Operating a statutory body in a commercial environment

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Government plays an important role in the lives of individuals and business organisations. There are many reasons why governments intervene in markets. For example, during the Second World War, many industries were taken over by the Government to co-ordinate production to meet the war effort.

One organisation set up to provide key benefits not just to the people of London but also to the country as a whole was the Port of London Authority (PLA). It was created by an Act of Parliament in 1908 to take responsibility for 'administering, protecting and preserving' the docks and wharves along the Thames. At that time, the situation was chaotic with many operations going out of business and serious problems of delay and theft.

Public ownership and privatisation

An industry or organisation owned by the Government is referred to as a public corporation or a nationalised industry. In 1979, Margaret Thatcher’s Conservative Government came into power. One of the key policies of this Government was privatisation. This is the process of returning the corporation or industry to private ownership and to the discipline of market forces. The PLA is neither owned by the Government nor is it privatised. It is a hybrid, known as a public trust.

The PLA's last remaining dock, the Port of Tilbury, was privatised in the 1990s. Previously the PLA had run the Port of Tilbury and employed more than 10,000 people. Now the Port of Tilbury is a private company and the PLA is no longer responsible for running its facilities.

The role of the PLA has changed radically in the past twenty years, from being a port operator as well as conservator and regulator before privatisation, to now being solely a navigation and harbour service. It is also responsible for marketing the port and the River Thames world-wide as a place for business, pleasure and recreation.

All organisations aim to serve the needs of their stakeholders. These can be individuals or groups, e.g. shareholders, managers, employees, customers or the general public, who have a stake in the running of the organisation or in the consequences of its activities.

In order to show stakeholders what its core values are, an organisation produces a mission statement. The PLA’s mission statement shows that it is committed to:

  • maintaining freedom of access to the Port of London
  • ensuring safety of navigation on the tidal River Thames
  • pursuing first class operational standards and competitive costs
  • promoting the UK’s largest port as a place where enterprise can flourish
  • respecting and enhancing the environment of the Thames
  • being a fair and considerate employer.

The PLA is responsible for a 95-mile stretch of the tidal River Thames from Teddington to the sea. It owns much of the river bed and the foreshore up to the high water mark. It provides navigational services for ships using the port, including the maintenance of shipping channels and moorings and navigation lights. The river can be split into three distinct sections, with different activities in each stretch.

To meet the requirements of its stakeholders, the PLA employs 409 people, half of whom work on the river to meet the needs of a series of legal responsibilities imposed by Parliament and exercise the powers they have been given. The responsibilities given to the PLA include:

  • regulation of safe navigation of the river
  • licensing of river works and dredging
  • hydrographic (river bed) surveying
  • registration of vessels
  • removal of sunken vessels and other obstructions
  • licensing of river operators, the watermen and lightermen
  • promoting the port.

The Port of London possesses considerable advantages over many of its rival ports. It is ideally situated to serve the markets in the prosperous South East. It can take advantage of London’s communications and infrastructure, including the new rail links and the major national motorway and trunk road systems which can  transport goods onwards to anywhere in the country. The frequent ferries have improved access to European markets and for cruise passengers there are five international airports within easy access. During 1997, over 30,400 vessels arrived at and departed from the Port of London, making it one of the busiest ports in Europe.

The PLA, however, is a public trust - it does not receive funding from the Government and cannot raise money from shareholders. All of its operations must therefore be financed from the money it can raise from river users. The cost of the PLA’s statutory responsibilities is currently more than £28m a year alone. Funding comes from:

a) The commercial river
The bulk of the UK’s largest sea port is situated between the sea and the Thames Barrier, although there are working wharves as far upstream as Wandsworth. The PLA collects revenues from conservancy charges on ships and cargo (i.e. a fee used for the upkeep of the river - similar to road tax which is paid to maintain the state of   the roads) and on providing pilots to sea-going commercial shipping.

b) The visual river
This stretches from the Thames Barrier to Putney. This is the part of the Thames that governs people’s views of the river. They can see it from their homes, the bus, the office or the House of Commons. There is some commercial traffic on these stretches of the river. The PLA gets money from the numerous passenger boats that operate in the area and use its piers. It caters for some 3 million visitors a year. The PLA also charges for commercial filming and any advertising on barges.

c) The tranquil river
This stretches from Putney to Teddington. In these upper reaches, the boats are mostly for recreational and leisure purposes. Revenue comes mainly from river works licences which cover, for example, houseboat moorings and boat club launch slipways.

The PLA has an enormous number of stakeholders. It recognises the importance of meeting their needs, regarding them as members of a community and trying to ensure that everyone is satisfied. The lifeblood of the port is, however, commercial shipping which provides the funding which sustains everything.

The river is both a national asset and a busy centre of commerce. Riverside land is in great demand for both residential and industrial use. Within this complicated juggling act, the PLA remains an independent statutory body operating in a fiercely competitive environment.

Promotion

One of the PLA’s major functions is to promote the Port of London to the world. It is, in many ways, an unusual brief, with so many interests that need to be considered when formulating the marketing strategy. The port currently handles over 55 million tonnes of cargo a year, ranging from crude oil and bulks, paper, motor vehicles and steel. Whilst the responsibility for clinching the actual deals with the shipping companies remains in the hands of the private wharf and terminal operators within the port, the PLA has an important role to play.

Promotion is crucial in attracting potential customers. In 1997, it mounted the 20th World Ports Conference, which attracted over 700 senior executives and 250 partners from port communities around the world.

The PLA also takes part in a number of overseas trade missions, attends exhibitions, seminars and conferences, meets and entertains customers. It developed a CD ROM and Internet web site to provide an interactive directory of facilities and services available within the Port. The PLA aims to offer the most competitive rates as possible for conservancy and pilotage. In fact, these charges have been held constant or reduced consistently over the last few years. It also acts to make the river as safe for navigation as possible.

In business, it is important to be as efficient as possible. In order to provide customers with goods and services, organisations frequently depend on the supply chain to provide them with key advantages over competitors. The introduction of industrial techniques such as Just in Time and lean production have pushed tighter stock control down the supply chain.

Just in Time is no longer perceived as an option for many manufacturers, it is essential to remaining competitive. Ports can no longer view themselves simply as the interface between the sea and the land. They must realise they are an essential part of the logistics surrounding the movement of goods throughout the supply chain. A port is only as good as the services it can provide. As markets become more competitive, manufacturers look to make cost savings in every area, including transportation.

'The trading scene, globally, is continually changing. At the same time, more pressure is being exerted to make all sectors of the supply chain more competitive', says Geoff Adam, the PLA Head of Port Promotion.

It is unacceptable for a modern organisation to ignore the impact of its activities on the wider community. People living in the society in which an organisation operates are also stakeholders. The PLA is confronted by a wide array of issues and has to try to balance the interests of all the stakeholders.

These concerns can range from encouraging international shipping companies to use the port, thereby generating millions of pounds worth of business, to dealing with minor complaints over houseboat licences and conserving the river environment. It has to consider the interests of the 20,000 people directly employed in port-related business and a further 16,000 with jobs indirectly dependent on the port, with those wishing to protect and conserve the indigenous wildlife. The needs of the national economy have to be set against, and reconciled with, the needs of the local community and environment.

  • One area of potential conflict amongst the PLA’s stakeholders which requires careful mediation is the demand for land for riverside housing and for industrial use. There have been a number of instances where people have moved into new residential developments which have been built near to well-established working wharves or docks and have then called on the local government to impose restrictions on those sites, in terms of hours of operation, noise and lighting.
  • The terminal operators are subject to the tides and because the owners earn nothing with the ships tied up, they want their ships loaded or unloaded as quickly as possible. The local authorities are becoming more aware of the importance of the port and all the economic benefits it brings to the local community, but they also have to consider the ever increasing demand for housing in the capital, particularly on brown field sites. Nonetheless, these sorts of restrictions have the potential to put the terminal operators out of business. This would create more land for residential developments and so the problem spreads.

The demand for housing and the continued industrial use creates environmental concerns. The PLA has to consider the wider social costs and benefits. Restrictions along the sensitive mud flats and the foreshore of the tidal Thames inevitably cause friction between operators, developers and the environmentalists. The fact that large sums collected from developers are used to protect the local wildlife is often insufficient to placate the conservation lobby.

The PLA has been successful in protecting some of the working wharves for their original intended use. When proposals are put forward for disused wharf sites upstream of the Thames barrier, each case is considered on its merits, using cost benefit analysis and looking, in particular, at the access to the wharf from both the river and by road. However, further downstream, where much of the heavy industrial terminals are sited, the PLA has been even more determined to preserve riverside sites for river related uses. Whilst always aware of the environmental considerations, it believes that the infrastructure is already in place for an effective, efficient and profitable port. Once these sites are lost to non-river related uses, they are lost for ever.

The PLA has to work closely with all levels of government ensuring that policies relating to planning and development enable the port to continue to thrive. The PLA expends considerable effort in explaining the port’s needs to the planning authorities and Government Ministers.

The PLA also works with the European Commission and is actively lobbying to try to achieve a level playing field and common accounting standards amongst all European seaports. Different central and local governments in each of the member countries have very different cultural attitudes towards their ports and have in the past offered varying degrees of support to their ports, which have had a considerable effect on their competitiveness. Any subsidy gives a cost advantage which can be passed on to the customers and make a crucial difference in a highly competitive market.

The PLA tries to keep all its stakeholders as happy as possible by adopting a highly positive commercial approach in all its dealings. It must consider the private costs of its actions, as well as the wider social costs and benefits, and balance the commercial aspects with the preservation of a national asset.