Faced with a 40 per cent downturn in shipping last year, Falmouth Harbour Commissioners (FHC) had to make radical business decisions to keep the organisation afloat in the stormy financial seas it faced. The publication of its annual report for 2016 reflects this and makes interesting reading.

FHC chair, Carrie Gilmore, in her first year at the helm of FHC, said that the organisation has had a challenging time in 2016 due to the drastic decline in commercial shipping revenue which resulted in a downturn in pilotage and harbour dues revenue.

Harbour dues revenue fell by 23.6 per cent with pilotage income dropping by 23.4 per cent. Turnover was £2,457,762 compared with £2,777,751 in 2015.

Falmouth Packet: Chart 1Chart 1

Carrie said: “This had a significant impact on our financial performance and resulted in an operating loss of £194,663. This loss includes deficit contributions and other costs associated with pension scheme liabilities of £239,044 without which the organisation would have made an operating profit of £44,381.”

The commissioner’s decision to split their business into two different sectors, Falmouth Haven and Falmouth Pilot Services, was a prudent one.

Falmouth Packet: Chart 2Chart 2

Carrie said: “Falmouth Haven turned over more than £1million for the first time, achieving a 10.8 per cent increase on the previous year, whilst Falmouth Pilot Services costs reduced by 11.8 per cent in response to a drop in income of 23.4 per cent.”

Responding to the downturn in shipping activities, the commissioners ordered a number of cost saving measures, including a significant reduction in staff costs and withdrawing of sponsorship for the town’s annual Red Arrows display. The board hopes to be in a break-even position before the end of 2018.

FHC was hit in 2010 by a High Court ruling which gave the Pilots National Pension Fund Trustee wide powers to seek deficit contributions from Competent Harbour Authorities (CHA) engaged or having been previously engaged in employing or authorising pilots.

FHC was badly holed below the waterline when given a massive pension deficit liability of over £3 million, a heavy financial burden.

In 2016 FHC paid a combined annual deficit contribution of £239,044. The amount of deficit will change as and when the pension fund undergoes regular revaluation. Deficit repayment contributions are agreed with the trustees of the funds from time to time with the aim of eliminating the deficit over the target period.

Harbour master and chief executive Captain Mark Sansom said: “The trustee of the PNPF requires us to keep details of the repayment scheme confidential but the size of the deficit in the accounts compared to the annual repayment makes it obvious that it will be an issue for a number of years to come.”

FHC has invested in new assets by ordering a new, purpose built mooring vessel Aberfal costing some £500,000. In light of the decline in commercial shipping FHC turned its attention to grow its leisure business.

A new pontoon system installed in Custom House Quay basin was almost filled overnight such was the demand for new berths for small craft in the port. This income will help shore up FHC’s coffers.

With A&P Falmouth heavily geared up for Ministry of Defence /Royal Navy contracts, the dynamics of the port has changed out of all proportion in the past decade. The MoD ships, whilst boosting the local economy, take up prime ship repair berths for many months and this has a major impact on FHC’s commercial shipping revenue.

The A&P Group is currently bidding for part of a £900 million contract to refit units of the RFA, therefore this scenario is likely to be the norm in Falmouth until such times as the capital dredging project and new berth infrastructure to accommodate larger ships gets a green light.

The halcyon days of bunkering activity witnessed in 2007 are long gone with Falmouth up against strong competition from other bunkering ports.

The FHC board recognises that the current outlook for commercial shipping is far from encouraging. With current oil and bunker prices volatile and the availability of low sulphur fuel oil between departure and destination ports now readily available it will have a marked effect on Falmouth’s trading position.

As FHC has no port infrastructure of its own to attract commercial shipping it is heavily reliant on other companies such as the A&P Group to attract business to the port with the commissioners playing an active role in keeping charges such as pilotage and harbour dues competitive.

Captain Sansom explained that the FHC annual meeting has been postponed until later this year but will deal mainly with future plans rather than discussing the annual report.