Movement of Goods throughout Europe post-Brexit: Irish Maritime Development Office

On behalf of the committee I would like to welcome Mr. Liam Lacey, director of the Irish Maritime Development Office, IMDO, and Mr. Daniel Fallen Bailey, economic and policy adviser in the IMDO, who join us remotely. You are both very welcome.

Before we begin, I will give the normal spiel. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable.

I wish to advise witnesses giving evidence from a location outside of the parliamentary precincts that the constitutional protections afforded to witnesses attending to give evidence before committees may not extend to them. No clear guidance can be given on the extent to which evidence given is covered by absolute privilege. Persons giving evidence from another jurisdiction should also be mindful of their domestic statutory regime, which obviously does not apply at this session.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I welcome Mr. Lacey and I call on him to make his opening remarks to the committee. We cannot hear Mr. Lacey, perhaps he could unmute his microphone. I propose a short suspension while we reconnect with Mr. Lacey.

Sitting suspended at 9.18 a.m. and resumed at 9.28 a.m.

I invite Mr. Lacey to make his opening statement.

Mr. Liam Lacey

I am grateful for the opportunity to meet the committee and to update it on the report that was recently prepared at the request of the Department of Transport dealing with maritime connectivity in the context of Covid-19 and Brexit related challenges. The report builds on previous work carried out by the Irish Maritime Development Office in the area and it updates the land bridge study, which was delivered in 2018.

The report takes account of important issues, including, but not limited to, market conditions, including trade and tourism volumes, capacity and utilisation of maritime transport services, and emerging trends that may influence demand and supply conditions in the future. The report considers the desirability of State intervention in the shipping industry, taking into account lessons learned in dealing with this question over the past two years. The report also takes account of recent industry consultations and emerging national and international influences. The report concludes by updating previous advice and making a series of recommendations, laying particular emphasis on a contingency approach that recognises the complexity and uncertainty of current circumstances and the value of scenario planning in preparing for the unexpected. The recommendations we make are cautious and prudent, cognisant of the important and serious implications for the national economy and vulnerable sectors within it of failing to protect maritime connectivity.

I will deal with some key points in the report.

I will outline the structure of the presentation. The presentation gives an overview of freight volumes through Irish ports. It then focuses on roll-on-roll-off, ro-ro, and lift-on-lift-off, lo-lo, traffic or on a combined basis unitised traffic, which are really the areas of concern when it comes to Brexit and Covid-related challenges. We look at demand and supply factors and discuss the case for State intervention in the shipping market. I will conclude with summaries and recommendations from the report and inform the committee about a communications campaign that has been running to alert the market to the necessary preparations for Brexit it should be undertaking.

The graph in front of members tracks volumes through Irish ports over the past 13 years. It relies on the iShip index, which is an aggregate measure of volumes through Irish ports. The graph is set at 650 so, in many respects, what members see on the screen amplifies the effect but it will give members a clear understanding of how volumes have moved over the course of the past two years in particular. Members can see that there has been a tapering off in ro-ro volumes, particularly as we came into 2020 and Covid had its effects. As volumes are at that level, and members can see at previous points on the graph that they were often much higher in Irish ports in the past, there is sufficient capacity in Irish ports to handle forecast volumes. This gives a more detailed monthly analysis of ro-ro volumes, which is an area of particular interest when it comes to discussing Brexit and land bridge implications. What members see in this slide is a comparison between 2019 and 2020 monthly carryings through Irish ports. The blue bar represents 2020. From the beginning of the year, volumes were running behind last year's levels. When Covid started to take effect as we went into March, April and May, volumes fell very significantly. There were points when ro-ro volumes on some services and in some ports were 35% to 40% behind last year's levels. The decline was not evenly distributed across all ports and all services. Some services suffered to a greater extent than others.

As we moved through the year, particularly in July, September and November, we can see that volumes exceeded last year's levels. In July, we were coming out of a lockdown period where demand was suppressed because of the restrictions. As these eased, volumes increased. In November, it was noteworthy that volumes were significantly ahead of last year's levels. This is important because our view is that those volumes contain a significant amount of traffic that is building stockpiles in Ireland in preparation for the effects of Brexit. This is a phenomenon we have seen in previous deadlines as the effects of Brexit came into play and the market took steps to mitigate those risks.

In this slide, members will see the effects of Covid-19 on the passenger business through Irish ports. They can see that in quarter 2, volumes in the Republic of Ireland were down by 91% while in Northern Ireland, they were down by 83%. For the island as a whole, volumes were down by 88%. This phenomenon of suppressed passenger demand and reduced numbers of cars travelling, particularly on ro-ro services, frees up space on those services for freight. As we head into 2021, our expectation is that passenger volumes will remain suppressed and the space made available because of the absence of passenger cars will contribute to the response of the shipping industry in respect of services with increased volumes of freight were that to occur.

I will discuss some of the demand characteristics of the market. This slide deals with economic and seasonality effects and some of the effects of stockpiling. As we head into 2021, economic forecasts suggest a slowing down in the Irish economy. This will reduce freight volumes. As we move through this stockpiling period and enter quarter 1 of 2021, the likelihood is that volumes will be reduced as we eat into those stockpiles and those stockpiles are used to meet demand. In any event, volumes are generally down on peak demand in January of each year - sometimes by as much as 20%. This occurs routinely for seasonal reasons.

On the supply side, it is interesting to note that there has been significant investment in the market over the course of the past number of years. Notable among those investments were Irish Ferries' investment in the MV W.B. Yeats while CldN made investments like the Selene. These represent very significant increases in capacity. These vessels were launched on the market as Brexit-busting vessels that offered significant additional capacity when needed on direct services to the Continent.

Overall, in the course of the past year, we have seen significant additions to capacity. Up to this point, six new services have commenced. Members will see on the screen that eight more services are planned for 2021. These are either new services or expansions of existing services. This represents a significant response from the market. Looking at the route map that outlines the services that are available, members can see the services outlined on the map here representing four different shipping companies and eight different services. This does not take account of the services that are planned to commence early in 2021.

It is worth noting that lo-lo capacity also makes a significant contribution on an annual basis. In 2019, more than 1 million 20 ft. equivalent units, TEUs, were moved between Irish ports and continental ports. The lo-lo industry is notable because it uses vessels that are not as specialised as those operating in the ro-ro market so there is greater availability. Operators have the ability to increase size. Given the prevalence of chartering in the lo-lo market, vessels can be off hire and new vessels can be taken on. Lo-lo has been shown to be a viable alternative to the land bridge with appropriate supply chain adjustments. That is something to which I will return as we look at other services because there are substitutes but the substitutes that work in terms of accommodating land bridge business require supply chain services for them to work effectively. On the lo-lo side, members can see the route map. There are nine different companies offering 23 different services.

It is important to understand the structure of the shipping market in Ireland. There are relatively low barriers to entry so it is open to new entrants. The market is served by a number of large high-quality providers - leading shipping companies in Europe and the rest of the world. The industry is capital-intensive so the participants in the industry have some costs creating an imperative to generate revenues to meet those costs so the industry will follow demand.

The industry and the market are highly competitive. There is a history of investment to retain and grow market share. I have referenced some of the investments in the recent past, and they are ongoing. The industry has a history of good service and meeting market needs, and it has responded commendably in meeting Covid challenges and demonstrating its resilience. Our shipping services and port companies have kept going, and they are to be commended for this.

The market structure supports the view that the industry will respond to changes in demand based on commercial imperatives. On the supply side, the big question, and what is not entirely clear, is the extent to which the land bridge will continue to function. Undoubtedly, there will be delays and disruptions at UK ports, and we are taking that as a sensible working assumption and advising importers and exporters accordingly. In the communications campaign we have been running for the last two months, we have been highlighting this and asking importers and exporters to take appropriate steps. However, the Dover-Calais route and, indeed, the services provided through the Channel Tunnel, are important trading arteries for the UK. The shipping industry believes that Dover-Calais and the Channel Tunnel will overcome the problems and will continue to provide services, notwithstanding its acceptance of difficulties on 1 January, as the users of the system develop an understanding of the new circumstances. It is not in the UK's interest for Dover-Calais to fail and it is in its rational self-interest to do everything possible to ensure that it works.

Demand for land bridge services is relatively inelastic, and this is a conclusion we reached in the land bridge report. Even with some increases in cost and time, there was still significant demand for land bridge services. We tested this out in regard to delays of up to 12 hours, although beyond that it definitely becomes more difficult to see the extent to which the land bridge will continue to be used. Nonetheless, inelasticity has been tested out to 12 hours. Land bridge traffic existed before the Single Market and with customs controls, and I am old enough to remember that. In those circumstances, it did provide a competitive option for importers and exporters. We are cautioning, however, that some sectors are heavily reliant on the superior speed of the land bridge, and as the alternatives are not capable of delivering the speed or the flexibility of the land bridge, this means that alterations to supply chains are necessary under those circumstances to make the alternatives work.

On the supply side, we tested our assumptions through consultation with the industry, and those consultations have been ongoing over the course of the last nine months. What we have found is that there is surplus capacity on all routes and there is a desire in the industry to meet emerging demand, which I described earlier as a commercial imperative. There is some support for a collaborative approach. We recommended in the report that we should test the extent to which participants in the industry can collaborate to provide greater coverage and greater frequency for users, and this met with some success in that there have been some announcements in regard to ferry companies operating on different days of the week to provide greater coverage.

We are operating in a benign charter market, so if additional capacity needs to be brought in, it is available in a reasonable time period. When we look at response times, which are dealt with in the table on the right-hand side, we can see four levels of response. First, the industry indicates that it has surplus capacity which is available immediately. Second, it indicates it can alter schedules to provide additional capacity and that is possible within a one-day to three-day time period. Third, it can redeploy vessels within the respective fleets, which can take up to a week. Fourth, it can charter in, and that process can take between two weeks and a month, depending on the circumstances in the market, the availability of suitable vessels and so on.

Turning to the case for State intervention, particularly in light of recent developments, we are asking is there a need for State intervention, and if there were a need, what would it look like. Our understanding is that it would require the State to go to the industry to provide the capacity that is needed, and that it is the self-same industry that is indicating clearly that it will respond in its own way and is capable of doing so. There is no evidence of market failure at the moment, and we have seen that through the variety of different responses that I have outlined. If there were to be intervention, there is a risk of market distortion and a risk of doing lasting damage as a result. There is a risk of breaching state aid guidelines and a risk of legal challenges, such as those that occurred in the UK when an attempt was made to intervene in the market. The evidence supports the view that the market will respond as I have outlined. The shipping industry is opposed to State intervention and the response of the shipping industry is demonstrably good, so the conclusion is that the case for State intervention has not been made successfully at this time. We fully acknowledge that, in extreme circumstances, State intervention may be required but our contention is it is not required at this time.

In summary, freight demand in January will be lower than normal because of economic considerations, because of the stockpiling that is currently ongoing and because of seasonal factors. Supply of capacity will be higher than normal because of the interventions in the market by the industry that I have mentioned, both from incumbents and from new entrants. The evidence shows there is surplus capacity on all routes. The market will be motivated to respond to emerging demand because of the structural issues in the market that I have outlined. State intervention is problematic. Holding out the prospect of State intervention in a functioning market is also potentially damaging because it creates an expectation and it can delay the spontaneous response of the market. However, importers and exporters must “ACT now”, and this “ACT now” phrase is an acronym for “assess, communicate and trial”, which has been part of an ongoing press and radio campaign that has been running for the last couple of months. We are asking importers and exporters to assess their current arrangements in order to be sure they will work as we go forward, to look at the alternatives and to assess those as well, to communicate their requirements to shipping companies so the steps that shipping companies are capable of making can be taken in advance, and to trial the alternatives and not leave that to 1 January.

To conclude, the recommendations in the report are that State intervention is not required and that we should maximise industry collaboration to overcome the challenges we face. That is a process that is ongoing and is part of the consultations we have been having and continue to have with industry. There should be scenario and contingency planning. That process is ongoing and we are involved regularly with the Department, teasing out different scenarios and planning for the unexpected to the extent that is possible. We have looked for a commitment from the shipping industry, and we have taken a different direction on this than in the UK. A capacity framework was put in place with the Department of Transport and we have gone directly to industry and asked it to prioritise vital supplies, such as medicines. The response was very favourable and a protocol has been put in place that will give access to officials from the Department of Health to shipping companies if there is a difficulty, and shipping companies have agreed to prioritise the response. We recommended a communications campaign and I have outlined that this is already ongoing.

We have recommended that we closely monitor developments in other member states and in related industries, such as aviation, to ensure that developments there do not place the maritime industry at a disadvantage. We have recommended that measures taken in those industries, and in other member states, should be applied in Ireland if and when they are applicable and beneficial here. We also recommend that there will be ongoing monitoring of market conditions. Such monitoring has been a feature for at least the last two years as we prepared for Brexit and when the Covid pandemic took an effect at the beginning of this year. We now operate a weekly monitor and update the Department with that information each week. We consult regularly and that was weekly with industry, shipping companies and ports. As many of the problems that we faced have been resolved, the meeting schedule has been extended so we now meet as required. Suffice to say, the monitoring of the market and our engagement with the Department on that issue has never been more intense. By way of information, I hold aloft the flyer that is being used to encourage importers and exporters to act now and take the necessary steps for assessing, communicating and trialling. That concludes my presentation and I am happy to take questions.

I thank Mr. Lacey for his presentation. I call on the members of the committee to ask questions in the order that they have indicated to me. As is normal, we will hear from members of the committee first and I call Deputy Richmond.

I thank both witnesses for the presentation, which is very similar to the report submitted to the Department. It would be helpful if we could have the Powerpoint presentation as it would make our follow-up work a lot easier. The movement of goods has been an issue since long before the referendum because people identified the need to focus on Ireland's direct shipping links with our biggest market that is continental Europe. A move away from the land bridge is something that would have always needed to worked on even if there was no Brexit.

I have questions on issues that were touched on in the presentation but I believe that we should use this time to go into a bit more detail about the issues that small business owners all over the country have conveyed to us as their public representatives. The delegation has spoken at length that there is sustainable capacity. Is there really roll-on, roll-off capacity? I was taken aback by the focus on the idea that space has been freed up due to the decline in the number of tourists. Is it sustainable to use that space? Please God, the tourism industry will be back and I know lots of people from the Continent who look forward to returning or coming to Ireland for cycling holidays or whatever. I would like the witnesses to allay my concern.

When we talk about the importance of roll-on, roll-off services and shipping to the Continent, it is not just about the destination ports. It is the ability to travel much further inland into new markets, particularly when one thinks of the resources that the Government has put into opening a new Enterprise Ireland office in Frankfurt in Germany. It would great to have new economic chanceries in all of the EU 27 member states and to really tap into the potential of the continental market but that requires long distance haulage to get goods to market in those places, which is an issue that is tied to the land bridge.

Mr. Lacey mentioned in his report, or perhaps I have seen it elsewhere, that there is the potential for delays to last up to 12 hours. To what extent has the IMDO engaged with the UK port operators such as in Holyhead, Folkestone and Dover? I ask because last weekend worrying scenes of trial runs were broadcast on television, etc., of Kent and other ports in the UK. Although the trial runs were the result of the impact of work done in France as opposed to the UK, there have been numerous media reports that the UK is not Brexit ready, particularly when it comes to exports and imports. The gridlock experienced at Dover, Folkestone or Portsmouth could be far worse than what has been speculated with Brexit. What is the knock-on effect on Irish exporters that are trying to get their goods to market, some of which must drop their goods at British destinations before continuing into continental Europe?

Mr. Lacey has mentioned the outreach that has been done with exporters in terms of encouraging awareness. I am concerned about the time pressure on fresh food exporters and seafood producers in Galway, for example, who only have a set period of time to get their goods to the fish markets in northern France. There is potential for a 12-hour delay with the land bridge and we know how long direct ferries take to sail across to France. What supports have the industry and the IMDO put in place to allay the fears of our exporters? It is all well and good talking about their need to diversify and consider other options but if either the land bridge or direct shipping is not the answer, then what is left for the exporters? Anyone who works in the fresh food, time sensitive area must be accommodated.

An awareness campaign was mentioned but I do not feel that, which is not a slight on Mr. Lacey. I have spoken to a lot of industry groups, chambers of commerce, exporters and SMEs and they are up against it in terms of dealing with the pandemic. We have often talked about Brexit preparedness in general terms. It is very hard for a small company that produces a niche product and perhaps employs three employees to also have a Brexit officer when its managing director is also the head of sales, head of human resources and maybe even the chief cleaner at times. They may think that the land bridge is fine at the moment but we all know that the situation will change drastically on 1 January. We all hope that there is a deal in the next day or two but the situation will change drastically, which has permeated the real discussion. How can we convince the people who are not in a position to appoint a Brexit preparedness officer that there is merit in direct shipping to their markets? I know that any exporter will tell anyone that their biggest issue is assuring their client and customer that a product will arrive on time. That level of reliability and guarantee is so important. When one considers all of the things like cost, price and standards it is the guarantee and level of importance that matter. The campaign for direct shipping needs to be backed up and tripled because Brexit is like a lot of things in that it is only until one experiences it that one realises all of the problems. We cannot ease off on getting prepared come the new year.

I want to ensure everyone has time to contribute so I ask Mr. Lacey to keep his responses as trimmed as possible yet take as much time as he needs.

Mr. Liam Lacey

On the issue of the return of passenger business to ferries and the impact that may have on the capacity of ferries to carry freight, we are very hopeful that there will be a significant return of passenger business because that is the lifeblood of RoPax services but it is somewhat unlikely in the first quarter. I make that point because it gives us some relief from the problem and the absence of passenger business helps. It is the desire of the industry and our desire that the passenger business will return as quickly as possible, and sooner rather than later, because it is needed. As that begins to happen, the industry is capable of responding by introducing more capacity. I have outlined four different responses by the industry and the introduction of additional capacity is the one that takes the longest time. That can be done. As the implications of the return of passenger cars to RoPax vessels and the timeframe become clear we can go back and rely on a response like that from industry.

I hope that the Deputy will agree that the response by industry over the last six months and the response that is planned from the beginning of 2021 are very significant indeed and will produce sufficient capacity to meet the needs of diverted land bridge traffic.

What is key is the comparison or substitute ability of other services for the land bridge. The key issue is that the land bridge is the fastest route to market.

That speed cannot be replicated on other services. In using other services, it is necessary to accept that compromises will have to be made. It is necessary to accept that there will be some changes to the supply chain because the speed of the land bridge cannot be provided by those other services.

There is another key ingredient, which is the frequency that is possible using land bridge services. On the Irish Sea, the services that make up part of the land bridge system are those that operate principally between Dublin and Holyhead and those that operate between Rosslare and Fishguard and Pembroke. On the Holyhead routes, there are up to eight sailings a day. On the Rosslare routes, there are four sailings a day. These 12 sailings give options to land bridge users seven days a week. We cannot replicate that with direct services to the Continent.

The use of direct services to the Continent will be more concentrated. There are fewer services. The total land bridge business is a maximum of 150,000 units per annum. The total amount of business using roll on-roll off, ro-ro, services to and from Ireland in 2019 was almost 1.2 million. Therefore, land bridge represents 12% of the total. It is impossible to produce the frequency for 150,000 vehicles that can be produced for 1.2 million vehicles. We have to accept that there will be less frequency on direct routes and importers and exporters will have to adjust to that.

I am presenting the facts and what represents the next best alternative to the land bridge. There are a number of different options, all involving changes to supply chain. The options are direct routes to the Continent. With a new entrant from January on Rosslare to Dunkirk, we get a model that is closer to what the land bridge delivers because it is delivering traffic into that part of France. Dunkirk is only 40 km from Calais. That is a notable addition. We have other additional services out of Cork into Zeebrugge, and we have Stena Line announcing an additional vessel in January between Rosslare and Cherbourg. These are all important developments.

Through those developments, we certainly have sufficient capacity. We have argued heretofore that sufficient capacity exists in the system because there are other services linking Dublin and Zeebrugge and Dublin and Rotterdam that rely mainly on unaccompanied movement of goods, but they are viable substitutes for the land bridge. Our call to the market is, if people want to protect their business, they should be aware of all of these options, that perhaps a portfolio approach to the range of services that they use is the most appropriate, and that they use different services as appropriate to protect against difficulties in other services and spread the risk in that way. Being aware of all of the different options gives choice to importers and exporters and improves frequency. If the speed of transit is increased, and it will be in using any of those other services, there are changes to supply chains that need to be made. That could mean developing buffer stocks on the Continent in warehousing, etc., to deal with the demand.

Turning specifically to the question of fast-moving perishable goods, and often high-value goods fall into the same category of needing to move quickly, the land bridge is categorised by the movement of perishable goods, which are often of high value. There is a difficulty there. The next best alternative does not overcome the difficulty but there must be changes in the supply chain if we are to overcome those problems. Therefore, a renegotiation of delivery patterns is absolutely embedded in the choice of any of the other alternatives. This is possible because we know that those alternatives for lots of different types of traffic are good substitutes. I accept that there is a problem with traffic. I mentioned it in my presentation. That is heavily reliant on the transit time of the land bridge because that cannot be replicated by the alternatives.

I was asked as well whether we are monitoring events in other ports, and we are. There is contact all the time, through ourselves and through the Department, on how matters are proceeding in other ports that are important to Ireland. We report on that regularly.

It is concerning that as we head into Brexit, there are trials taking place in UK ports and there is talk of disruption, etc., but to a great extent we expected that to happen. What is unclear is how long lived that will be and how quickly UK ports will return to normal operations, albeit with the requirement for customs controls and inspections.

I thank Mr. Lacey. I think we will be returning to some of those points.

I thank Mr. Lacey and Mr. Fallen Bailey for appearing here. That is probably the most relaxed report about Brexit. On some level, on listening to it, I would be very happy but I am not sure that I should be. Mr. Lacey has said that the market is sufficiently flexible. Obviously, this is something that Mr. Lacey is much more au fait with than I am.

Mr. Lacey spoke about the land bridge existing before the Single Market. I would argue that it is a far more complex world for imports and exports than it was at that time. Mr. Lacey also stated that there is surplus capacity.

Deputy Richmond and, I am sure, others will deal with how we have heard, from the National Audit Office in Britain, of the absolute lack of preparation. We have all seen the tailbacks. We have heard the worries that the Irish Road Haulage Association has. We also had the port companies before the Joint Committee on Transport and Communications Networks in the past while on the idea that there is a traffic management system that involves the port tunnel possibly being used as a slow-moving carpark that trucks just keep driving around until space opens up.

I welcome the fact that Mr. Lacey talks about communication with other ports. Does that mean we could deal with problems, such as the one that has been pointed out to us whereby Calais's IT system was prepared too quickly and does not allow for goods from this State coming through Britain as a land bridge? That seems like it will be a significant problem and will cause chaos on top of chaos.

In fairness, Mr. Lacey has spoken about a conversation with stakeholders and that there will be a need for adjustments to the supply chain. I want to know what exactly that has consisted of and who are the stakeholders. I assume that should be the hauliers, the ports and the ferries, but it also needs to be the business sector. In fairness, Deputy Richmond spoke about the fact that there are certain goods, particularly fresh food, that needs to be delivered within time.

I welcome the fact that there are new ferries for direct delivery, but sometimes the problem with them is the length of time they take. I would say many businesses involving almost every good operates a just-in-time scenario that is based on the speed of delivery available to them at present, and I am not sure that full preparations have been made. I want to know what conversations Mr. Lacey has had with all these stakeholders. I understand we do not know exactly what Brexit we will have but we know it is bad. Therefore, there will be a considerable operation relating to checks, difficulties, etc. I want to know what Mr. Lacey's plans are, what consultation has happened, with whom it has happened, what is prepared into the future to ensure we can mitigate whatever we can, and that we have some level of operability with imports and exports across Europe from 1 January.

Mr. Liam Lacey

I thank the Deputy. The UK land bridge existed before the Single Market. I take his point that imports and exports are perhaps a lot more sophisticated now than before. The technology we have for dealing with customs declarations and so on has also changed. I would make that point, however, that there is an opportunity to rely on technology to mitigate some of the problems.

I cannot comment on the detail of traffic management in ports, especially the traffic management system for the Port Tunnel and Dublin Port. The Deputy indicated that he had meetings with representatives of the ports and I am sure he has had responses from them on that matter. I am aware, through engagement with the ports over the past year, that they have been working tirelessly on this problem. Systems have been put in place, or are in the process of being tested, in Dublin Port and elsewhere.

With regard to communications with industry, since the publication of the report under discussion here we have spoken to representative groups, including IBEC, the Irish Exporters Association, the Freight Transport Association of Ireland, the medical devices and pharmaceutical industries, and groups that are linked to the Department of Enterprise, Trade and Employment, including business and innovation, where we took a session with lots of different stakeholders entering the conversation there. We also had stakeholders enter the conversation in the session we did with the Irish Exporters Association. That contact has been ongoing. In our normal work we engage with the groups to discuss these questions and to try to find the best solutions. On the issue of finding the solutions for individual sectors or individual importers and exporters, I am not sure that we can help to any great extent in communicating with them, but we can direct their communications to the ports and the shipping companies because they are the actors that can make a difference in this scenario. If importers and exporters are articulating new demands or different requirements, shipping companies are capable of making adjustments to the frequency and capacity of their services, but that conversation needs to take place. We have been urging that conversation, going back to a forerunner of the Assess, Communicate, Trial, ACT, campaign in 2019 and a campaign called Be Prepared for Brexit, which dealt with all of these issues. In the room on that occasion we had representatives of industry, importers and exporters. We were advising the same sort of approach - that one needs the actors who can make a difference to be talking to each other. We have been urging that.

On the timing of deliveries and the sophistication of supply chains, I understand that point fully, but I believe we must accept that if the land bridge is a lot slower and if we have to rely to a greater extent on direct services, then things change. We cannot replicate the speed of the land bridge using direct services. There is going to have to be adjustments in the supply chain and just-in-time systems. Just-in-time systems operate around the conditions that apply in different parts of the supply chain. If goods cannot be delivered any sooner than two days, is the just-in-time system into which those goods feed capable of adapting? Those conversations need to take place again. I hope this addresses the Deputy's questions.

Deputy Ó Murchú has a brief supplementary question.

With regard to technology, I am afraid that the solutions are not there. I want Mr. Lacey to response regarding the problems at Calais. I accept his point that there needs to be a renegotiation and adjustment of supply chains, but we have heard that sometimes part of the problem is that all the ferries come into ports here at the same time because that is what suits the businesses at the tail end. Perhaps the State intervention should force a proper conversation - perhaps force is the wrong term - around a renegotiation of what will work for businesses, ports, hauliers and ferry companies. It could be just a case that everybody is waiting until they see what happens, at which point it will be too late. Any intervention that the IMDO could make to that would be beneficial. Perhaps Mr. Lacey could respond to that, even if it is the case that the State needs to step up. I also want a response on the Calais situation, the IT systems and any other problems that may have been uncovered.

I ask that Mr. Lacey gives a brief response to that supplementary question.

Mr. Liam Lacey

We have had recent conversations with authorities, particularly in the French embassy, following up on developments in Calais. That happened within the past two weeks. We were reassured that progress was being made and that preparations were in good order. There was a degree of confidence expressed to me about the ability of Calais to respond. It is important to differentiate between new systems that are being put in place that are going to have teething problems as they are unfolded, and the long-term effectiveness of these systems. There is no question that on day one there is going to be significant disruption. I have never seen port development or new systems being introduced that did not cause that problem initially. With time, practice, and readjustment, and given the necessity to make these things work, we can be more confident that these issues can be resolved than the Deputy is expressing. It is in the interests of all parties to resolve them. In the end, if one is introducing barriers to trade, customs inspections, and health inspections and so on then it is going to take longer to progress through a port. This is a fact that has to be accepted. Although all of these attempts are made to mitigate those effects through technology and the introduction of new systems, it is the case that with these new procedures it is going to take longer to progress through ports.

I thank Mr. Lacey for his presentation. The IRHA has taken issue with the report. I am not going to go into that now because I suspect that there are others here who will do that. I have two secondary questions in my capacity as a Deputy for Dublin Bay North, which is adjacent to Dublin Port. The first question was also referred to in earlier contributions, which is the traffic management plan in and around the port. I believe that Mr. Lacey said he did not want to comment on that and perhaps it is for other agencies, but I am aware that Mr. Eugene Drennan from the IRHA will say later at another Oireachtas committee that we need a new entity to deal with the traffic congestion issue. Currently there is a traffic management group under the aegis of the Department of Transport, which includes representatives from Transport Infrastructure Ireland, Dublin City Council, An Garda Síochána, the Office of Public Works, the Revenue Commissioners, and the Dublin Port Company. Does Mr. Lacey have a view on that? I believe it is too late to set up a single entity. This problem is on our doorstep. We need to proceed with the traffic management group that is in place to deal with any problems arising in traffic congestion. If it is not a matter for the IMDO then that is fine, but perhaps Mr. Lacey will comment on the proposal from the IRHA for a single entity.

This is a secondary question in terms of the overall issue we are dealing with here. It relates to Dublin Port. Does the office have a remit for the physical capacity of Dublin Port from the point of view of space and future development? The residents of Clontarf, whom I represent, have had a very uneasy relationship with Dublin Port, in particular due to the proposal to infill 52 acres of Dublin Bay. Does the IMDO have a remit for the future development of the ports from the point of view of physical space?

I saw a newspaper article again this week about the possibility of developing Bremore as a port. I recall the late Deputy, Seán Dublin Bay Rockall Loftus, calling for the complete relocation of Dublin Port to Bremore. I would not have gone that far. I am interested to know whether the office has a remit in that regard and if the witnesses think the Dublin Port Company has enough space for anticipated future development.

Mr. Liam Lacey

I thank Deputy Haughey. Regarding the traffic management plans and their detail, with respect, I am not in a position to answer the question but I have general comments that I am happy to make. Dublin Port has developed satisfactorily and has met economic needs in the Dublin area, the hinterland around Dublin and the demands of the national economy for many years. The port has ambitious plans for the future that will take place within the general footprint that is available to Dublin Port at the moment. Significant efforts have been made at Dublin Port to move non-essential activities outside the port to free up the land in the port for what one might call core trade purposes. That has been a welcome development. Overall, we have seen these plans introduced effectively and implemented well within Dublin Port. The port has been efficient in the way it has gone about those things.

These are my observations as an outsider. I have a degree of trust in Dublin Port that it can deal with traffic management issues and that the people in Dublin Port are best positioned to engage in that activity. I do not know the detail of Mr. Drennan's proposals on a single entity to deal with the traffic issues in Dublin Port. Dublin Port and the people in it are very experienced and are and should be highly motivated to resolve this problem. I think that should be the locus of attention for this problem, but I would welcome the proposals being put forward by Mr. Drennan, insofar as I would be very happy to read them and see exactly what they entail.

Regarding the physical capacity of Dublin Port and its future development, a lot of the development in our ports in recent years has been driven by some of the tenets set out in the national ports policy. The policy has tiered our ports. We have three tier 1 ports in Dublin, Cork and Shannon-Foynes, two tier 2 ports in Waterford and Rosslare and then ports of regional significance. The national ports policy has had the effect of generating economies of scale in the tier 1 ports, and has done so very effectively. Volumes have grown very significantly in the tier 1 ports as a result of that concentration. In terms of generating efficiencies and economies of scale, I think the national ports policy has been effective. The policy is going to be reviewed in the next year or so, and that is the appropriate time to look again at the distribution of capacity around the ports in Ireland. It is encouraging that we have alternatives being put forward by the Port of Drogheda on the Bremore project. We see significant developments on the drawing board in ports like Rosslare and there are developments under way in the Port of Cork. As the sustainability agenda takes more of a hold in terms of how maritime transport and road transport happens in Ireland, the importance of regional ports and ports outside of Dublin may very well increase.

These are general comments. The question the Deputy asked requires much more detailed analysis. I am quite sure that that will be provided for in the review of the national ports policy when it takes place.

I thank Mr. Lacey. I do not think it will come as a surprise to him that it was I who asked that he would be requested to come before the committee today as a witness and to answer a few questions. Before I do that, we are also joined by Deputy Verona Murphy. I will cede to her first to pose questions to Mr. Lacey.

If it is okay with Mr. Lacey, there might be a little back and forth as opposed to just one question.

It might be okay with Mr. Lacey, but it might not be okay with the Chair.

I will not take long.

Deputy Murphy can pose questions and allow Mr. Lacey to respond. They can let me direct the conversation.

That is perfect. Could Mr. Lacey tell us about his previous role before he joined the IMDO?

Mr. Liam Lacey

In a previous life I was managing director of the container and terminal division in Irish Continental Group. Before that, I managed freight services in Irish Ferries and was responsible for Irish Ferries ro-ro freight business. I spent more than 30 years involved in the shipping industry at a senior level with responsibility for market development and the development of infrastructure.

I thank Mr. Lacey. I do not want to prolong the agony.

We are focused on the evidence on the preparedness for Brexit.

Absolutely. In regard to that, I wish to ask about the assess, communicate, trial, ACT, campaign following on from the IMDO report. As a freight manager in Irish Ferries, who did Mr. Lacey engage with as a customer?

Mr. Liam Lacey

I am sorry, but I do not understand Deputy Murphy's question.

Who did Mr. Lacey mainly deal with in that role? Was it hauliers?

Mr. Liam Lacey

Does Deputy Murphy mean in my previous role?

Mr. Liam Lacey

The entire freight market.

I do not want to-----

It is pertinent to the report.

Deputy Murphy should put her series of questions and then I will allow Mr. Lacey to respond. He is not a witness in the sense that she could ask questions like that.

The relevance is that Mr. Lacey is quite experienced and the IMDO report certainly talks about capacity and it recommends that there is an ACT campaign, which refers to assess, communicate and trial. The communication is with the importers and exporters who never deal with logistics. They deal with logistics companies, which are the hauliers that the IMDO never engaged with in its review at any stage. The report itself talks about capacity on lo-lo ships. It says on page 8, part 4, that there is sufficient capacity on direct ro-ro services to handle diverted land bridge traffic. Mr. Lacey talks about the fact that we had the land bridge before we had the Single Market. I wonder what the volumes were then because the one point that is consistent about the IMDO report is that the volume of 150,000 units did not change through Covid. There was no intimation that it had declined. Mr. Lacey said himself earlier that it would be 150,000 per annum.

Does Deputy Murphy have particular questions to pose.

The question is what engagement Mr. Lacey had outside of operators that are currently in the market here. Who did he engage with? You are aware, Vice Chairman, that we have DFDS coming into the transport committee later. The company says its engagement with the IMDO was pretty negative. Mr. Lacey might clarify what engagement he had with DFDS on the requirement for services.

In addition, I am quite concerned about Mr. Lacey's call for support for a collaborative approach. Will he clarify with whom it is proposed to collaborate because I am concerned about that from a competitive perspective if commercial operators are to be completely independent? As he can imagine, this would have an effect on those who use their services. Will Mr. Lacey clarify those points? If possible, I will then come back in again.

Mr. Liam Lacey

To deal with the collaboration issue, there are regulations in place at an EU level that allow shipping companies, particularly those involved in deep sea trade, to collaborate in the provision of capacity. This is a phenomenon in the airline industry as well. This may only be done where it results in an improvement for customers and the companies involved must abide by competition law. Where the total system can be improved through collaboration in a way that delivers benefits to customers, that is allowed. As I said, there is precedent for that, particularly with regard to deep sea trade. We were interested in understanding the extent to which that can happen in the Irish maritime industry within the confines of what is permissible under competition law.

Will Mr. Lacey address my other questions?

Would the Deputy like to restate any questions she feels were not answered?

Was there engagement with the operators not included in the report, such as DFDS, which are to due before the committee later and which have said they have very negative engagement with the IMDO on the provision of service to Ireland, if required? Perhaps Mr. Lacey will clarify that. Did he speak with representatives of the IRHA? For the benefit of the committee, there are only three groups that use the ports: shipping companies, container companies and hauliers. There are two modes of transport involved: shipping and haulage. I do not believe Mr. Lacey engaged with the IRHA in conducting his review.

With regard to the ACT campaign launched on foot of this report, every importer and exporter had to go to their logistics provider for a solution. It was at that stage that the IMDO report was released. There was very negative engagement on the fact that the report said we had sufficient capacity and that no intervention or extra services were required. Vehicles were being left behind as direct services left both the week after the report was released and the week before. They were not able to access direct ro-ro services to mainland Europe. This contradicts the report and I ask for comment on that.

The Deputy has put a number of questions. Mr. Lacey may also want to respond to her assertion.

Mr. Liam Lacey

With regard to engagement with stakeholders who are interested in operating in the Irish market, such activity takes place all of the time within the IMDO. The Deputy will have seen the response within the market over the past year. Our role is to ensure there is a level playing field and that new operators can enter the market and compete pari passu with incumbents and that they are at no disadvantage. The supports we offer obviously do not extend to providing commercial advice or anything like that, but they extend to making information available so that a would-be new entrant to the Irish market can make a judgment as to the prevailing market conditions. I am not at liberty to comment on the engagement we have all of the time with companies that are interested in establishing in Ireland or in adjusting the services they offer in Ireland because those matters are commercially sensitive and we have to protect that information. I am not sure what lies behind the Deputy's question but we deal with all comers fairly and honestly. We create a picture and present information to enable them to evaluate opportunity. We do this in respect of all inquiries we receive.

I will ask some questions myself and, if we have the chance, we will get back to all other Deputies. Does Deputy Harkin wish to speak? No. That is fine. As Mr. Lacey will be aware from our previous interaction, I was concerned about the report when it was published. I was of the view that it was overly complacent with regard to the real pressures that would come on the land bridge in even the best circumstances and with regard to its complete disruption in the worst circumstances. I was concerned that we had not prepared for that.

I have a number of questions. With regard to the recommendations Mr. Lacey has again presented to the committee, other than the communications campaign, the general recommendations basically amount to advice to watch and wait. We have dealt with various stakeholders with regard to Brexit and there does not seem to be anything proactive in these preparations. He asserted that we cannot replicate the 12 daily sailings to the UK, but we could replicate quite a number of them and have done so. Since our previous interaction with the IMDO, the number of scheduled direct sailings from Rosslare Europort has quadrupled. That indicates that there is significant market demand. There is also a new player, although it was indicated that the existing players had sufficient capacity. That is my understanding of the report. Despite this, DFDS has entered the market with an initial three new vessels that will sail from Rosslare to Dunkirk from 2 January, as Mr. Lacey indicated. There is obviously demand. I spoke to representatives of DFDS on the day it launched this new schedule of sailings and the company had received immediate inquiries, including a request from one very big logistics company for four containers on every sailing. There was obviously very significant unmet demand. I am glad these new services have come to meet this demand but I am still not convinced there will be sufficient capacity in the event of significant disruption, which may still potentially arise.

To move on to my final point, in Mr. Lacey's presentation he said that it is not in the UK's interest for the Dover-Calais route not to work. That is self-evident but it will not be direct action by the UK authorities that stops the route. If, as has been indicated today, agreement on fisheries remains a real pressure point, there is at least the potential for French fishermen to disrupt the unloading of British ferries at French ports. There are real issues that have not, in my judgment, been substantially addressed in the report or in Mr. Lacey's presentation. I am interested in hearing his comments on that.

Mr. Liam Lacey

In the Vice Chairman's opening comments, he used the word "complacent". I do not accept that in any way. We have been working non-stop on these issues since the commencement of the Brexit problem and even more intensively as deadlines approach. The final deadline is now approaching. I assure the Vice Chairman that there has been no complacency. Our approach has generally been to allow the market to respond and to steer clear of State intervention. My view is that this is a good approach and that it has produced the results we have seen. What would the circumstances be like had the State intervened to support a service, an individual operator or a group of operators? What would the response have been from the industry, which has invested heavily and which is prepared to continue to invest and to respond to market demands?

That would have caused a chaotic response and we could have had grave difficulties. The spontaneous desire of an industry and of participants in that industry are lost in order to solve the problems of the market in such a scenario.

On being proactive, we have been proactive all of the time in the advice we give to the Department and the Minister and in our engagement with the industry, which has been ongoing over the past two or three years. There has been a non-stop engagement over that period to try to understand, tease out and address problems. All of this was compounded by Covid-19 since the beginning of 2020 and that intensified that communication with industry. There has been no lack of communication with industry, therefore. Our role is in the maritime industry and we have been engaged in a concerted way with the maritime industry throughout this process. Through colleagues in the Department, we also have access to a broader range of issues that are involved in the Brexit problem that relate to what is happening with Revenue, clearance procedures and engagements with other agencies and Departments that have concerns and issues. On all occasions, those issues are processed and we try to find solutions and move on. That has been part of our work in recent years and it continues to be a significant part of our work.

On the new entrant to the market, I am delighted that has happened and I have expressed my views about that. The news of this new entrant immediately went up on our website and it was pushed out to the market we serve and the contacts we have. The new service offers a different solution that brings traffic closer to Calais than previous services have done. The promoter of the service is working with the assumption that this will capture a significant chunk of land bridge business. If that is the case, we wish it well. It has been able to enter the market because there is a level playing field and because it will be able to compete on the same basis as everybody else. We have tried to ensure that this remains the case. That has resulted in this new endeavour of the DFDS ro-ro service to Europe coming into the market and as I said, we wish it well.

There is an important issue with the substitutability of some of the services that operate on direct routes to the Continent. There is a concentration on ro-ro, as if it is the only mode of access to the Continent and as if driver-accompanied solutions to the Continent are the only solution. It is not because we have seen higher growth in recent years in the use of unaccompanied trailer services to the continent. That growth has been satisfactory and at a faster rate than ro-ro services and the same is true of lo-lo services. These alternatives provide solutions and I am not saying this is any partisan way. I am just laying the information before the committee. These services work and it is in the interests of Irish importers and exporters to know that these services are there and to evaluate whether these services can make a contribution to them meeting the needs of their customers.

I will go back to the issue of overall capacity. Capacity is a function of the volume of a vessel and the frequency of sailings. It is a mathematical equation so it is not an entirely difficult thing to calculate capacity. When that is matched with demand, the evidence is there as to whether there is surplus capacity and the extent of the surplus capacity. We have carried out that analysis. When I spoke about the range of direct services to the Continent, I outlined that there were four different operators at the time of writing and now there are the additional services that we have spoken about. When one looks at capacity across those services and when one adds in what is planned for January, there is sufficient capacity to carry the land bridge business. That is an irrefutable fact. The question remains as to whether the frequency and the points of arrival and departure of those services are sufficient to satisfy the market. If these new services can do that, they stand a good chance of doing well in attracting land bridge business and if they do not, there are other alternatives.

When one combines these alternatives and when one encourages importers and exporters to be aware of the range of solutions that are available, that is when Irish importers and exporters are most protected. Putting a portfolio of solutions together with one solution countering the risk of another makes for effective solutions. That is what we have been encouraging for quite some time, going back to 2019 with the Getting Ireland Brexit Ready campaign, the launch of which at least one member of the committee attended. I hope that answers some of the questions.

I thank Mr. Lacey for his comprehensive reply. I must say it is novel for a presentation to a committee to say that inaction resulted in the outcome that we all welcome. Many a civil servant who has come before committees such as this would be delighted to be able to say that doing nothing is the thing to do. I am not saying the Irish Maritime Development Office did nothing on this but not having a new positive outreach to new market entrants resulted in market entrants. From what I understood of our initial discussion and the initial report was that there were sufficient players in the market to expand their capacity. We now have a new player in the market and the commercial reality of that and of the significant investment it has made, would underscore a different reality.

Mr. Liam Lacey

That is an important point and I would like to come back on it.

Mr. Liam Lacey

I did not say we do not have engagement with would-be new entrants to the market. That happens all of the time and we welcome that. We encourage new entrants into this market and we present them with the reality of the market conditions that exist. After that, there is a commercial choice to be made by those new entrants but this happens all of the time and it is part of our ordinary activity. Those discussions are surrounded in issues of commercial sensitivity so we do not speak openly about this but that is a seminal part of the work we do in this organisation.

I greatly welcome that and I thank Mr. Lacey for that clarification. It was my misapprehension that the Irish Maritime Development Office's initial view was that there were sufficient players in the market and that they could ratchet or ramp up their volumes. In fact, Mr. Lacey indicated on the last occasion that they could even switch vessels from the UK to continental markets if that was what the market demanded.

Mr. Lacey said there will be a need for a renegotiation and for adjustments to the supply chain. I am back to the same question of whether the State intervention and the involvement of the Irish Maritime Development Office should have a more proactive and collaborative approach to ensure there is a conversation between the ports, ferries, hauliers and representatives of business, as much as that can be done. We all accept there will have to be changes and moves but we need to ensure that everybody can get enough out of it and that is accepting that some of these measures will have a cost factor and other factors will be involved. If we were to listen to the port companies previously, they did not want to get into the conversation but they said that they had engaged with the ferry companies and it suited the ferry companies to operate at the times they operate, which creates difficulties for ports and hauliers in the sense of three or four ferries all arriving at the one time and the gridlock that would cause in a normal time.

If we are talking about 1 January on, it could be absolute bedlam. It is a matter of ensuring that those conversations happen and that the best plans can be put in place. Could I get Mr. Lacey's opinion as to whether that requires State intervention and his opinion on anything the IMDO could do to facilitate that?

Mr. Liam Lacey

I think I have dealt comprehensively with the issue of the renegotiation and adjustment to supply chains. If one is stepping outside a known system, namely, the land bridge, that has a transit time of, say, 18 to 20 hours, all the alternatives are slower. One therefore needs to work around that by renegotiating supply chains and making the necessary adjustments. To do otherwise would be just to bury one's head in the sand and hope it will be okay. We are very much of the opinion that importers and exporters need to know the realities, including the realities of the alternatives that are available to them, so they can make those choices. We have been advocating this for a very long time.

In the report a recommendation is made on scenario and contingency planning. In that process, and with the Department, we have looked at and continue on an ongoing basis to look at what might happen. If the market does not respond in the way in which we want it to respond, what happens then? It is entirely unhelpful, in the context of a functioning market, to set out a priority that there will be State intervention because the market is demonstrably capable of doing its job. I do not say this because of any misunderstanding of how the shipping industry behaves. I am very familiar with the shipping industry. I know it is driven by commercial imperatives and not by a sense of altruism. It will do what is in its interest from a commercial point of view, and it is in the interest of shipping companies to follow demand and to service that demand. If that demand is not being adequately serviced or if there are superior ways of addressing the demand, new entrants are free to come in. That very much characterises the response from DFDS. There is an operator that feels it can provide a better solution than the solutions currently available. I assume that that is the premise of its business plan, that this will be successful because it will do things better and differently from current operators. If that is the case, it will succeed.

As for the operating times of ferries, and in response to a question from Deputy Verona Murphy earlier, I alluded to a previous career with Irish Continental Group. With the issue of scheduling and the timing of arrivals and departures, one deals with mobile assets. These things can be changed, but one changes them in response to market conditions. It is a particularly difficult thing with ro-pax services, where the interests of both passengers and freight are combined on one single service and there is an attempt to strike a balance that will meet the requirements of both markets. It is less difficult with freight-only operators, which can attend to the singular requirements of a freight market without having to consider the requirements of a passenger market. Again, my experience with the market is that the times that deliver most for consumers are the times during which shipping companies operate. There is no logic in suggesting they would want to do otherwise. They operate at times when the demand is at its maximum and they satisfy the greatest number of customers, whether freight-only customers or a combination of both freight and passengers. I hope that helps with Deputy Ó Murchú's questions.

I will take a brief supplementary contribution from Deputy Verona Murphy. We have a few minutes left only.

Again, I believe Mr. Lacey is disingenuous when he says the report was compiled on the basis of capacity.

We will avoid using the word "disingenuous". The Deputy might say Mr. Lacey was mistaken.

I believe "disingenuous" is the word on the basis that the engagement-----

I ask the Deputy not to use that word.

Fine. Mr. Lacey should have engaged with the hauliers. They are the people who use the services. He said clearly that his remit is marine and maritime. Those ships are used by both passengers and hauliers, who facilitate the exporters and the importers. I think he is absolutely correct in his assertion about the report. I do not think there is a defence to it. It was so negative in what it outlined for the market and detailing the capacity, which was not what the actual market dictated, which were the logistics experts, the hauliers-----

Does the Deputy have a question for Mr. Lacey?

No, I do not because I have not got any answers to the questions we have asked.

If no other Member is indicating, I thank Mr. Lacey sincerely for his presentation. I ask him to forward on the slide presentation and we will circulate it to all Members. I thank Mr. Fallen Bailey for attending in support. I wish them and all their colleagues a very happy and, I hope, a very restful Christmas.

Mr. Liam Lacey

I thank the Chairman for those comments. If there is anything else we can do to help or any information we can provide, please let us know. We would be happy to accommodate any such requests.

I thank Mr. Lacey. I do not think there are any other issues, so I now adjourn the meeting until the agreed next meeting, which will take place on Wednesday, 13 January 2021. I thank the Members and wish them all and our staff a very happy and restful Christmas too.

The joint committee adjourned at 10.57 a.m. until 9 a.m. on Wednesday, 13 January 2021.