The outlook for the leisure marine sector

Shoosmiths hosted one if its best attended Shoosmiths Aviation & Marine Breakfast Association (SAMBA) webinars on 25 February.

Joined by representatives from industries across the marine spectrum (boatbuilding, finance, insurance, marinas and the RYA) Elliot Bishop and Sarah Fairweather discussed the impact of Covid and Brexit on the leisure marine sector in particular and the outlook for the coming year.

The challenges faced

Adrian Powell, General Counsel of luxury yacht builder Sunseeker International, said there was a noticeable slowdown in orders, particularly at the large end of Sunseeker’s model range, immediately after the EU referendum in June 2016, which continued through the remainder of 2016. The quantitative easing programme announced by the UK government in August 2017 to mitigate the potential economic impact of Brexit and the reduction in the value of Sterling, then helped drive a strong for-ward order book in 2017 and 2018. Forward orders started to slow in 2019 but sales remained strong. Brexit was eclipsed by Covid in 2020, which as with many companies, had a sudden and serve impact on Sunseeker’s business. In the interests of the safety of its employees and to reduce demand on the NHS, Sunseeker took a decision to cease its operations completely during the first lockdown (April 2020 to July 2020). After implementing a robust COVID Safety Management System and with strong support from its shareholders, Sunseeker embarked on a controlled restart of pro-duction activity from July 2020 onwards.

General demand for new product held up well over the summer of 2020 and in to 2021, notably from the United States. With successive lockdowns continuing into 2021 production challenges remain, particularly in terms of labour availability and disruption in supply chain. It is difficult to assess at this stage how much Covid restrictions might have masked the supply chain disruption resulting from Brexit driven customs controls. With the UK’s withdrawal from the EU and the end of free movement, Sunseeker anticipates that labour availability could continue to pose a problem when the world re-turns to near normal. There are however positive underlying indicators for an early post Covid recovery and reasons for the industry to be cautiously optimistic for the future.

James Crew, sales director of Close Brothers, agreed that while Brexit did have a slight dampening effect, it was Covid that had the most significant impact logistically. Finance enquiries for all types of craft in the UK continues to be surprisingly high and had remained relatively steady during the lockdowns, but overseas (the Med market) interest was hampered by travel restrictions and the practical difficulties in arranging surveys. This had resulted in a few clients delaying or cancelling proposed purchases. He conceded though that the UK market was still not without issues due to some new boat delivery delays and the lack of preowned inventory available. However, he remains optimistic for the forthcoming season and beyond.

Mike Wimbridge, managing director of yacht insurers Pantaenius, described how the impact on the wider insurance market of the devastating hurricanes in 2017 had resulted in many firms simply stepping away from writing yacht insurance or only looking to write business on vessels valued over $10m. As a consequence, insurance capacity shrank virtually overnight and increasing M&A activity could reduce the choice of broker even further in the UK. Brexit hasn’t helped either over the last year and “uncertainty” remains the keyword. Covid has further disrupted the insurance sector and since many owners have been unable to get to their boats, the likelihood of previously incurred claims being notified, particularly for those based further afield such as those in Greece or Spain for example, is bound to increase.

Jon White, general manager of The Yacht Harbour Association (TYHA) also noted the far more significant impact of Covid (especially on outlying marinas that rely on visitors) on meeting the needs of their tenants, employees, customers and contractors. TYHA has taken steps to help their members in the UK and overseas understand the rules, follow Covid safety protocols and find solutions to the problems their businesses faced. Continuing maintenance operations so marinas could keep on looking after customer’s boats was essential. Indeed, many marinas did not furlough any staff during the last lockdown, keeping a full complement on board to prepare for the coming season. Brexit has had an impact only in the sense that many south coast marinas in particular have faced questions from customers about HM customs procedures and VAT status of boats.

Howard Pridding, director of external affairs for the Royal Yachting Association, (RYA) outlined the diversity of his organisation. The RYA is the national governing body for the sport of sailing and windsurfing and has responsibility for the GB sailing Team as well as serving 105,000 personal members, 1,500 affiliated sailing clubs and running a training and qualification business with 2,400 recognised training centres. Covid quickly had an impact across this diverse range of interests; lockdown stopped all boating activity, members could not access their boats, clubs had to close their doors completely and training centres, along with the staff, many of whom are self-employed, were also affected. The RYA’s elite sport activities were also impacted.

However, Howard lays the more significant ongoing problems that will be faced by recreational boaters firmly at the door of Brexit. Those include customs and VAT issues (such as potential double payments) surrounding private boats as well as recognition of RYA qualifications outside the UK. The full implications of the Schengen Area rules for seasonal cruisers who are now, in effect, third country nationals since Brexit, have yet to sink in for many individual owners. Similarly, the full impact of new border controls, both in the UK and the EU have yet to be felt.

Reasons to be optimistic

The travails of Brexit and Covid in particular have forced the leisure marine sector to become more flexible and agile, re-think marketing strategies and in some senses have had a positive impact. The vaccine roll out and the likely emergence of the promised V-shaped economic recovery has definitely given hope that there genuinely is light at the end of the tunnel. From the finance and insurance sectors their contribution is to be consistent to facilitate that recovery.

Despite many boat shows being cancelled, Sunseeker, Close Brothers and Pantaenius also reported a growing acceptance of “virtual boat tours” and all noted positive signs of a good underlying general demand as new boat enquiries increase. Sunseeker has also developed local showcase sites, often in conjunction with other luxury goods suppliers, and increased their use of on-line advertising, employing digital media and live streaming to launch all their latest new models, which has been well received.

However, it’s the obvious desire to be back on the water across the board that encourages optimism. Just as, for example, the housing sector reports the trend for buyers to want to move out of cities into more spacious country locations, so many more people are reviewing their life goals and expectations, seeking outdoor activities in the UK and aspiring to get on the water, asking themselves “why wait”?

Elliot concluded:

“Against a backdrop of ongoing wider environmental and economic challenges, there is no doubt that the ‘double whammy’ of first Brexit, then Covid lockdowns had a significant impact on the marine industry. Overall though, while challenges do remain, the message we took away from the webinar discussion was that, as many more people reflect on their Covid lockdown experience and take the opportunity re-examine their own work-life balance, there are indeed reasons to be cautiously optimistic about the future.”