* Shipping contributes $14 bln annually to UK economy
* Potential currency turmoil could hit port operators
* Over 40 percent of shipping via UK terminals is with EU
By Jonathan Saul
LONDON, April 5 (Reuters) - If Britain votes to leave theEuropean Union, the country's shipping sector faces years ofdisruption as trade agreements get reworked and currencyvolatility leads to higher costs at a time when the industry isbattling its worst global downturn.
Shipping contributes some 10 billion pounds ($14.2 billion)annually to the UK economy and directly employs 240,000 peoplein multiple areas including maritime services such as ports,transportation, as well as ship broking and marine insurance.
As several shipping segments struggle with worsening marketconditions due to global economic uncertainty, a Chineseslowdown and a surplus of ships for hire, alarms are soundingover whether Britain will quit the EU in a June 23 referendum.
Renegotiating trade agreements with individual EU countriesas well as the EU itself could take years following Brexit,which would also add to the burden on companies.
"No one has left the European Union before, and the EU mayseek to 'punish' the UK for leaving, in order to discourageothers from leaving too. The Brexit negotiations are unlikely tobe quick or easy," said Guy Platten, chief executive of the UKChamber of Shipping trade association.
"If it is lengthy, with tariffs and other penalties builtin, then the consequences could be profoundly negative."
John Nelson, chairman of the Lloyd's of London insurancemarket, said it was "fantasy" to expect bilateral negotiationsto be simple.
"It would be impossible to do that except over many, manyyears," Nelson told Reuters.
Legal experts said there were also likely to becomplications over commercial paperwork.
"If existing contracts are drafted in a way that presumesthe existence of an EU containing the UK, or makes a referenceto the EU without specifically defining what that is, suchcontracts may give rise to disputes as to the meaning or ambitof the contract," law firm Ince & Co said in a note.
Potential currency turmoil could also hit port operatorsgiven that over 40 percent of overall shipping traffic passingthrough terminals in Britain is with EU countries.
"The exchange rate could have some impact on trade andtherefore on the volumes handled by the UK ports," said JoannaFic, senior analyst with ratings agency Moody's.
"If sterling weakens, imports become more expensive. Givenimports account for a larger chunk of movement of goods throughUK ports, you could see some implications for domestic demand."
Leading operators Associated British Ports and Peel Portsdeclined to comment. Scotland's Forth Ports said it would "workwithin the outcome of the referendum", declining furthercomment.
SINGLE MARKET
Britain's Transport Minister Robert Goodwill told Reutersthe shipping industry had benefited from the EU's single market,which had brought fairer competition between shipping firmsoperating in Europe, cut costs for freight shippers and removedcustoms duties for UK shippers trading within the bloc.
That view was echoed by the City of London Corporation,which runs the only global financial centre to rival New Yorkand last month formally backed Britain staying in the EU.
"At a time of increasing competition in shipping markets, wewant businesses in the UK to be able to keep their eyes strictlyon doing business and not worrying about what ifs and a level ofuncertainty," said Jeffrey Evans, lord mayor of the City ofLondon and a senior director with ship broker Clarksons.
Britain ranked in the top 10 of global ship-owning countriesas of January 2015, according to the latest report by U.N. tradeand economic think tank UNCTAD. The UK accounted for nearly 3percent of the world total or just over 48 million deadweighttonnes, versus over 16 percent or 279 million dwt held byGreece, the No.1 ship-owning nation, the UNCTAD report showed.
Danish shipping company DFDS, which has activebusiness operations with the UK, said it was better for Britainto stay in the EU given the potential impact on the wider bloc.
"We are concerned that Brexit will bring about a prolongedperiod of uncertainty which could in itself be negative forinvestments, trade and growth," DFDS Chief Executive NielsSmedegaard said. ($1 = 0.7049 pounds) (Additional reporting by Carolyn Cohn; Editing by VeronicaBrown and Dale Hudson)
Clarkson (CKN)
