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Where Has All The Business Gone?

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Professor Alan McKinnon of the Logistics Research Centre at Heriot-Watt University, Edinburgh, is the nearest person we have as a guru on the economic fortunes of road transport.

At the recent RHA Scotland and Northern Ireland Conference in Limavady, he gave a dramatic presentation that went far to understand the economic conundrum the industry finds itself in.

Think of this: the economy continues to grow yet hauliers throughout the UK report declining business and an ever-increasing severity of competition. History tells us that as the gross domestic product for the country rises so too does the need for road freight. But the professor has identified that things have changed.

An element of de-coupling of road freight growth from economic growth has occurred, which while welcome to the government in its quest to restrict the growth of traffic, spells bad news for those that provide it. Between 1998 and 2004 a gap has opened up between GDP and road tonnekm.

Had the latter followed pattern and mirrored GDP, UK road freight transport operators would be moving an extra 21 billion tonne-km a year.

They are not. So what has happened?

Professor McKinnon offers a number of reasons which can be summarised thus:

  • Rationalising distribution centres, for example, replacing 17 regional depots with one central distribution centre.
  • Stabilisation of the average length of haul, which rose to 93km in 1998 and has not increased since.
  • Higher freight rates primarily due to increasing fuel prices are dampening demand. Companies are minimising the need for transport.
  • Decline in road's share of the freight market. Rail, water and pipelines have increased their share albeit at only market rate but accounting for 22% of the 21bn tonne-km highlighted as the growth gap.
  • De-industrialisation/off shoring. The loss of manufacturing capacity and its supply chain has been replaced by an imported container shipped to a central warehouse.
  • The changing composition of the GDP represented by an increase in the service sector off set by a reduction in production.
  • Displacement of freight from trucks to vans under 3.5 tonnes. No details are available, but not all white vans belong to plumbers!
  • Finally, foreign hauliers operating in the UK market have taken around a third of the 21bn tonne-km.

These operators captured 6.75bn more tonne-km in 2003 than 1997, equivalent to 1.35 million hauls of 20 tonnes over 250km.

At last we have some idea of the scale of the challenge facing road hauliers. In our debate with government over the impact of the foreign haulier enjoying lower fuel costs and free access to our roads, this last point is powerful ammunition indeed. It puts into perspective the government's much trumpeted contention that foreign vehicles account for just 0.6% of all HGV movements.

But irrespective of whether this anomaly will be addressed (and rest assured the RHA will keep the pressure on) the de-coupling of GDP from road transport growth cannot be ignored. The extra business borne by this trend is no longer there. At least we have a clearer understanding of the issues involved. And for the enlightened the time to address remedies is now.


by TNN Admin
22/06/2006

Roadway


 
 


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