United Kingdom

F. United Kingdom

The reform of the UK port system took place as part of the general privatization initiatives of the Thatcher Government, which led to the Port Act of 1991. The UK has a long history of private terminals, beginning in the 1800’s. While most private ports were relatively small, dedicated facilities for bulk cargos, they also included Southampton, Felixstowe Port, Mersey Docks, the Tees and Cardiff. Most of the common-user ports were placed under the control of either independent port authorities, governed by commercial objectives, and port trusts, operating as non-profit organizations. This system was meant to ensure public access and to avoid monopolistic behavior. However, the ports suffered from decreasing efficiency and The reform of the UK port system took place as part of the general privatization initiatives of the Thatcher Government, which led to the Port Act of 1991. The UK has a long history of private terminals, beginning in the 1800’s. While most private ports were relatively small, dedicated facilities for bulk cargos, they also included Southampton, Felixstowe Port, Mersey Docks, the Tees and Cardiff. Most of the common-user ports were placed under the control of either independent port authorities, governed by commercial objectives, and port trusts, operating as non-profit organizations. This system was meant to ensure public access and to avoid monopolistic behavior. However, the ports suffered from decreasing efficiency and

The Government sought to resolve these problems first by resolving the labor problem. During the 1980’s the Dock Labor Scheme, under which all cargo-handlers were non-casual and were regulated by the state, was ended. Then, in the 1990’s, the ports were sold off (full privatization). This privatization was accomplished in two stages: first, the transfer of the port’s rights and liabilities to a port authority that acted as a limited liability company under the Companies Act and second, the sale of these companies to holding companies whose shares are publicly traded. The privatization of the Trust ports required the creation of a temporary (and very short-lived) project vehicle into which the assets could be dumped prior to being sold, rather than the creation of port authorities. There was a debate at the time as to whether the Government had the right to privatize the Trust ports as it was not the owner of the assets, and the corporate vehicle was one way of getting around that particular legal problem in a way which protected the buyer.

In 1993, five trust ports were privatized. They were sold through competitive bidding, but the financial bid had to be accompanied by a Business Plan, and the Government was not obliged to accept the highest offer. It did so in four of the five cases (Forth, Clyde, Tilbury, Medway) which were won by Management/Employee Buyouts. In the fifth case (Tees & Hartlepool) the Management/ Employee Buyouts again was the highest bid, but was rejected by the Government. There were other bidders for all five ports, but the response was lukewarm because of the Government’s stated intention to give preference to Management/Employee Buyouts if they came within 5-10 percent of the highest bid. Potential bidders were also discouraged by the speed with which the bidding process was carried out, uncertainty about how the unions would respond to new owners, and fears about a potential price war between the newly privatized ports. Today, only a few small public ports remain. Although these ports are private, their activities are still governed by local acts of parliament, which define what activities may or may no be undertaken on port land.

The process of port privatization has been the subject of considerable controversy because of difficulties in the process of bidding out the ports. One port was transferred to the management without competitive bidding and then 18 months later sold to Mersey Dock and Harbor Company at considerable profit for the management. MDHC has bid for other ports. Felixstowe, after being controlled by P&O, was bought out by Hutchinson Whampoa, which subsequently purchased Southwick and Thamesport.

Thamesport initially had a competitive advantage in terms of costs because it was not a part of the National Dock Labor Scheme. When this was taken away, the port was privatized through a leveraged management buyout. When the management organization, Maritime Transport Ltd, failed to improve the situation in the port and defaulted on their loans, the port was taken over by their bankers. This occurred in 1993 and two years later the Rutland Trust purchased the port from the bank, keeping in place the management. They invested in the port and improved its performance. Then, in 1998, Hutchinson Whampoa purchased the port and it continues to thrive.

The Port Act also created Associated British Ports which became a holding company for the assets of the British Transport Dock Board. The Associated British Ports is a wholly- owned subsidiary of a larger holding company that is listed on the London exchange. The Associated British Ports has a portfolio of operating and landlord ports and also derives revenues from the redevelopment of redundant dockland and continues to exercise considerable control over the The Port Act also created Associated British Ports which became a holding company for the assets of the British Transport Dock Board. The Associated British Ports is a wholly- owned subsidiary of a larger holding company that is listed on the London exchange. The Associated British Ports has a portfolio of operating and landlord ports and also derives revenues from the redevelopment of redundant dockland and continues to exercise considerable control over the