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Message to the Minister - Cost of Not Going Ahead with Project

posted Mar 30, 2011, 6:31 AM by Richard Cliffe
This news item is our message to decision makers who are clearly agonizing over what decision to announce tomorrow - the drop dead date for a decision on the IOS ferry Project (key tenders expire).
 

Harbour Funding.

The case for funding the harbours is largely driven by regulatory requirements (safety and security).  We know that the IOSSC consider operations from Penzance South Pier to be highly compromised by inadequate facilities and severe overtopping.  An accident on either Pier could easily see severe operating restrictions imposed by the HSE which would affect the economics of the route.  We believe IOSSC require the improvements proposed for Penzance before investing in any fall back vessel solution.  We have not seen an alternative solution that costs less which offers a credible sea defence solution.  The loss of the £11.75 million EU funding has to be a key consideration (due reallocation in Jun 2011 we believe).

 Vessel.

The alternative to a publicly funded vessel is naturally a private funded solution as proposed by IOSSC.  Privately funded should be the default but the IOS route is an example of market failure – it is a borderline uneconomic ferry route.

The privately funded solution, with or without some Government help, will result in a ferry solution that is:

  • Smaller (reduced passenger capacity ~320 verses 600)
  • Slower with 3 hr + verses 2 hrs 40 mins crossing (12.5 v 15.5 service speed)
  • Poorer ride quality (shorter, lighter vessel which will bob about more)
  • More weather restricted (not designed for open ocean route)
  • Risky for Class B MCA licensing (due to design and necessary hull mods)

 The IOSSC proposal costs approximately £13 million for 2 second vessels.  To make this happen the IOSSC have to raise a large deposit and borrow perhaps as much as  £10 million  - presumably in 2 phases (one loan per vessel).

A loan for the ferry is conceivable with repayments of perhaps £600K to £750 K per year depending on terms.

A further ~£5 million loan for the freight vessel raising repayments to well over £1 million a year is impossible given historic cash flows/profitability.

There has to be a risk that the Company will not be able to borrow ~£5 million of the proposed ~£10 million.  There is also a risk it will struggle repaying the loan for ferry if there is a wet and windy summer season causing frequent cancellations or reduced custom.

 

Economic Impact on West Cornwall

The IOS is the flagship tourist destination in West Cornwall.  Over 100,000 people visit the Islands each year and as a result tourism accounts for perhaps 85% of the Islands’ economy.  Penzance and West Cornwall benefits from this industry because the visitors and all the goods and services to sustain them are provided from or through West Cornwall and especially Penzance.  The prosperity of West Cornwall is affected by what happens on the IOS because:

-          Visitors to the IOS often have to stay overnight in West Cornwall (mainly Penzance) on inward and outward journeys.  They are a mainstay for the hotel/ guest house/hospitality industry because the IOS tourist season is long (Apr – Oct) and the visitors are discerning and generally have deep pockets (it is expensive to holiday on the IOS).

-          The IOS is a popular day trip for holiday makers to West Cornwall.  It is a reason for visiting West Cornwall rather than somewhere else.  The ferry is critical to this market because it offers an inexpensive ticket (£30 return in 2011) verses £85 on Skybus – it is an enjoyable and inexpensive day out.  There is enormous potential to increase this market with a better vessel and terminal facilities (the current Scillonian is notorious for seasickness in anything but a calm sea – a larger longer vessel should give a much improved ride).

-          Many visitors to IOS add on extra days to their journey in Penzance which is a natural base for exploring the Penwith Peninsula. Such visitors visit St Ives (Tate Gallery etc), the Minac Theatre and many other attractions in Penwith.  They will often visit the Eden Project on their inward or outward journey (1 hr by road from Penzance).

-          There is extensive business to business trade between Penzance and IOS which covers the spectrum from large building firms to tradesmen (sole traders).

-          Penzance is the nearest significant retail centre for the IOS.  Retailers of larger items like furniture and carpets are especially dependent on IOS custom.

-          Penzance is an important communications hub.  IOS visitors help justify the rail sleeper service from London and the retention of Penzance as a mainline station rather than a branch line.

It is because of the many economic links between the Islands and Penzance that businesses in West Cornwall overwhelming support the investment in Penzance Harbour despite the compromises necessary. Despite threats of a buoycott by objectors (an empty threat as it turned out) over 120 local businesses have publicly declared support for Option A (Penzance Harbour development) – the list is attached.  People of working age recognize the important of the ferry link to the economy of Penzance which explains nearly 800 letters of support to Cornwall Council planning staff and a paper petition with over 3000 names collected in just 6 weekends in a Penzance shopping centre in Jan/Feb 2010 (2500 names can be seen on-line on Cornwall Council’s website).  The “Future Penzance” facebook site www.facebook.com/afutureforpenzance which was created to support Penzance Harbour developments and other key investments has over 4200 supporters.  Local concerns about the future of Penzance (Ghost Town Penzance) have been expressed here ……..http://www.youtube.com/watch?v=iOhzKsB9IK4

The future of Penzance Harbour is another consideration.  It has been in a process of gradual decay for decades.  It raises just about enough revenue to cover operating costs but enough to cover investment in modern facilities for ferry passengers or visiting sailors.  It has greater potential and the proposed Government/EU grant guarantees its future for at least 25 years and perhaps longer.  Historic harbours are notoriously expensive to maintain and there are many in Cornwall that are being lost to the sea because they have no economic purpose (Mullion is under ‘managed retreat’ because the National Trust cannot afford to maintain it).  Keeping the ferry service at Penzance and providing a vessel likely to popular increases harbour revenues (there is small harbour fee per passenger) and provides income to maintain the Harbour against the relentless attack of the sea.

 

Political Risks

The IOS Ferry Link is not a party political issue from the perspective of local individuals.  Individuals of all political persuasions are represented in groups for and against it.  However failure of the link will locally be attributed to the Lib Dem MP and Lib Dem Cornwall Council councillors are perceived as having used the project like a political football.  The equivocal stance taken by the local MP saw his support dramatically reduced at the general election (nearly 10,000 cut from majority). 

The ‘problem’ of the IOS lifeline is unlikely to go away with a privately funded solution:

  • The BIH helicopter service is likely to cease later this year following sale of the Heliport.  There is a risk of BIH going into administration if sale fails.  This outcome was admitted when the BIH Chairman admitted to a meeting of Penzance Town Council on 14 Mar 2011 that “there will no helicopter service at all, anywhere, if this sale does not go through”.   
  • The problem of Islanders getting on and off the Islands in winter will become much more common with no helicopter service.
  • The proposed second hand ferry will inevitably have significant weather restrictions.  It was not designed for an open ocean ferry route.  Cancellations in adverse weather are likely to be common.
  • Adverse summer weather (like 2008) could see a thousand plus holiday makers stranded on the Islands with Skybus unable to fly and the vessel unable to sail.  When it can sail it will have difficulty coping with any backlog due to its small capacity.
  • Problems with IOS transport will quickly damage the vital Tourism Industry both on the Islands and within West Cornwall.
  • A passenger ferry which operates in calm summer weather only is not a ‘lifeline’ service. 
  • If the IOSSC ferry solution does not work well then phase 2 (freight vessel) cannot happen.  There could be a need to return to Route Partnership proposal.
  • Any significant and sustained drop in tourism activity resulting from travel problems for the IOS will reflect on the Government – especially with the emphasis on economic growth.

 

Problems with the privately funded solution will all become very obvious before the next General Election.  As a minimum the lack of a winter service and reduced summer passenger capacity will have kicked in.

Alternatively the Minister could have launched the new Route Partnership vessel in 2013 and rightly claimed the Government has made a vital strategic investment in one of the UK poorest regions and provided a reliable lifeline service to a remote Island community for the next 25 years.

 

Dick Cliffe

Coordinator

True Friends of Penzance & IOS

Tel. 01736 331734

 

 

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Richard Cliffe,
Mar 30, 2011, 6:40 AM
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