A British flag flutters on a ship in Riga, Latvia. Picture: REUTERS/INTS KALNIS
A British flag flutters on a ship in Riga, Latvia. Picture: REUTERS/INTS KALNIS

London — Companies are leaving Britain’s shipping registry due to uncertainty about Britain quitting the EU and future commercial arrangements with the bloc, industry officials say.

All commercial ships have to be registered, or flagged, with a particular country partly to comply with safety and environmental regulations. Shipping companies in many “flag states” pay corporation tax based on vessel tonnage rather than profit.

Britain’s ship registry plays a key part in its maritime sector and the loss of such companies from the flag could hit tax revenues they generate.

The flag is suffering both from the uncertainty and because of Brexit itself.

The departures could also complicate British government attempts to secure extra space on ships to help cope with any trade disruption in a no-deal Brexit.

The government faced embarrassment in 2019 after stacking up a £50m loss for cancelling contracts for extra ferries to bring in essential supplies in the event of a no-deal, including a deal a ferry firm that had no vessels.

With Britain due to leave the EU on October 31, business leaders fear the UK could crash out without a deal.

French shipping group CMA CGM said that before Britain’s 2016 referendum on EU membership, it was the largest owner of container ships under the UK flag with 49 vessels.

“In the light of Brexit and to avoid any uncertainty in the period with our fleet status and regulations … CMA CGM has decided to transfer its fleet under UK flag to other European countries,” the company said. “This decision was taken after it appeared to us that the UK flag was excluded from the draft agreement envisaged between the UK and the European Union.”

CMA CGM, the world’s fourth-biggest container shipping line, said as a French company it complied with the EU regulatory framework with regards to its fleet registered in EU member states, allowing the group “to remain competitive”.

Shipping data showed CMA CGM’s UK ships were transferred to the French and Maltese flags on March 1, 2019.

A spokesperson for Britain’s Maritime & Coastguard Agency said: “We regret that CMA CGM has chosen to reflag its vessels due to its obligations under EU regulation”.

“It is, however, no reflection on the UK Ship Register itself, which the company came into originally because of the high quality it represents.”

On May 31 2019, there were 1,229 vessels registered with the British flag, representing 10.5-million GT (gross tonnage). This was down from 1,315 vessels or 16.5-million GT at the end of May 2018, official data showed.

Separate data from valuation company VesselsValue showed the British flag was ranked 22nd in the world, with Panama at no.1 with more than 203-million GT.

Norwegian vehicle carrier Wallenius Wilhelmsen said it had completed the sale of eight UK-registered vessels to its company in Malta at the end of October 2018 as part of efforts to simplify its ship owning structure.

“Due to the need for simplification of group structure and uncertainty of Brexit consequences we concluded to exit UK,” a company spokesperson said.

Bermuda-registered Stolt-Nielsen, which is listed in Oslo and whose business includes ships and terminals, said the group was reviewing its UK-registered ships.

In January, British ferry and shipping freight operator P&O decided to shift the registration of its UK vessels to Cyprus in part to keep its tax arrangements in the EU.

“Companies undoubtedly will have flagged out because of Brexit and it will be to do with either fiscal or financial considerations,” said David Balston, director of policy with the UK Chamber of Shipping trade association.

“The flag is suffering both from the uncertainty and because of Brexit itself.”