Storm brewing over port expansion

It was the shipping magnate Samuel Cunard who turned Liverpool into the powerhouse of the ocean liner age, when his RMS Britannia first paddled up the Mersey bound for Boston in 1840. Within 100 years, however, Southampton had become the port of choice for the floating palaces of the 21st-century cruise industry.

Liverpool's famous Pier Head – once a gateway for millions of transatlantic passengers bound for the New World – went into decline and became little more than a romantic relic of its glorious past.

Despite the area being designated a Unesco world heritage site in 2004, attempts to rekindle the city's seafaring greatness have sparked a row with the owners of the Hampshire port. They are trying to block Liverpool's plan to upgrade the Pier Head into an embarkation and arrivals point for cruise ships, rather than just the stop-off it is now. Such a move would bring the city a far greater share of the millions the cruise industry generates for hotels, shops and restaurants in ports.

While 300 ships and one million passengers used Southampton last year, only 55 ships have visited Liverpool in the past two years, including 26 Royal Navy vessels. However, these alone generated £13.6m for the city's economy.

Associated British Ports (ABP), which owns Southampton docks, is furious that Liverpool received £20m of public money, including £9m from the European Union, to redevelop its Cruise Liner Terminal near the historic waterfront buildings known as "the Three Graces". It has written to the Department for Transport insisting that it throws out Liverpool City Council's plan to upgrade the terminal to an official "turnaround" point.

ABP, which is backed by Southampton City Council, claims Liverpool's proposal would distort the cruise market and unfairly benefit Peel Ports which operates the port of Liverpool. It is particularly annoyed after spending £19m on an Ocean Terminal which opened at Southampton this year. A source close to the company said: "If our customers want improvements, it is down to us to deliver them – we don't get any gifts. This really rankles and simply isn't fair."

Despite the recession, the cruise industry is booming. In 2008, more than 1.5 million Britons took holidays afloat – twice the number of a decade earlier. Forty per cent of passengers depart from the UK, rather than flying abroad to join a ship, and increasing numbers are seeking out cold-water cruises to northern Europe and the Baltic states.

Operators have responded to the boom by commissioning ever more luxurious cruise ships. Royal Caribbean's new Oasis Of The Sea, due to come into service this year, can accommodate 5,400 passengers and is based on a theme park. It has seven "neighbourhoods", a central park, four swimming pools, a "royal promenade" and a myriad of bars and restaurants.

The trend is a throwback to the days before jet travel, when glamorous Hollywood stars such as Katharine Hepburn were seen on the gangplanks of White Star liners on Liverpool's waterfront. Cunard withdrew its last vessel sailing between Liverpool and New York, the RMS Sylvania, more than 40 years ago, followed soon after by the last two operators, Canadian Pacific and Elder Dempster.

Since then, cruise passengers in the North-West have had to embark from the heavily industrialised Langton terminal at Bootle. Councillor Gary Millar, a member of Liverpool City Council's enterprise and tourism committee, said changes were needed to meet passenger demand. He added: "We believe the creation of a full turnaround facility at Liverpool will benefit the cruise liner industry in the UK, as the city is uniquely positioned to attract business from outside Europe."