo 13 Liquid bulks 14 M archwood military port 15 Investment 15 Growth forecasts Socio-Economic Baseline 17 Study area definition 17 Economic baseline conditions 17 Baseline conclusions and implications for this study Economic Impact of the Port of Southampton 25 Introduction 25 A pproach and methodology 26 Employment 29 Turnover 35 Gross Value Added Economic Impact of Southampton s Cruise Sector 39 Introduction 39 Economic Impact of Cruise Industry in UK Cruise Impacts Conclusions and Implications 43 Appendix A 45 Appendix B 49 i 4

3 Executive Summary About this Study Atkins was commissioned by Marine South East to prepare a study assessing the economic value of the Port of Southampton and explore its role as a major generator of wealth and employment for the Solent and the wider UK economy. The study builds on the work previously undertaken for the Solent Waterfront Strategy and the Port of Southampton Masterplan and presents an up to date analysis of the port s various economic activities and the economic impact they have at the local, regional and national level. Methodology The methodology of the study is consistent with the methodology applied in the Solent Waterfront Strategy, using both empirical and secondary data sources. In conducting the economic impact assessment, the primary task was to collect comprehensive and robust data for the following key groups: Users of the port and businesses located on the ABP port estate; Suppliers of services and goods to business located on ABP port estate; Businesses directly reliant on the commercial or cruise operations of the port located in Southampton outside of the ABP port estate. Other port activity located on land outside the ownership of ABP. Businesses strongly reliant on the Southampton cruise market (for example, hotels, taxi firms and coach operators). Face to face and telephone interviews were conducted with a representative sample of approximately 20 Port related businesses. This approach enabled us to establish a detailed understanding of the nature of different businesses, the interdependence between businesses and presented the optimal means by which to gather critical financial and employment data which is central to ensuring a robust measurement of economic impacts. Data was also collected from a range of secondary sources including the Department for Transport, the Business Register and Employment Survey and Annual Reports sourced from Companies House. 5

4 PORT OF SOUTHAMPTON The Role of the Port The Port of Southampton has a long history as an important gateway for the transportation of people and goods. Today, it is a modern, highly successful passenger and cargo port and a key driver for the local and regional economies. It provides a wide range of passenger and freight and cargo functions including cruises, roll-on/roll-off vehicle transport, container shipping, transportation of dry and liquid bulks and the import of fresh produce and perishables. Southampton is the UK s busiest cruise port. It has four cruise terminals and handles over 300 cruise ship calls and 1.2m cruise passengers per year. In terms of freight traffic, Southampton ranked as the UK s fifth busiest port in 2009, handling 37.2 million tonnes. Almost two thirds of the port s traffic is inward, making Southampton one of the UK s largest import hubs. Southampton is also a leading port for roll-on/roll-off vehicle imports and exports, handling 471,000 vehicles of all sizes in Vehicle exports outnumber imports by a ratio of more than two to one making the Port a key global gateway for the UK motor industry. Southampton is also the UK s second largest container port handling 840,000 containers in Southampton s DP World container terminal is of particular importance to the UK economy as it handles approximately 40-45% of the UK s deep-sea trade with the fast-growing economies of the Far East and China. The dry bulk cargoes transported through the Port of Southampton include a wide range of commodities such as grain, wheat, fertiliser, animal feed, glass, aggregates, cement, coal, biomass, ores and scrap metal. In total, Southampton handled 1.7 million tonnes of dry bulk in 2009, 783,000 tonnes of which were foreign traffic and 912,000 domestic traffic. The vast majority of foreign traffic was exports, mainly agricultural products. The Port of Southampton is also home to the UK s only import terminal for fresh produce from the Canary Islands. Canary Islands Fruit Terminal handled 54,000 tonnes of fresh produce in Southampton is one of the UK s leading hubs for the import and export of liquid bulk cargoes, primarily crude oil. The Esso and BP oil facilities at Fawley and Hamble (which are not controlled by ABP but are located within the wider ABP controlled harbour authority area) handle some 28 million tonnes of oil and petroleum-related products per year. The Ministry of Defence facility of Marchwood Sea Mounting Centre is also located within the wider Port of Southampton area. The centre is the only military facility of its type in the UK, supplying Army and Navy ships taking part in operations around the world and handling some 100,000 tonnes of cargo a year. Economic Impact The Port directly generates some 5,100 jobs (8,300 jobs including oil and defence activities taking place in the wider Port area). Taking into account indirect and induced jobs supported by the Port s activities, the Port of Southampton directly and indirectly supports some 9,370 jobs in the Solent, 11,570 in the South East region and 14,160 across the country as a whole. These job estimates exclude jobs directly or indirectly supported by oil and defence activities at Fawley, Hamble and Marchwood. Taking these into account, the Port directly and indirectly supports around 14,640 jobs at the sub-regional level (Solent), 17,910 at the regional level and 21,760 at the national level. Similarly, the above estimates do not capture the full importance of cruise operations reliant on Southampton which collectively safeguard up to 30,000 jobs throughout the UK. In fact the survey research undertaken as part of this study indicates that, on average, the Southampton cruise sector generates around 2.5 million total turnover per cruise Home Port call (embarkation and disembarkation). The Port of Southampton s role as a major employment generator becomes even more important when considering Southampton s higher than average levels of unemployment, its low economic activity rates and its relatively high levels of multiple deprivation. In terms of turnover, businesses directly linked to the operation of the Port generate some 772m per year (excluding oil activities). Based on the business survey results, Port businesses spend approximately 50% of their expenditure in the Solent, 20% in the rest of the South East and 20% in the rest of the UK (10% of expenditure goes to international suppliers). This means that approximately 70% of the Port s regional supply chain expenditure is retained within the Solent. 2 6

5 Investment and Future Growth Taking into account indirect and induced turnover, the Port generates some 1.23 billion of GDP per year at the Solent level, 1.47 billion at the regional level and 1.75 billion at the national level. Therefore the Port s supply chain is a significant driver for the local and regional economies. The main sectors benefiting from the Port s supply chain include the purchase, maintenance and repair of equipment and the distribution of fuel. The supply chain structure is however evolving as new commercial and regulatory priorities emerge, for example in supporting renewable energy facilities, waste management, and port security. Because of the nature of many Port businesses (branches, subsidiaries or divisions with headquarters elsewhere), supplies are in many cases procured centrally and not necessarily locally. This means that local suppliers often have to compete for supply contracts with other businesses around the UK and sometimes Europe and the rest of the world. For the above reasons, Southampton and the Solent sub-region have the potential to further expand the share of the Port s future supply chain benefits they capture. The key to Southampton s success and longevity as a leading port over the years has been its ability to grow, evolve and adapt to the requirements of the times, including changing trends in shipping and trade. Continued investment in the Port s infrastructure has been central to its success and ABP and private port companies have invested over 100m in the Port over the past five years alone with plans for further major investment projects over the coming years (subject to attaining the relevant approvals) such as a fifth cruise terminal. Continued investment in the Port s infrastructure is vital as it is expected to continue to grow significantly over the coming decades. The Port s Master Plan forecasts total cargo traffic to increase by 61% over the period 2005 to 2030 while cruise passenger numbers are forecast to increase by 173%. The Port s future growth however is at risk of being jeopardised by the lack of space for expansion and other limiting factors such as the insufficient road infrastructure which creates congestion and delays in and around the port. Assuming that no such factors will constrain the future growth of the Port and the Masterplan s 2030 growth forecasts are achieved, then the Port has the potential to directly or indirectly support some 19,000 jobs by 2030 and contribute some 2.9 billion towards national GDP. The above figures, while broad estimates only (which exclude oil and defence activities), illustrate the further economic potential of the Port. 7

6 7. Conclusions and Implications 7.1. The Port of Southampton plays an important role as one of the UK s busiest and most diverse deep-water ports. It is the single busiest cruise port in the UK and is also a thriving freight and cargo hub, acting as a major international gateway for the transportation of a wide range of goods, materials and passengers It is fair to say that many of the convenience and comparison goods found in supermarkets and high street stores across the UK enter the country through the Port of Southampton. Similarly, Southampton is of vital importance to the UK manufacturing sector and the motor industry in particular as it is the point of export for over 340,000 vehicles, accounting for about a quarter of all UK vehicle exports. It is also a major gateway for the export of UK agricultural products such as cereal The Port has grown significantly over the past decade and its position as a leading UK gateway follows significant investment by ABP and key port operators. ABP plans to continue investing in the Port in future years to maintain its competitiveness and to accommodate the significant growth forecast anticipated for the coming decades In terms of its current economic value, the Port directly generates some 5,100 jobs (8,300 jobs including oil refining and defence activities taking place in the wider Port area). Taking into account indirect and induced jobs supported by the Port activities, the Port directly and indirectly supports some 9,370 jobs in the Solent, 11,570 in the South East region and 14,160 across the country as a whole These job estimates exclude jobs directly or indirectly supported by oil refining and defence activities. Taking these into account, the Port directly and indirectly supports around 14,640 jobs at the sub-regional level (Solent), 17,910 at the regional level and 21,760 at the national level. Similarly, these estimates do not capture the full importance of cruise operations reliant on Southampton which collectively safeguard up to 30,000 jobs throughout the UK The Port of Southampton s role as a major employment generator becomes even more important when considering Southampton s higher than average levels of unemployment, its low economic activity rates and its relatively high levels of multiple deprivation Despite the positive growth projections and ABP s commitment to continued investment in the Port, the Port s ability to continue to grow is constrained by lack of space for expansion. The Port has already greatly optimised its use of existing space through higher density developments (like multi-storey car parks) and the gradual removal of non-port related uses from the Port but without additional land for expansion its position as a major port of national and international significance is likely to become unsustainable In terms of turnover, businesses directly linked to the operation of the Port generate some 772m per year (excluding oil refining activities). Taking into account indirect and induced turnover, the Port generates some 1.23 billion of GDP per year at the Solent level, 1.47 billion at the regional level and 1.75 billion at the national level The business activities directly or indirectly supported by the Port also make a significant contribution to the national exchequer. It is estimated that the total value of income tax, national insurance contributions and corporation tax collected by HM Treasury exceed 176m per year. 8

7 PORT OF SOUTHAMPTON As discussed earlier, the Port s future growth is at risk of being jeopardised by the lack of space for expansion and other limiting factors such as the insufficient road infrastructure which creates congestion and delays in and around the port. Assuming that no such factors will constrain the future growth of the Port and the Masterplan s 2030 growth forecasts are achieved, then the Port has the potential to directly or indirectly support some 19,000 jobs by 2030 (Table 7-1) and contribute some 2.9 billion towards the national GDP (Table 7-2). The above figures are broad estimates only (and exclude oil refining and defence activities) but illustrate the further economic potential of the Port In conclusion, the research and analysis undertaken in this report confirm that the Port of Southampton generates significant economic value for the local, regional and national economies. Responding to national and international demand, this has been facilitated by ongoing significant private investment by ABP and key operators at the Port. Jobs 2011 Jobs 2030 Solent 9,370 12,593 South East 11,569 15,549 UK 14,157 19,027 (Source: Atkins) Turnover 2011 Turnover 2030 Solent 1,231,550,265 2,032,372,031 South East 1,468,198,744 2,422,902,375 UK 1,746,608,719 2,882,349,839 activities) (Source: Atkins) 9