A precarious business
Economics and shipping
Shipping is enormously important to the world`s economic system,
and to the economies of countries that own ships. Ships carry 95%
of all freight carried between countries: far more than in trucks,
trains or planes. World trade, and the standard of living we enjoy,
depends almost totally on ships. Shipping, however, is a risky
business. In 2003, there are around 43,000 sea-going ships. They earn
money for their owners, and give employment to millions of
seafarers. Governments benefit from taxation on ships, and are keen
to have as many as possible flying their flag. Ships support the
major industries of shipbuilding and repairing, vital to the
economies of some countries, especially in the Far East. 
 `Barrad Wave`: refrigerated cargo ship |
Britain was once the biggest owner and builder of ships. In the
late nineteenth century, its lead in shipbuilding and trade
encouraged owners to build up a huge fleet of ships. Between 1870
and 1910, one in three of the world`s ships were British. For
steamships, the figure was even higher: four out of ten. Over half
of the world`s trade was carried in British ships. Since the First World War, the British fleet has declined;
slowly at first, but much faster in the last 30 years. There are
many reasons, including the flags-of-convenience [definition]
under which running ships is much cheaper. In recent years, the
government has eased the burdens of taxation and regulation on
ships flying the UK flag, and the British fleet has actually grown
again. However, this has mainly been due to owners from the
continent of Europe taking advantage of lower charges. The number
off ships actually owned in Britain, and the employment
opportunities for UK seafarers, continue to decline. This underlines the point that shipping is a precarious
business. Economic factors, such as oil price rises, or a recession
in trade, can have a serious effect on a shipowner. In a recession,
there are too many ships chasing too few cargoes, and freight rates
fall. Often, a ship will earn less than it costs to run. The owner
then has a choice of selling it, often for scrap if it is old, or
laying it up in the hope that trade will improve. A boom can have
the opposite effect. Because ships take a long time to build, an
upturn in trade can mean there are not enough available. Freight
rates increase, and owners who have ships available do well.
Successful shipowners are the ones who can survive and prosper
through these trade cycles.
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