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Does location matter anymore?

For centuries the great port cities analysed in the recent Xinhua-Baltic International Shipping Centre Development Index report were built on the confluence of trade, people and ideas. Centred around ships and the presence of their owners, managers and charterers, maritime clusters steadily grew across Europe, Asia and the Americas. A combination of talent, time-zone, geography, expertise and government policies has helped locations such as Singapore, London and Shanghai thrive. Successful clusters combine the experience and size of established companies with the energy and drive of smaller and start-up firms. Collectively they have consistently delivered innovation, jobs and tax receipts.

 

But has the successful shift to working from home during the COVID-19 pandemic ruptured the maritime business cluster concept forever? Will like-minded and complementary as well as competing businesses operating in the same field continue to see the advantage of co-locating in the same expensive business districts? Has the theory of clustering, which describes the economic advantages of the concentration of specialised industries in a single location, been overturned by a brave new world of remote meetings and home working? Or will we see a swift return to business as usual and offices in maritime clusters fill up again with shipbrokers, tech-specialists, financiers, insurers and lawyers when the pandemic ebbs?

Of course, the impact of COVID-19 has been felt very differently around the world. In China, thanks to rapid government intervention, a swift uptake of technology and strictly enforced lockdowns, life in the cities has returned much to normal fairly rapidly. Office work and face-to-face activity have continued. But in Europe and the US, a devastating winter wave led to further lockdowns, which only at the time of writing are beginning to ease.

Whilst we don’t need offices in every country, we do believe that regional hubs are key

 

Maritime employers have faced very different challenges around the world and adapted accordingly. The London P&I Club, one of the world’s leading providers of mutual insurance services for shipowners, is one such employer. Headquartered in London, but with important regional hubs in Athens, Cyprus and Hong Kong, it believes that proximity to its members is critically important.

“Whilst we don’t need offices in every country, we do believe that regional hubs are key,” says Chief Executive Ian Gooch.

The London Club has grown its Hong Kong office over the past 12 months, which it sees as an important regional base for Asia. He notes that face-to-face culture is extremely important in China and that“Zoom meetings haven’t been as popular there as in Europe.” At the same time however, its London headquarters has managed to successfully function with mainly homeworking for the organisation’s claim handlers, underwriters and administrative staff.

He says that the Club is committed to London, but that the future will probably involve some form of hybrid working and possibly a smaller office. However, the Club sees the advantages of having all its disciplines under one roof. The same is true for shipbroker Simpson Spence Young. The firm is one of the largest shipbrokers with offices in 20 locations around the world including Singapore, London, Dubai and Shanghai.

Remote service delivery will become a part of everyday life for us

“Shipbroking has always thrived on personal interactions, the buzz of the trading floor and building a relationship with your clients,” explains Chairman Mark Richardson. “Lockdowns and travel restrictions have made this tough, but thanks to technology we have continued to work well across our network of global offices.”

Most businesses report that the pandemic has simply hastened existing trends. For many in the maritime business sector, the past 12 months has been about accelerating digitalisation, automation and efficiencies. But for classification societies, whose surveyors’ work involves physical presence and travel, COVID-19 restrictions have brought forward changes to testing and certification processes.

“Remote service delivery will become a part of everyday life for us,” says Laurent Leblanc, Bureau Veritas Senior Vice-President, Technical & Operations.

He cites the example of a survey in early February 2021 of an engine test conducted jointly between head office in Paris and a facility in China with multiple stakeholders also witnessing the test process. A BV machinery expert located in Paris, a network office in Germany and an equipment maker in Europe were able to witness testing in a facility in China where BV surveyors were also present. Using real-time video communication tools, those unable to travel due to COVID-19 restrictions were able to be virtually present and to witness and contribute to confirming an important test procedure.

Will London and the UK still be the best place in the world to transact such business? Definitely

“The capability does not replace our surveyors but allows speed of access and connectivity between teams and stakeholders to enable decisions to be made quickly,” says Leblanc.

The consensus which seems to be emerging amongst maritime employers is that the future of work will feature a good deal less travel and possibly more homeworking, but certainly a commitment to location remains. Flexible working is popular with many employees, particularly those juggling young families and the pandemic has challenged many leaders’ pre-conceptions about working from home.

However, maritime knowledge workers still need to collaborate, share ideas and work closely with clients. Younger and new employees need to be trained and learn about a company’s culture: this is difficult to achieve remotely. Maritime clusters succeed because they provide access to know- how. When companies are located in close proximity to each other, it is easier to share knowledge and best practices or recruit the right people.

Jos Standerwick, Chief Executive at promotional body Maritime London says: “Maritime London does not prescribe to the rather dystopian view that COVID-19 may facilitate the end of the ‘physical cluster’. Will we spend more time working from home? Probably. Is this a bad thing? Probably not. Will there still be a need for a physical market to cement old relationships, forge new ones and work together to find solutions to the increasingly complex questions facing international shipping? Yes. Will London and the UK still be the best place in the world to transact such business? Definitely.”

Baltic Exchange Chairman Denis Petropoulos has the final word: “Remote working has been successful because so many of us have taken our longstanding business relationships from our pre-pandemic life home. But these need replenishing and renewing through personal interaction. The great maritime hubs facilitate this.”

Click here to download a copy of the The Xinhua-Baltic International Shipping Centre Development Index report.

 

This article is shared by courtesy of the Baltic Exchange – the world’s only independent source of maritime market information for the trading and settlement of physical and derivative contracts.

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