Shipping forms the backbone of the global supply chain, with around 90% of the world’s trade transported by sea. In the United Kingdom shipping is extremely important with 95% of our trade being moved by sea and it is also one of the UK largest employers with 180,000 people.
In recent months, global shipping traffic has slowed, however cargo is still moving and ports are still operating, keeping the UK supplied with vital elements such as medicines, food and equipment required to sustain people and businesses during this period. Supporting the UK Shipping industry, especially the seafarers, and workforce that keep the country alive is extremely important in these times.
At present ship owners are experiencing very different circumstances depending on the type of fleet they own and/or operate. Crude oil tankers are still enjoying a very buoyant market as oil traders seek to take advantage of low oil prices by chartering tankers to be used for storage, however this maybe short lived as the OPEC+ meeting resulted in an agreement to cut daily production by 10%, despite this cut oil prices are still below $30 per barrel for Brent Crude. Dry bulk has suffered in terms of mineral and grain cargoes and further disruption is likely due to the spread and individual country responses to lockdown and its consequent impact on the availability of workers. Container traffic has fallen by 30% since the start of the COVID-19 pandemic and the forecasts are generally negative. The car carrier market, which is a large industry in the UK is suffering most of all out of all the cargo markets.
Despite this rather bleak outlook it is important to remember that shipping needs to and will continue and that the pandemic is likely to become more manageable over the coming months, and so a recovery may come soon.
There are many challenges that face the shipping industry today. Shipping companies need to build resilience and put in place appropriate contingency plans. Keeping a close eye on current and future cash flows and maintaining close contact with stakeholders are two key requirements for navigating through these uncertain times.
Companies and especially their workers need appropriate financial and physical support to give them the protection they need to work through these unprecedented times.
The following website are a useful guide for information and support for your business:
UK Chamber of Shipping: The spokesperson for the shipping industry in the UK and have very useful information on their website: www.ukchamberofshipping.com
UK Government: Has offered several schemes for providing financial support to those affected by COVID-19: www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees
At BDO LLP we are committed to supporting our clients and helping them through this challenging time. The BDO team have put a COVID-19 Hub together designed to support our clients, friends and families in navigating the various options available to keep businesses and their employees afloat and operating productively: www.bdo.co.uk/en-gb/covid-19
BDO’s M&A team are following the impact of COVID-19 on the shipping industry closely and we will be reporting our findings over the coming weeks to keep you informed.
If you have any questions relating to how to protect your employees and business during this time BDO are here for you and we encourage you to pick up the phone and talk to one of the team.