Distribution Industry Market Review 2007

PRLog (Press Release) – Apr 12, 2007 – Distribution Industry Market Review 2007

Executive Summary

This Review deals with the UK market for the physical distribution of goods and the industry that serves this market. Distribution is defined broadly, to include all modes of freight transport (rail, road, pipeline, sea and air), as well as other activities that form part of the supply chain, such as cargo handling and storage, freight forwarding and the supporting activities provided by port and airport authorities. It also covers the activities of the national post and courier/express companies, which transport items by various modes.

It is estimated that the UK market for freight transport and distribution services was worth £74.45bn in 2006, having grown by 6.1% at current prices since the previous year. This figure represents the total turnover of UK companies in this market, and it inevitably includes some 'double counting', because supporting sectors such as ports and airports handle the same items as the transport principals. Figures for individual sectors of the market are presented within the relevant chapters of this Review.

The industry has benefited from a stable economic background in recent years, albeit one that has experienced considerable legislative and regulatory change, both positive and negative. Positive influences have included the opening up of markets, particularly in Europe — most recently with the expansion of the EU into a community of 27 countries. Negative influences, in terms of the narrowly defined commercial interests of firms in the sector, have included the impact of taxation and of legislation aimed at protecting employees' rights, increased fuel costs (excluding taxation), traffic congestion and competition from foreign road hauliers.

A key issue in the industry is the extent to which the rail sector can be made more competitive: the level of rail charges is currently considered to be too high, particularly in relation to road transport, the dominant mode in domestic distribution. However, road freight is also suffering as a result of a general decline in the freight intensity of the UK economy: increases in freight transport are not keeping pace with increases in overall economic activity. The UK maritime sector has benefited from an increase in world trade and in global demand for shipping, although the subsequent surge in the construction of large container ships has led to overcapacity and a fall in rates. Although air freight has only a small share of world trade in terms of tonnage carried, it continues to hold a significant share of the market as measured by the value of goods shipped. In the national post and courier sector, a key development was the ending of the Royal Mail's monopoly of the UK letter market on 1st January 2006.

The future of the UK freight transport and distribution industry rests on the prospects for continued stable economic growth and low inflation. This situation seems likely, despite some challenges and concerns, which centre on the threats posed by an uncertain national and international security situation. Against this background, It is forecasted that the UK freight transport and distribution market will see further growth in value between 2006 and 2011, but with freight intensity continuing to decline.

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