Boatbuilders' voyage of recovery: As the London International Boat Show prepares to open, Peter Rodgers sees signs of an upturn in the sector

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AFTER three years stuck in the doldrums, the first stirrings of a breeze are being felt in the British boatbuilding industry. Two of the most keenly awaited signs of better weather to come are a sharp improvement in the market for second-hand boats and a big drop in the number of repossessions by finance houses over the past year.

'The second-hand market is showing a tremendous improvement with prices firming as demand outstrips supply, and there will be a knock-on effect on demand for new boats,' says David Piles, marine finance manager of Lombard North Central, the NatWest subsidiary.

Tony Beechey, head of the British Marine Industries Federation, says: 'When you hear yachtbrokers complaining about a dearth of good quality second-hand boats, that is good news for boatbuilders.'

Lombard says its boat financing business in the second half of 1993 grew 15 per cent compared with a year ago, with the greatest interest in sailing and motor boats between pounds 15,000 and pounds 50,000. Marine mortgage interest rates, with the loan secured on the boat, are down to about 9 per cent.

Mr Piles adds that over the past year the industry has seen a steady fall in the number of boat repossessions - which were almost unknown until the recession - and Lombard is confident this trend will continue.

Until recently, the boatbuilding industry was plagued by cut-price sales of nearly new boats that had been repossessed after their owners failed to keep up payments because of redundancy or the failure of their businesses. This undercut the prices of new craft, a crisis not unlike that which hit home owners.

So, with the economy out of recession and the City back in the money with high bonuses, the hopeful noises coming from the boatbuilding industry ahead of the London International Boat Show, which opens on Thursday, may prove more realistic than a year ago.

But the recovery will be modest. As the home market shows early signs of revival, the foreign sales that kept many companies afloat during the recession are now harder to make. The devaluation of the pound 15 months ago proved a life- saver for exporting firms. Now Continental economies have stalled just as Britain is recovering.

Sam Newington, chairman of Fairline, the only quoted boatbuilder, says that although he is worried about the recession in Continental Europe, his worst fears have not been realised.

'I don't think the recession is as bad in Germany as the German car sales figures show,' he says. 'Our boat exports there have held up quite well.'

Fairline, based at Oundle, Northamptonshire, builds only motor yachts, including some large ones. Last month it announced full year pre-tax profits of pounds 558,000 after a loss of pounds 507,000 in 1992, and sales rose 22 per cent to pounds 33.7m. About 90 per cent is exported, compared with 60 per cent five years ago when the British market was healthier. But home sales are rising again.

Mr Newington says: 'As always in a recession, large boats are selling better than smaller ones. People with money always have money.'

But Mr Newington is concerned about the effect of changes in European VAT rules this year. Many Britons, Germans and Dutch took advantage of a loophole to buy boats VAT-free in Northern Europe and base them in the Mediterranean.

European Union customs officers are now obliged to collect back VAT on all boats under eight years old on which it was not paid. Mr Newington says the French have not announced how they will implement the decision, but Spain has begun collecting tax at 'favourable' rates. The risk is that second-hand boats may be dumped on the market by owners who cannot afford the VAT, hitting new sales.

Other successful builders, such as Marine Projects, of Plymouth, maker of the Princess series, and Sunseeker, of Poole, Dorset, are also export-dominated. Privately owned Sunseeker, which has a new pounds 600,000 model on show, exported 99 per cent of its pounds 35m output.

Sailing boat builders have been much more dependent on the home market, so production slumped in the recession. Some famous names such as Sadler and Westerly went to the wall.

Westerly was revived as a much smaller unit in a management buyout and recently merged with Victoria Marine to form Westerly Victoria. Peter Gregory, who runs the new company from Warsash, near Southampton, says: 'As an industry we tend to follow the stock market closely.' So, after last week's records, he is hopeful.

Peter Poland, who produces about 100 craft a year at Hunter Boats in Essex, is more circumspect. A small company with high productivity, Hunter has survived three recessions without receivership, an increasingly rare feat.

Volume is much the same as a year ago, Mr Poland says. 'Where it goes in the next year I don't know because I don't know what Europe is up to.' But Hunter increased sales in both 1992 and 1993 when others were cutting back. It is introducing one of the few new models at the show, a 26.5ft sailing cruiser costing pounds 28,000.

Equipment suppliers see the bigger picture, since their gear goes into other people's boats. David Guthrie, of Simpson Lawrence, a Glasgow firm that makes anchors and winches and sells chandlery wholesale, says there was a limited recovery late in 1993, a year in which turnover rose pounds 1m to pounds 12m, and 1994 looks better.

Robert Hill, of the marine electronics group Brookes and Gatehouse, which exports 85 per cent of production and equipped most of the Whitbread round-the-world racers, says President Clinton's repeal of a luxury tax on boats costing more than dollars 100,000 has boosted sales of top-of-the-range systems.

At least four of the British marine electronics firms, including B&G, have been taken over by international groups in the past couple of years as the volume of electronics going into pleasure craft soars. Hand-held equipment that uses satellites to give a position anywhere in the world to an accuracy of 50 metres - which is making the sextant redundant - is now widely available at under pounds 400.

Meanwhile, the recession has made running a boat cheaper, judging by the decision of the biggest marina operator, Marina Developments, to hold berthing rates constant for the third year running.

The company, quoted on the stock market until recently, was vilified for the speed with which it put up marina prices in the 1980s yachting boom, but the recession and a new supply of cheaper moorings offered by harbour authorities has put the boot on the other foot.

Yachting will never be a cheap pastime, but a useful side-effect of the recession is that it has become a little more affordable.

(Photograph omitted)