investmentGATEWAY

Ferry and shipping freight operator P&O is reviewing its UK-registered fleet and is already re-flagging two vessels to keep European Union tax arrangements ahead of Britain's departure from the bloc, the company said in a statement.

According to a P&O spokesman, two of their UK ships operating on the English Channel route to France would be re-flagged to Cyprus, which boasts the EU’s third largest shipping register and the 11th biggest merchant fleet worldwide.

“The change is being made to preserve the tonnage tax financing arrangements, under which the ships should remain flagged in an EU member state,” said the statement.

The spokesman added that P&O was reviewing the flag status of its four other ships operating on the Channel route, although no final decision had been taken.

Such a taxation system allows shipping companies to pay corporation tax based on the tonnage of their vessels rather than on profit.

The move will come as a further blow to the UK’s fleet. As of November 2018, there were 1,306 vessels of over 500 GT (gross tonnage) per ship registered with the British flag, down from 1,317 in 2017, 1,328 in 2016, 1,330 in 2015 and 1,327 in 2014, official data showed.

With just over 100 days until Britain is due to leave the EU, British Prime Minister Theresa May is yet to win the support of a deeply divided parliament for the deal she struck last month with Brussels to maintain close ties with the bloc.

At the same time, the British government is stepping up preparations for a “no-deal” Brexit.

Since the creation of a Cyprus shipping Ministry last year, companies registered under the tonnage tax system increased 13.69% from 168 to 191.

The Central Bank of Cyprus’ ship management survey (January-June) shows that the sector has recorded its largest increase since 2013, which is creating more jobs.

Data shows that shipmanagement’s contribution to the economy, in the first six months, amounted to €506 mln or 5.1% of GDP which is the highest since 2013.