Charity is Top of the Class

Malcolm Latarche
Malcolm Latarche

26 April 2016

Almost everyone connected with shipping will have heard of Lloyd’s Register and most of those will recognise it as a classification society and member of IACS. Some may even know it as the first classification society and make the link to the London coffee houses of the 18th century and the number of other and unrelated shipping organisations that also have the name Lloyd’s in their title. What most will not know is that the organisation is not a company in the modern sense of the word and has always operated under somewhat unusual conditions.

Like many UK shipping institutions founded at a time before modern corporate structures were established, Lloyd’s Register has had an unusual status for most of its history. Until very recently it was an Industrial and Provident Society and more specifically a community benefit society which meant it operated as a non-profit organisation and was recognised as a charity.

To be a charity, Lloyd’s Register was obliged to have exclusively charitable objectives which have from its foundation been considered as conserving life and property by way of ensuring that ships were seaworthy when last inspected. Unlike most other classification societies that have been established since its foundation, Lloyd’s Register has had no shareholder dividends to distribute and all surpluses have been required to be reinvested into its objectives. These have developed over time to include contributing to knowledge and practices relating to ships as well as the inspection and classification of ships.

Quite obviously the world of shipping and commerce today is quite different from what it was in the 18th century and the income which Lloyd’s Register was making from its core activities has become quite considerable as a result of the number of ships classified with it, and expansion into other industries and activities where risk evaluation and mitigation are required.

In 2006, a new Charities Act was passed by parliament which Lloyd’s Register considered as requiring a change in the organisations structure and the separating out of what might be seen as business activities from the charitable objectives. This was implemented in 2012 when the Lloyd’s Register Foundation was established as a new charity and Lloyd’s Register Group Limited, its wholly owned commercial trading arm. In the process another charity, the Lloyd’s Register Educational Trust, which was previously funded by Lloyd’s Register was incorporated into the new Foundation.

Today any surplus from the commercial activities is used partly to allow the commercial aspect to thrive and partly to provide funds for the charitable activities of the Foundation. With all the income from the commercial arm being recorded in the Foundation’s accounts it has acquired the distinction of being the UK’s largest charity. Income is of course not profit and the expenses of the commercial arm are not inconsiderable.

Despite its long history as a charitable organisation, there have been some who consider that the restructuring is all about avoiding tax a notion that is strongly countered by the trustees that are responsible for the Foundation. In fact the most recent set of accounts show that the tax take from Lloyd’s Register Group Ltd. amounted to around 45% of trading profits.

The purpose of the Foundation as set out in its mission statement is to be known worldwide as a leading supporter of engineering-related research, training and education that makes a real difference in improving the safety of the critical infrastructure on which modern society relies.

The Foundation meets its aims by awarding grants, by direct activity, and through the societal benefit activities of its trading group. The work of the trading group is well known to all within the industry and while some may have occasional criticisms of the way class works, most would recognise that overall the benefit is quite considerable.

And since for most flag states a ships classification is not a legal requirement, the fact that the majority of owners do opt for it highlights the importance that is put upon it.

In 2014/15 the Foundation’s income was £19.5 million and it awarded grants of £12.7 million plus a further £10 million grant just after the year-end. This equates to charitable spending of 65% of income (or 116% with the donation just after year-end). In the 2013/14 financial year, charitable spending was £17.2 million or 143% of income, with the Foundation digging into its reserves to fund charitable causes.

In January this year the Foundation announced that since it was established it has awarded £53.5m in grants to beneficiaries in 21 countries. The grants are given to research bodies, education establishments and other organisations across the whole gamut of industries that Lloyd’s Register is active in.

Not all of these will be related to shipping but some that do include research into big data by the Alan Turing Institute, sponsorship of apprentices through the Shipwrights’ Company charitable fund and one that really goes to the heart of saving life and property is a grant that has assisted in training 1,600 lifeboat volunteers with the Royal national Lifeboat Institution. The funding is continuing and over the five year period to 2021 a further 1,800 volunteers are planned to be trained.

Most of the grants awarded are for scientific research with a lot being focused on enhancing the safety of the engineering infrastructure on which modern society relies. However, funding on projects is set at levels where the research groups do not become overly reliant on the funding from the Foundation but also look to other sources.

The Foundation will work with the groups to access other funds and also where the project has a potential marketable outcome to seek to accelerate the research to put the results into practice.

Another venture that the Foundation is undertaking is to digitise its huge collection of historical documents that include drawings and survey reports of the many thousands of vessels that have been classed by Lloyd’s down the years. Part of the collection that is currently being worked on are the ‘Ship Annals’, dating from 1834-1960s which contain plans, first and last survey reports and any associated correspondence relating to each ship.

The number of ships in the collection is estimated at 65,000, but considering each ship has a number of associated plans and reports, it is likely to be a lot more. The project has an interesting parallel with that on big data being undertaken by the Alan Turling Institute since the drawings and survey reports actually represent a huge source of data albeit recorded on paper rather than electronically.

The project has been named ‘Project Undaunted’ after the first survey report prepared for the re-constituted society, London no.1, belonging to the barque Undaunted. The survey was carried out by Nathaniel Middleton on 1 July 1834.

A pilot ‘First and Famous’ project has been started, with an aim of digitising the ships that everyone has heard of and some they may not, that Lloyd’s Register has classed. This list currently consists of 229 ships, including the Cutty Sark, Mauretania, Sirius - the first vessel to cross the Atlantic Ocean under steam, Dunedin - the first vessel to carry frozen meat from New Zealand to London, Fullagar - the first all-welded ship - and many more.

This feature was published in full in the Spring Journal with image courtesy of the RNLI.