As an island nation with a long seafaring tradition, the UK has an enviable heritage in technology and innovation in the Maritime Sector. In 2019 the UK Government Department for Transport (DfT) published its first long term strategy for UK maritime sector in a generation: Maritime 2050: Navigating the Future. This sets out the UK ambition to be world-leading on safety, technology, skilled people, and the environment. A new report Consultancy Research into the Maritime Technology Sector prepared by London Economics on behalf of MarRI-UK and DfT, provides further evidence of the economic benefits that can be attributed to investment into the Maritime Sector.
Geopolitical events, the COVID-19 pandemic and the climate change challenges are combining and will result in a major transformation of trade and the mechanisms used to achieve it. The growing demand for essential raw materials such as rare earth metals will further disrupt traditional supply chains as protectionism and other trade restrictions are put in place by leading nations. In addition, opportunities exist which will enable a modal shift in freight transport approaches, moving us away from traditional solutions to a new paradigm, such as the re-adoption of coastal shipping, offering opportunities to re-energise the UKs ports and harbours.
The UK maritime industry contains 5 high-level segments:
- The shipping industry, with activities including the transport of freight and passengers;
- The port industry, which concerns all warehousing, management, cargo and passenger handling and customs activities;
- The Marine Engineering and Scientific (MES) industry responsible for shipbuilding, support engineering, marine science, and other academic activities;
- The Marine Business Services (MBS) industry dealing with shipbroking, insurance financial and legal activities;
- The leisure marine industry including recreational and boatbuilding activities.
The sector has demonstrated both its value and resilience during the pandemic. Goods have continued to be shipped to, and exported from, the UK from around the world (95% of all goods are moved by ships and through ports), unlike other sectors, the maritime industry (with the exception of the Leisure cruise industry) has continued to operate without major government subsidies. Whilst issues around throughput have received media attention (largely owing to Brexit issues), the growing list of UK Trade agreements reinforce the need for a step change in the relationship between the sector and the UK Government. Membership of agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the archetypal mega free trade agreement, will enable the UK sector to grow and regain its leading position as a maritime nation. The sector is fundamental to global value chains supporting manufacturing industries.
However, the maritime sector is capital intensive, with investment required in infrastructure such as our ports and harbours, the ships, digital systems, skills and training in a globally competitive sector. To achieve the goals set out by Government, investment particularly in innovation, is required. In other nations, for example Germany*, Berlin is making available €1 billion to support German ship and shipbuilding projects including federal funding for ship innovation advances, ongoing maritime research and research ship development and for Germany’s on-shore power plant installation programme.
MaritimeUK estimate that the UK maritime industry generated a business turnover of £44.5bn in 2017. This includes 42.5% from the shipping industry, 10.7% from ports, 32.0% from MES and 14.8% from MBS. The gross value-added (GVA) contribution of the industry to the UK was £16bn in 2017. This contribution is led by the shipping industry (38%), MES (32%) and followed by MBS (17%) and ports (12%).
It is against this backdrop that the need arose to rethink the UK Maritime Research and Innovation ecosystem. Industry and Academia with the support of the UK Government created Maritime Research and Innovation UK (MarRI-UK) to provide a clarity of focus and collaboration across the UK Maritime Sector. Working with MaritimeUK, MarRI-UK is establishing a network of regional, industrial and academic communities to work together to address the challenge that research and innovation in the sector is fragmented and incoherent in the UK and to seek to attract greater levels of investment into the sector.
Following its launch in 2019 and with the support of DfT, MarRI-UK has developed three innovation calls, all of which were heavily oversubscribed demonstrating that the UK Maritime Sector recognises the market opportunities available to be the leading nation for innovation. With more than 60% of the projects awarded to Small and Medium Enterprises (SMEs), the opportunities for international growth are clear, as the Fourth Industrial Revolution takes hold, transformational change is underway in the sector, COVID-19 has accelerated the technological revolution at a time when the global economy is volatile. New combinations of advanced technologies are generating new concepts such as MarRI-UK’s Zero Carbon Coastal Highway concept, - enabling a fundamental shift from traditional transport to one where concepts such as automation, alongside data-driven insights, digitalisation and de-carbonisation acquire real meaning and scale for the coming decade. Shipping will continue to play an important part of the world economy for decades to come. However, the vessels, the ports infrastructure, and the systems that connect them could change substantially.
Smart shipping market research
Jointly commissioned with DfT, London Economics were appointed to undertake economic research to inform DfT approach in supporting the smart shipping industrial sector in the UK. The research focused on the UK’s strengths in smart shipping technology and provides economic and technology research.
The report highlights that the most important drivers underpinning the development of smart shipping technologies in the UK are:
- Improving environmental sustainability and energy efficiency;
- Optimising workflows to increase capacity and efficiency;
- Digitising transaction documentation to improve customer service, and increase efficiency through transaction time savings, error reduction, improved security, and added value services;
- Brexit - the UK’s departure from the EU creates uncertainty with the risk that we may see a drop in EU/UK trade with implications for the UK’s ports.;
- COVID-19 – the pandemic has had a marked impact on world economies while the longer term issues remain uncertain.. There is no evidence from the report, however, to suggest that the pandemic may not be a key enabler of smart shipping technologies.
The report collates industry news and market intelligence focused on four smart ports technology segments:
- Big Data and AI software systems (performing a range of optimisation tasks);
- Autonomous vessel technologies are expected to reduce maritime emissions, enabling massive fuel savings, and reducing the cost of shipping. Autonomous technology is anticipated to lessen the scope for human error from operations on the vessel’s bridge, thereby reducing the risk of accidents;
- On-board technologies include safe navigation, ship performance, maintenance and more. Despite the shipping industry’s apparent or perceived reluctance in embracing technology, the sector still sees technological advancement in several key areas such as AI, smart ship platforms, alternative propulsion, and connectivity;
- The service industry will adapt from the provision of new technologies and applications coming to market by supplying appropriate services and responding to the need for more training. The UK offers great opportunity in the field of consulting. Leading universities, maritime colleges and regulatory experts provide much weight to the UK maritime ‘brain trust’, which is generating value for many projects.
The report then identifies areas for possible intervention: Funding and investment, collaboration, skills development, policy and regulation.
Strategic Choices which can be leveraged to achieve substantial and long-lasting benefits are:
- The manufacturing and deployment of smaller autonomous vessels
- Smart shipping sensor development and sensor integration services
- Smart shipping command and control systems and expertise
- Smart shipping data and intelligence services
- Smart shipping cyber security and risk management
- Training in the adoption and utilisation of smart shipping technologies.
Key implications for the smart shipping industry are:
- The sector is dynamic and long-term benefits of early adopters are unlikely (leapfrogging) but short-term gains are worthwhile
- Enjoying long-term returns require ongoing edge R&D to keep ahead of the competition
Growing markets favour firms with access to resources that enable them to scale up quickly
MarRI-UK role to address market failure in Smart Shipping
The report identifies four areas of market failure which MarRI-UK is well positioned to play a key role:
Coordination Failure: the UK commercial shipping sector seems ‘off the pace’ compared to other nations. There are pockets of innovations from industry and academia, but there is no real trend in the direction of technology development for on board systems for the commercial shipping fleet.
MarRI-UK is looking to address this from a Research and Innovation perspective, through the development of a series of key research roadmaps, driven by industrial needs, seeking to generate a single coordinated research agenda for the sector. Furthermore, over 65% of projects awarded to date have been won by SME’s.
Imperfect information: in the case of maritime technologies, they are perceived to be high cost, long lead time, and with uncertain return on investment, thus reducing the incentive for companies to develop new technologies. The result is an underinvestment in research and development (R&D).
MarRI-UK is focussed on the development of technologies from Technology Readiness Level 3 (TRL) to 7, the “industrialisation” element of research and development, enabling companies to mature technologies into early-stage products that demonstrate the benefits that can be delivered.
Externalities: negative externalities have been identified, such as machine integration and cross-technology integration, human-machine interactions, and environmental externalities. These negative externalities mean there is under-investment in maritime technology, as the social costs and benefits do not reflect the private costs and benefits of the technology.
MarRI-UK has gone through road mapping activities where a key enabler identified is the consideration of a socio-technical and a data and information dimension. These dimensions are focused on the value and benefits that can be accrued through better management and exploitation of data to improve the “end to end” system performance (e.g. factory to consumer role of shipping) and social value through improved understanding of technology risk and benefits, and the need for appropriate legal and regulatory governance of technological solutions.
Large capital requirements: seen to act as a barrier to entry in the marine technology sector. The required upfront investment for new entrants is high and firms may not have access to enough capital to establish themselves in the market, providing incumbents with an advantage. While the appetite for smart shipping innovation is high, ports were considered to have no or very little R&D budget according to interview participants in this project. Coordination across a large supply chain with split incentives, uncertainty and imperfections in information, leading to low investment, barriers to entry such as high capital requirements, transition costs and a lack of efficient scale.
MarRI-UK, in focussing on mid TRL research and innovation, aims to support the maturation and demonstration of appropriate technologies to a level where more in depth return on investment considerations can be developed, alongside clarity of the achievable performance improvements, supporting the development of investment business cases and providing higher levels of confidence for potential investors.
John Howie, MBE
Chair of MarRI-UK
To find out more about MarRI-UK and how to get involved, please contact email@example.com.