UK new build sector remains optimistic despite economic pressure
Stephen Hills, Commercial Director at Pendennis and Chairman of Superyacht UK, looks at how 2022 shaped the UK shipbuilding industry …
Many new build yards are reporting record profits and stacked order books, however, considering the current state of the UK economy and the ongoing energy crisis, the new build sector is undoubtedly experiencing some unprecedented challenges. Stephen Hills Commercial Director at Pendennis, and the current Chairman of Superyacht UK, looks at how the events of 2022 have shaped the British shipbuilding industry.
Despite all the bleak economic news at the end of 2022, my assessment as Chairman of Superyacht UK is that for most companies within the sector, business is good, order books are strong and pre covid profits are in sight again.
A feature of the Superyacht supply process is that generally, projects take time. Great endeavours of the highest quality are rarely quick to achieve so while the consumer post covid boom in discretionary spending has now moved to concerns about the cost of living, high inflation and soaring energy costs, the impact on British yards does not appear immediately, most projects already started have some way to run and from the discussions, I have had with UK business, the loss of Russian business has had limited impact in a position of generally increased demand.
The difficult challenge for the UK superyacht business now is to decide how, and if, those broader economic pressures will influence the behaviours of our clients and prepare accordingly. The last year has almost without exception seen companies growing with determined recruitment drives in response to very strong order books, and at the moment demand appears to remain healthy.
For the UK Superyacht sector, I remain convinced that to protect our industry we should continue to focus on investing in our people and facilities in order to deliver service, quality and innovation so that we develop and maintain our unique place within the whole global industry where most projects include some UK input, be it on the service side from our surveyors, legal teams, classification societies, finance, brokerage, insurance, designers, equipment suppliers, crew, management, or in new build or refit facilities. In all areas, it’s fair to say British companies are recognised as leaders in what they do because they offer the best service, the best quality, and the best innovation.
As the market adjusts, I am an optimist and believe that our clients will still be in a position to create strong demand and while the post covid peak may drop back to pre-covid levels this should be a sensible reset rather than a catastrophic drop-off. However, I think the real threat to our industry which we must be aware of and respond to is our impact on the environment. As an industry, we need to be able to present our product in the correct context and take steps to effect a real reduction in the impact of what we do. We are not big enough to lead the development of alternate technology, others will have to lead on topics such as alternative fuels and prime movers, however, we are able and do have the resources to be active and reduce wherever we can.
Clients will increasingly expect these behaviours coupled with a readiness to embrace and demonstrate new technology wherever possible. In my view, the failure to respond to this challenge is more likely to have an adverse effect on our business than the current economic issues. Our customers are generally well placed to deal with economic downturns, but no one is immune to the risks of environmental change and potentially legislation, it is argued by our critics that luxury goods are the least justifiable and we need a response.
But don’t wait for someone to solve this problem for you. My opinion is that each business needs to establish its own credentials within this debate. The required change will come as companies increasingly recognise this fundamental shift in the marketplace and take real steps to improve, not greenwashing, but demonstrable reductions achieved through real investments.
We will see a significant increase in customers who include an assessment of the environmental credentials each company offers as part of their selection criteria and as ever those offering the best proposition will emerge as the new leaders. In due course, I expect environmental credentials will rank above, or as a fundamental pre-qualification criterion, before Time, Cost and Quality in the client selection process.
At Superyacht UK we will be looking to facilitate debate on this topic, to support the exchange of ideas and initiatives and represent the industry as a whole where possible. If each company in the industry is not stepping up to the challenge, then there will be little to publicise and will simply be fuelling our critic's arguments. We need to be an industry of environmental champions.
While we offer customers luxury experiences, (a good colleague used to say, “something everyone seriously wants but no one needs”), we should do this in a way that is fully on board with the global mission to meet emissions targets and wherever possible to only leave footprints…or should I say “leave only our wake”.
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