Foreword
Summary
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2
3
4
5
6
A1
Acknowledgements
Figures and tables
Economic value of English law | Oxera

A1.1.1: Size of the market

Published: October 5th 2021
Download the Report Executive Summary Funders
2.1: Introduction 2.2: Economic value is created by ‘gains from trade’—realised through transactions 2.3: The law underpins growth in the volume of transactions (and therefore the generation of economic value) 2.4: Considering the law as infrastructure on which transactions take place
3.1: Introduction 3.2: The economic value created through the UK legal services ecosystem 3.3: The economic value created for the UK as a whole -3.3.1: English law as a global market standard -3.3.2: Agglomeration effects -3.3.3: Reduced transaction costs for UK businesses trading internationally 3.4: The choice of law and legal services for internationally mobile transactions
4.1: Introduction 4.2: English law provides significant value to the UK economy -4.2.1: Maritime sector -4.2.2: Commodity trading -4.2.3: ISDA swaps and derivatives -4.2.4: International insurance contracts -4.2.5: The value of English law to the UK economy is significant 4.3: Risks and opportunities 4.4: Future opportunities for the use of English law represent significant potential value to the UK
5.1: Introduction 5.2: English law suffers from a type of ‘market failure’ 5.3: Solutions to the free-rider problem: coordination across private and public parties 5.4: How to manage the ‘provision’ of English law
Experts Funders
Chapter A1

A1.1.1: Size of the market

The UK maritime sector as a whole has been estimated to contribute between £14bn and £17bn of direct gross value added (GVA) annually to the UK economy. [1]Eddings, G., Chamberlain, A., Colaco, H. and Philips, I. (2020), ‘The Shipping Law Review: United Kingdom – England & Wales’, June., [2]Maritime UK (2019), ‘State of the maritime nation report 2019’, September.

The UK has a large industry supplying business services to the maritime sector, which contribute approximately £4bn to the UK economy.[3]CEBR (2017), ‘The economic contribution of the UK Maritime Business Services industry’, September.

Many of these businesses provide services to international clients, and thus most of their transactions can be considered to be internationally mobile transactions.

The UK has a market-leading 35% of global maritime insurance premia and 60% of protection and indemnity (P&I) clubs.[4]See: https://www.maritimeuk.org/about/our-sector/maritime-business-services/ (last accessed 5 May 2021).

Maritime legal services are also an area of strength, with London leading in dispute resolution services.

London is a major centre for mediation, with a total value of cases mediated each year of around £11.5bn, including many shipping cases.[5]Eddings, G., Chamberlain, A., Colaco, H. and Philips, I. (2020), ‘The Shipping Law Review: United Kingdom – England & Wales’, June. It is estimated that 80% of the world’s maritime arbitrations are dealt with in London.[6]LLMA (2018), ‘Call for Evidence Response Maritime 2050’. The UK is home to leading governance and regulatory bodies,[7]For example, the International Maritime Organization and the International Association of Classification Societies. and is home to the Baltic Exchange, a leading source of market information on trading and settlement of both physical and financial shipping derivatives.

A stylised picture of this ecosystem is shown below in Figure A1.1. The diagram shows four broad categories of businesses involved in the maritime ecosystem:

  • ship building—this comprises the shipyards where new vessels are built, as well as the suppliers of equipment and materials required;
  • ship ownership, management and port services—this category includes ship owners (who may buy vessels via brokers) and ship managers who are commissioned to operate the ship. At ports, owners often rely on ship agents to liaise with various port authorities and port services;
  • ship users—charterers hire a vessel from a shipowner. The charterer may own cargo itself, or use the vessel to deliver cargo on behalf of someone else;
  • professional services—a wide variety of affiliate service providers are involved in the maritime sector. Ship brokers may act as intermediaries between ship builders, owners and charterers. Other important services include finance, engineering and insurance. Around 60% of the business services GVA in the maritime industry comes from insurance (see section A1.4 for a discussion of insurance).[8]PwC (2016), ‘The UK’s Global Maritime professional services: Contribution and trends’, research report published by the City of London Corporation. Classification societies establish and maintain technical standards, and surveyors examine vessels to report on their condition. The maritime legal sector provides advice to all participants in the ecosystem and assists in dispute resolution.

Figure A1.1 Illustrative diagram of the maritime sector ecosystem

Figure A1.1 Illustrative diagram of the maritime sector ecosystem
Source: Oxera.

The maritime sector particularly benefits from business ‘clustering’ due to the widespread use of sub-contracting, outsourcing and the use of highly specialised skills.[9]For a more detailed analysis of the competitiveness of the UK maritime sector and a discussion of ‘clusters’ in this industry, see Oxera (2015), ‘International competitiveness of the UK … Continue reading

Businesses in a similar sector are able to gain productivity advantages by locating close to one another, thus benefitting from greater specialisation, knowledge spillovers and access to specialised labour. Maritime clusters evolve over time. One model describes how initially a cluster is focused on more basic services and would tend to be located around shipyards or ports.[10]Lam, J.S.L. and Zhang, W. (2011), ‘Analysis on Development Interplay between Port and Maritime Cluster’, December.

As the cluster develops, it may become a centre for various maritime business services. Ultimately, the centre can become distinct from the physical activities that it serves, as agglomeration effects become critical for success.

The UK, and London in particular, has become the leading global hub of international maritime services. This is no longer directly dependent on the growth of the UK as an importer/exporter/owner/operator of vessels.

There are many reasons for the success of the UK as a global maritime centre that attracts a large proportion of internationally mobile transactions. A rich maritime heritage, access to a highly skilled workforce, strong education institutions and a stable business environment are all important factors. Another important attraction of the UK maritime cluster is the widespread use of English law.

References

References
↑1, ↑5Eddings, G., Chamberlain, A., Colaco, H. and Philips, I. (2020), ‘The Shipping Law Review: United Kingdom – England & Wales’, June.
↑2Maritime UK (2019), ‘State of the maritime nation report 2019’, September.
↑3CEBR (2017), ‘The economic contribution of the UK Maritime Business Services industry’, September.
↑4See: https://www.maritimeuk.org/about/our-sector/maritime-business-services/ (last accessed 5 May 2021).
↑6LLMA (2018), ‘Call for Evidence Response Maritime 2050’.
↑7For example, the International Maritime Organization and the International Association of Classification Societies.
↑8PwC (2016), ‘The UK’s Global Maritime professional services: Contribution and trends’, research report published by the City of London Corporation.
↑9For a more detailed analysis of the competitiveness of the UK maritime sector and a discussion of ‘clusters’ in this industry, see Oxera (2015), ‘International competitiveness of the UK maritime sector’, May.
↑10Lam, J.S.L. and Zhang, W. (2011), ‘Analysis on Development Interplay between Port and Maritime Cluster’, December.