Fishing quota - additional allocation from 2024: consultation - business and regulatory impact assessment

8. Scottish Firms Impact Test

The following Standard Industrial Classification^[8] sectors are likely to be impacted by this policy:

• 03110 – Marine Fishing
• 10200 – Processing and preserving of fish, crustaceans and molluscs
• 46380 – Wholesale of other food, including fish, crustaceans and molluscs

We do not expect any impact on the competitiveness of Scottish companies as a result of the change in HTR method.

The expected impacts are summarised for each element of the allocation method of Option 2.

8.1 A) Historic Track Record

The overall economic value will remain tied to the landed value of the total allocation, which will vary according to the outcome of international negotiations and subsequent quota apportionment by the UK Government to the Scottish Ministers. Annually updating HTR better reflects the activity of the fishing fleet compared to a fixed period, ensuring AQ is fished by active vessels. It also reduces the barrier to new entrants, as it will be possible, albeit for the cost of leasing quota, to build up a track record. However, it is possible that the price of leased quota increases to account for the additional quota it may generate negating some of this benefit. Costs for leasing quota are commercially sensitive so these have not been published here, however the Scottish Government does have an understanding of the indicative costs to lease quota. After 5 years this catch-generated HTR would be the basis for receiving AQ (and generating onward HTR).

The requirement to be active on 1 January of each year in order to be eligible for HTR-linked AQ will remain unchanged. Moving to a rolling reference period means that periods of inactivity of member vessels represents a risk of losing HTR allocations. To estimate the impact of this change, the number of inactive vessels was examined in the 2022 Sea Fisheries Statistics. Between 2018 to 2022, the number of non-fishing over 10 metre vessels varied between 21 and 37 vessels^[9]. Assuming that 20% of these were sectoral vessels targeting demersal species, a rolling reference period will potentially reduce eligibility for AQ by between 4% and 8% of the sectoral fleet in a given year, depending on levels of inactivity. This would however mean an increase in allocation for other active vessels in sectoral groups, and once a vessel returned to activity it could use its previous track record to access some AQ.

8.2 B) Special Allocations to the non-sector group

Adjusting quantities of AQ made available to the non-sector fleet through Special Allocations, and increasing AQ for three species with recent high utilisation, generates an expected benefit of approximately £570,000 above Option 1, i.e. current arrangements (Table 4). This assumes a similar allocation as seen in 2022, as noted previously the AQ allocation changes year on year based on the total allocated catch of species and so will vary in future years.

Source: Values estimated from 2022 Scottish Sea Fisheries Statistics¹².

Note: these are estimates based on 2022 figures. Quota varies between years, as does realised landed value, so this will not be an accurate reflection of value in future years.

The expectation is that greater focus on a smaller number of species will increase uptake, noting that we will retain the option to reallocate or exchange quota if indications are that it will not be fully utilised by the non-sector group in-year.

Of course, making this special allocation takes the equivalent landed value away from sectoral group allocations. Estimating this in terms of landed value, looking at uptake of this opportunity in 2022, we expect the uplift in North Sea cod allocation to be fully utilised, i.e. cost to the sectoral group to be 100% of the landed value of the cod special allocation; approximately 70% of North Sea saithe to be landed. The allocation of North East Atlantic mackerel will be within ICES zone 4a.

As we intend to retain the ability to reallocate or exchange unused quota by a certain point in-year, there are potential costs to the non-sector as well. These are expected to be the landed value of 30% of the North Sea saithe special allocation and 10% of the North East Atlantic mackerel special allocation based on previous experience of uptake. It is possible that quota could be exchanged for other stocks that could be more readily fished, offsetting the impact to the non-sector.

Special Allocations spread the benefit of AQ to a larger number of vessels. The majority of non-sector vessels have tended to land a small quantity of fish over the year (Tables 5 and 6). While there are expected to be costs from lost quota to the sectoral groups, this is expected to be proportionally less than the benefit seen by the non-sector in terms of change in revenue relative to total revenue due to the current distribution of quota.. Using the SeaFish Fleet Enquiry Tool to estimate revenue for different fleet segments^[10], and historic STECF data^[11] for the pelagic fleet, we expect the estimated change in Special Allocations to increase income of the non-sector group by approximately 1.7%, at a revenue cost of 0.15% to the demersal sectoral fleet and 0.1% to the pelagic sectoral fleet. These are indicative estimates and are not precise; SeaFish data was used at the UK level, this value will vary depending on annual quota apportionment and allocation, and the market price of fish.

Source: Scottish Government management data. Note: Values also expressed as % of total number of vessels.

Source: Scottish Government management data. Note: Values also expressed as % of total number of vessels.

The over 10 metre non-sector group will continue to receive 200T of North East Atlantic mackerel AQ, this is unchanged from the current arrangement.

8.3 C) In-year transfers:

Quota secured in-year as a result of negotiations between coastal states must be allocated quickly to ensure they are fully utilised. Making these allocations on an equal basis among eligible vessels requires minimum administration to deliver quota and therefore minimum cost to government and the fishing industry in allocating and receiving quota. We do not expect any impact from retaining the option of allocating in-year transfers on an equal share basis. Affected vessels would be gaining quota for no additional effort on their part.

Where there may be costs is, if an in-year transfer of quota occurs which recipients did not intend to utilise – for example if pelagic vessels focusing on mackerel also receive some Atlanto-Scandian herring quota on a flat rate basis, where another group of vessels desired the allocation.

Another potential cost is, if a vessel did not have an active licence attached to it on 1 January of the year in which the exchange took place, they would be ineligible for quota, leading to loss for that year of any transferred quota and a larger share for the remaining vessels.

The even distribution of quota is expected to benefit those vessels with the least existing quota over those with the higher volume of quota.

8.4 D) WS Cod Applications

Inviting applications primarily on the basis of the use of selective gear and techniques with a reduced impact on the environment, has an environmental benefit. This may be, for example, catching cod without the use of demersal trawl gear, demersal trawling using nets with a mesh size that leads to less bycatch, or the installation of Remote Electronic Monitoring systems. The benefit of using a larger mesh size could extend to include reductions in fuel consumption and associated GHG emissions.

Approximately 200 tonnes of cod will be available through this method, with an estimated landed value of £750,000, based on 2022 landed value^[12]. We estimate uptake to be similar to figures for West of Scotland haddock, in the region of 75% based on their catch being shared in the mixed fishery (see Table A1 in the annex). Cod is a high value stock and vessels may change behaviour and fishing locations to take advantage of the allocation, so uptake may be higher than estimated. There has been no directed fishery (i.e. a fishery for which a TAC is set) for this stock for some time, so any increase in landed cod is expected to see positive benefits for the onshore businesses accessing new quota.

The association of this catch with reduced environmental impact could attract an improved price as seen with MSC certification^[13], potentially from enhanced market access to premium markets. The application process will not be ready until 2025. This benefit has not been monetised, due to a lack of comparable examples to draw from and due to the criteria still being developed.

Fishing using selective gear and techniques with a reduced impact on the environment may result in a lower level of landings per unit effort compared to gear set out in landings obligation guidance. This may result in lower landings per unit effort. For example, adopting a mesh size greater than 120mm, or opting to deploy alternative gear such as fish traps may result in fewer cod being caught compared to mobile gear configurations that are typically used. However, the initiative would start from the presumption that there would be no access to the West of Scotland Cod AQ and therefore a potentially reduced landing per unit effort is superior to none at all.

Among vessels that caught over 0.5T of demersal fish in ICES zone 6a in 2021 and 2022, more than 10,000 tonnes of landings came from vessels operating gear that would potentially be more selective and with a reduced impact on the environment compared to a 120mm mesh gear configuration (Table 7). This is not a statement of the criteria necessary to secure West of Scotland cod AQ, but it does give an indication of the number of vessels that may face the least barriers to accessing quota if required to do so using a different gear configuration and fishing technique.

Source: Scottish Government management data. Note: Restricted to vessels landing >0.5T of demersal species in 6a during 2021 and 2022 to identify demersal vessels fishing the in the West of Scotland. Tonnage shown in the table includes all demersal species caught anywhere to indicate gear use.

There will be some cost to vessels, noted above, to invest in selective gear to enable fishing with a reduced impact on the environment, compensated for by the value of the cod AQ. However, as there are already vessels equipped to fish with more selective and lower environmental impact gears, the criteria is not expected to result in higher costs to the industry as a whole but rather transfer the allowance between vessels within the fleet.