"Buenas Dias. I have to tell you that this presentation is unsuitable for those with a delicate disposition, any of you on medication and anyone active in the industry - by active I mean fighting for survival.

If it becomes too much for you, you are free to leave at any time. The exits are clearly marked. Unfortunately the exit routes from the industry are, for most of us, not quite so clear.

My title 'Level Playing Field', may give those of you having an unusually good second day at the RHA Conference a clue to the outcome of this presentation.

In order not to engender any real sense of bitterness, envy or unease towards our Spanish counterparts, I plan to tell you just a little about the Spanish distribution industry - then express some of my own frustrations, and put forward some thoughts which might help stimulate this afternoon's debate to positive effect.

By positive effect, I mean, if we capture and adopt clear and resolute objectives that we and the RHA might take home, not Duty Free but Duty Bound. So let's get on with it...

Is running a Spanish transport company more profitable than a UK one?

We are not talking about the quality of life, the weather, the food, the wine or the coffee - we know how much better that is - we come here to have some of that.

What we are interested in this morning is the commercial environment, legislation, enforcement and taxation.

Lets start with some key cost differences...

Spanish Driver takes home more of his pay:

Employment costs are much higher in Spain - double the UK at 24% NI.

BUT - a Spanish Class I driver is 36.5% cheaper than a UK Class I driver.

Because it costs companies so much more to employ drivers, they don't! - Particularly in the hire and reward sector.

80% of distribution vehicles are owner-drivers, as are more than 50% of Class I vehicles. A self employed driver can choose to pay as little as half the NI a company would have to pay to employ them.

This may explain why the implementation of the Road Transport Directive has been delayed in Spain - frankly it is unimportant given the profile.

Fuel is, of course, the other major cost issue we pay, or should I say the duty on fuel in Spain is 38% less than in the UK.

These two costs, WAGES and FUEL can represent 60% of our operating costs in the UK.

There are no significant cost differences in equipment, insurance, maintenance, road tax, tyres etc. The result is that a 40 tonne articulated tractor unit is 36% cheaper to operate in Spain than the UK.

Two other costs I would mention, money and business rates:

MONEY - Spain (Eurozone) 2% - UK 4.75%.

Borrowing money is 135% cheaper in Spain.

BUSINESS RATES - In Spain on a 5 acre site we pay £1630 Activity Tax. In UK on a similar site we pay £153,000 (UBR).

Now what about distribution rates? I have modelled my presentation on what we do as a member of Palletline and the national pallet distribution rates Framptons Iberica has negotiated in Spain - and assumed a similar system would be used. There is, however, no directly comparable pallet system in Spain, to my knowledge, at the present time. The Spanish distribution industry is not fond of pallets. It prefers to apply tariffs to each and every carton - it is more rewarding.

What I have done is look at a typical night trunk model where the trailer capacity of 52 pallets can be used, with a gross weight of 26 tonnes. I have used as accurate a distribution profile as possible and applied average pallet rates on a two-day delivery service net of hub fees.

On the Spanish rates the revenue secured is £1927 (£37 per pallet) and on the UK rates we achieve £1767 (£34 per pallet):

• £160 more revenue on the Spanish vehicle
• We estimate the cost advantage to be £550 assuming they are travelling similar distances
• Therefore each Spanish pallet is worth £14 more than a UK one

If our costs were in line with the Spanish, or if we could achieve £14 more for each pallet here in the UK, what would that mean to us?

In our business, with three trunks into Palletline each night, this £14 would represent additional revenue of:

• £1,960 per night
• £9,800 per week
• £490,000 per year
• At no extra cost to our business
• With the emergence of so many networks in the UK, prices are constantly being eroded and our industry, instead of securing added value for innovation, efficiency and environmental responsibility, is going ultimately to give it all away

Now lets look at the commercial conditions. Palletline Espana would apply the following conditions to a typical customer...

The safe loading is the responsibility of the sender and offloading the consignee/delivery point:

• All mechanical aids must be provided by the delivery point
• No timed deliveries
• The rates and service levels agreed depend on year round commitment from the customer

When the service required by the customer exceeds their average shipments by 25%, the service is subject then to vehicle availability - there is no obligation on the carrier to cover everything the customer wishes to send when he wishes to send it:

• Prices are subject to automatic review every 3 months if the cost of fuel increases against the base price agreed at the beginning of the contract
• The diesel prices used as a reference are taken from the "Report on Hydrocarbon Prices", issued monthly in Spain
• Insurance is an additional charge of between 5 - 8% of the invoiced freight charge i.e. between £96 - £155 per night trunk. The cover provided is £1600 per tonne, all risks
• Our Goods in Transit insurance cost is £27,000 per annum. The extra revenue, on Palletline only at 5% would produce £66,000 and at 8% £106,000. We could join the electrical retailers who make their profit from the sale of insurance, but for RHA Conditions of Carriage. Palletline requires members to insure for a value of £10,000 per tonne
• Payment 30 days from invoice date. Invoicing takes place on the 10th, 25th and 30th of each month - three payments each month
• In the UK, our only additional charge is £15.00 for a timed delivery service. Tail lift delivery is included in network distribution rates at no additional cost and all vehicles carry pallet trucks. Driver involvement is obligatory

Before moving to my own frustrations and some thoughts on what we might do to improve our chances of survival, I want to briefly mention Enforcement and Taxation.

Enforcement - Yes, but not against Spanish operators - they don't need to cheat, unless of course they quote lower prices than those advised by Regional Authorities throughout Spain and thereby damage the market. They can expect lots of trouble from fellow carriers and trade bodies if they do.

And...

Taxation - Yes, but tax avoidance is a national sport and considered fair play, (as many of you who have bought property here will know!) After all they don't want to discourage effort and enterprise or damage the economy.

Incidentally, black is a favourite colour in Spain - apparently it takes the heat out of everything, not just the sun!

So how are you feeling now?

I'm sorry but in my opinion, we have only ourselves to blame, and it is only our industry that can do anything about it.

In the UK we have too many hauliers chasing too little freight for too little money. Spain has a licensing system that impacts on capacity control - we give anyone an Operator's Licence, conditional only on status issues - not whether the market needs them or whether they have the commercial tools to succeed without compromise.

What the chancellor does should be a profit opportunity for us and of concern only to the consumer. It will only concern the consumer when the tax delivery chain really works. It always breaks down amongst us - we all have to pass it on and more because we pay in advance too.

The trouble is, some in our industry don't know when their costs are going up. If they do, they can't work out what that means in terms of rates and can't begin to know how to approach their customer. They can however find the time and the inclination to write to the RHA or the press to complain about the situation and ask why somebody else isn't doing something about it. And then they go and cheat to save money and take another haulier's traffic at lower prices, because they need the cash - even if it is less.

Lack of money is the reason for no drivers, no fitters and no training. When was the last time you could make a choice about the drivers you employ without an interpreter? It's not people or skills we are short of, it's money.

One of my major customers wrote to me recently and said that I should not regard anything I do for him as a profit opportunity for my business. Because they are such a large customer to one part of our business, they believe we should get the profit from our other customers - we don't work for them directly any more.

A Financial Times Headline of the 4th April read: 'Tesco and Asda to invest £167 million in savings for shoppers.'

Forgive me, Madam Chairman, but I am going to use an expletive - 'Up the Arsenal!' - all their suppliers - including hauliers, will have to make this investment.

The Bank of England's April 2005 Summary of Business Conditions stated: "The distribution sector found it much harder to raise prices, so that rising transport costs were squeezing margins. Major supermarkets continued to resist most pressure for price increases by suppliers."

Can we afford to involve ourselves in Factory Gate, Back Load and Supermarket Pricing? Isn't it time for Road Haulage Industry pricing?

What can we do? Strike - they do in Spain. BUT THEY ALL DO. It's the only way - but they can also afford it, we can't. They have the money and the perceived right to do so - the public respect such rights - everyone in Spain enjoys this privilege. Our position is entirely different.

No, the only way we shall improve our chances of survival is if we all make some important and difficult choices. There will be no gain without pain.

To get anywhere near a level playing field, and to secure a better future, I believe that we all need to think of ways to address the following issues:

• How we might secure a significant reduction in capacity and some form of capacity control, especially the open door to foreign operators engaging in domestic business and new entrants to the industry without proof of real need for additional trucks using the already heavily congested UK infrastructure
• 2 million powered vehicles are crossing the channel every year, only 450,000 of them are UK registered vehicles - 24% and falling
• Zero Tolerance on deliberate law breaking

Standard RHA Commercial Terms of Business (I am not talking about Conditions of Carriage). We must compete for more business on better terms for more money - not all-inclusive for less. Our preoccupation must be increasing our profit opportunities, not limiting our liability when something goes wrong.

Consignor Liability - you can't be party to your freight being carried illegally, in an unsafe manner or inefficiently. Incidentally - white van man is the most expensive and inefficient form of transport there is and as far as I am concerned they should be issued with Anti Social Behaviour Orders.

Perhaps an RHA interactive operating costings model - internet based? Cost tables are not as helpful as they might be because everybody's circumstances are different.

Government grants for transport industry training administered by a single agency. We only invest for a return, not a departure - so not many are training - certainly not drivers.

Priority access and usage of the infrastructure with designated freight routes including 45 or 50 mph speed limit on good A roads.

Congestion Charges - trucks under O licence should be exempt. Given the likely popularity of this funding opportunity in the future, I believe a principle has to be established - we go to these areas because we have to - not because we choose to.

Oh dear - I seem to have forgotten fuel, Lorry Road User Charging and the Working Time Directive - I obviously needed more than 48 hours to prepare this presentation!

But most of all, I would like to see those elected to represent all members of the RHA and those employed to assist them, focus on the development of initiatives and services which attempt to help us all move out of a 3% industry to one which is significantly more profitable and one which properly rewards us for our investment, professionalism and hard work and the vital role we play in the UK economy.

The generation of profit for members, rather than income for the RHA has to be of paramount importance. The future of the RHA depends on it.

Oh and by the way, in case you're wondering - I make 8.4% gross profit from 55 trucks in the UK and 21% from having none in Spain. I'm not very good at it either, but I don't cheat and in Spain I don't either - I don't have to.

Thank you for your attention and for inviting me to address this conference."