War breaks out in UK cruise industry

A war has broken out in the UK's £2bn cruise industry setting leading ports on a collision course with the government over a controversial bid by Liverpool for a bigger share.

War breaks out in UK cruise industry

A war has broken out in the UK’s £2bn cruise industry setting leading ports on a collision course with the government over a controversial bid by Liverpool for a bigger share.

Port owners fear the government will give the go-ahead for Liverpool to use its publicly-funded cruise terminal for lucrative “turnaround” journeys, which they claim will give the Mersey city unfair advantage in a highly competitive market.

At present liners, such as Cunard’s flagship £453m Queen Mary 2, are only permitted to berth for “port-of-call” visits at the terminal, part of the city’s iconic waterfront development, and built in 2007 using £20m grants, some from Europe.

Strict conditions preventing it competing for “turnaround” cruises, the big-money earners where voyages would start and finish at the terminal, were imposed by the Labour government to safeguard fair competition with other ports in the UK that had not benefited from public subsidy, at least in recent years.

Now Liverpool has applied for a “change of use” to enable it to tap into the lucrative “turnaround” market, where car parking, hotels, baggage and passenger handling as well as food and fuel supply can inject as much as £2m per ship into the local economy. The stakes are high, not least for the ports who fear Liverpool, one of the few cities in the world where liners can berth near the city centre, will steal their business.

Labour refused a similar request by Liverpool city council, owners of the terminal, in 2009, with then shipping minister Paul Clark telling parliament such change of use “would be likely to have an unfair and adverse effect on competition between Liverpool and other cruise ports”. But its renewed bid with the coalition government, appears to have found more favourable ears despite protests from other ports, chiefly Southampton, cruise capital of northern Europe.

The Department for Transport has launched a consultation after Liverpool offered to repay £5.3m over 15 years of the £20m public funding it received, which included money from the North West Development Agency and the EU.

Opponents argue this is not acceptable. Already, the uncertainty could cost Southampton its long-planned £30m fifth cruise terminal, which was due to open in 2013.

Last week Associated British Ports (ABP), owners of Southampton port, put plans on hold. “When the competition is not fair, you have to ask why you would invest another £30m,” said Doug Morrison, ABP’s Southampton port director.

If the Department for Transport decides in favour of Liverpool, it is likely opponents will apply for a judicial review.

Southampton, which claims 67% of UK cruise trade, attracting 350 ships and 1.2 million passengers annually, estimates it could lose 40 vessels as “turnaround” to Liverpool. The fear would be losing a liner such as the QM2, the jewel in the crown of Cunard, which until the 1960s had used Liverpool as the hub of its operations since Cunard’s RMS Britannia left Liverpool for Boston in 1840.

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Liverpool, which last year saw 16 cruise ships visit, would attract passengers from the north, and from Harwich, England’s third busiest cruise port.

Hutchison Ports, which runs Harwich, said in a statement it was “concerned about the impact on the cruise business through Harwich” and that ” the public subsidy will be used to compete with privately-funded ports”. It was”surprised” the government was looking at the bid, already rejected twice.

No-one was available from Liverpool council, which said in a statement: “We are simply looking to retain Liverpool’s share of the cruise market, and we hope to reach a solution that satisfies everyone, including our fellow ports.”

It says the terminal would replace an existing facility at neighbouring Langton Dock, where cruises can “turnaround”, but which has seen business decline. Run by Peel Ports, at its peak it accounted for about 5% of the UK market.

“It’s big business, and Liverpool want a slice of it and I don’t blame them. But you can’t use public money to take on a private company,” said Royston Smith, Southampton’s Labour leader. “It’s simply not right.” Shipping minister Mike Penning told the Liverpool Daily Post that Liverpool’s offer to repay a percentage of the subsidy “allows me to go to a whole consultation that makes everyone happy and brings cruise liners back to where they came from on the Mersey”.

Chancellor George Osborne, MP for Tatton in Cheshire, has described Labour’s previous refusal to remove the restrictions as “a rather odd decision”.

Some question why the Peel Group, owned by the billionaire businessman John Whittaker, 69, does not buy out the grant money. The Peel Group has large business interests in the north-west, including Salford’s MediaCity and John Lennon airport. “They could write a cheque for £20m tomorrow and it wouldn’t bother them in the least,” said Smith. “And if they did, well, that would be fair and equitable. No state aid issue.”

Opponents believe Liverpool’s ambitions are greater than merely retaining its market share, pointing to plans for a £23m – £10m in public money – upgrade of the cruise facility discussed by councillors five months before the consultation was announced, but only discovered recently in council minutes. Southampton and Ichen MP John Denham has written to Penning questioning why this information was not included in the consultation.

North-east MEP Martin Callanan and others want the European Commission to act over the EU slice of the finding.

Morrison said: “We welcome competition and Liverpool is undoubtedly a fine city. But just like everywhere else, it should be for the port authority to invest in its facilities. If the government decides it is right to give one port authority a huge competitive advantage like this, then clearly it will shatter private sector confidence to invest.”

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