"Scotland's Trade with Europe" - Edinburgh meeting of 13 March 2001

Mr. John Russell of John G. Russell Transport addressed the Scottish Branch in Edinburgh on Tuesday 13th March 2001 on Scotland's Trade with Europe.

Starting with the current economic situation and highlighting the present position with the country's GDP, Mr. Russell showed that this is much higher than in the rest of the UK. Consumer growth has continued and now there are 28 million people employed - the highest number ever and unemployment is under 4% - the lowest rate since the 1970's and better than the rest of Europe. Germany is concerned about their birth rate as at current levels there may not be enough working people to maintain their economy in the future. The UK economy has major growth in the number of working females, increasing growth in services and consumer income. A major factor is the growth of call centres, now employing 4% of the British workforce.

Looking at globalization, Mr. Russell pointed out that the UK is clearly part of the global economy with the UK investing more in the USA than Japan. However, there are problems with globalization, particularly the UK skills shortage and language limitations. Turning to the Budget, Mr. Russell said that the economy we have is worth having and worth keeping and cannot be maintained with complacency, as companies have struggled. There have been job losses, e.g. Rover at Longbridge, but we still have an excellent national level of employment.

However, a number of things can go wrong. For example, Scotland suffers from high seasonal demand and it was almost impossible to find LGV drivers from September to December last year but they were queuing up for jobs in January. Electronics and distilling, Scotland's two largest exporters, both have peaks in the last quarter. Restrictions on overtime beyond legal driving limitations will create a real employment difficulty. Externally we have an uncertain economy in USA, good growth, no inflation but a trade deficit of $1bn per day.

Scotland is more dependent on Exports, emphasising the differences in European economies. The UK exports more per head than USA and Japan. Its foreign sales were just over 20% of gross final expenditure in 1999. Receipts from trade in services (such as financial services, travel, transport and communications) and investment income make up about half of total British external earnings, and the UK consistently runs large surpluses on these accounts. The UK was the world's second biggest foreign investor in 1998 and UK investment abroad significantly exceeds investment in the UK.

The channel tunnel was expected to revolutionise transport between UK and Europe with rail being the predominant mode. Last year it increased its cross channel freight share from 39% to 48% but the growth was in the road freight vehicle shuttle service resulting in substantially increased LGV mileage in the UK. Whilst Euro tunnel offers competitive terms for the road vehicle shuttle, their charges for through rail freight services generally make rail freight uncompetitive. Service standards on International rail freight are less reliable than road and short sea alternatives through no fault of the UK Train Operating Companies.

The majority of Scottish exports to Europe are still by short sea services where there are more options. Short sea cannot match rail or through road for speed but has advantages in cost over through road and better reliability over rail. The proposed fast ferry from Rosyth could have an impact on Scottish Exports and no doubt improved speed with reliability could be advantageous and both will be needed for success. We have seen a number of short sea services introduced from Scotland over recent years that unfortunately failed to survive.

Scotland has a particular difficulty for short sea services due to the predominance of exports and lack of balancing imports, exacerbated by two of Scotland's major exports, i.e. alcoholic beverages and electronics having highly seasonal trends. Alcoholic beverages account for 40% of sales in only three months of the year and this creates problems in getting sufficient capacity for these peak flows.

The strength of the Pound encourages shippers to seek the cheapest prices and exporters even of high value materials take very short term views of charges, usually taking the cheapest price on offer. Often shipping decisions are made on very short term price considerations with little regard of the wider consequences such as reliability, continuity, security, etc. Currently carriers frequently accept there is no profit made on the export leg, even losses are sustained on exports, in order to cover import loads at better prices. So the carriage of Scottish exports to Europe is not the easiest method of earning a living in the current climate.

Mr. Russell thought that E-business would not transform his business, however the practical aspects of incorporating E-business in his company strategy as a proper business tool is overwhelming. It creates far better communications for management information, customer relationships, and supply chain management. Logistics greatest opportunities at the moment definitely come from the ability to better manage the business however it is still these basics that count.

He expressed concern regarding the investment needed for rail freight transport and was awaiting the strategy of SRA on freight. Both major rail freight train operators have in recent times been offered for sale without takers and they now urgently need a clear understanding of track access costs. The grants originally provided by the Government were due to end this year and without further and substantial grant to assist track access their operations are basically unsustainable.

The SRA will shortly deliver a strategy statement that will, hopefully, give the much needed assurance to all involved in rail freight to progress. It would be timely to so do, the rail transport industry has had a most unfortunate period, with the consequences of the accident at Hatfield, followed by the road accident at Selby affecting Rail. It was unfortunate that Railtrack had to impose restrictions to ensure further similar problems were not encountered due to the rail cracking phenomena which would have caused a media backlash. All the restrictions actually did was to transfer passengers to road with a much greater risk of being involved in traffic accidents. The effect on freight has not been so dramatic, we have had real inconvenience and it is so important to realise we no longer have the heavy industries in Scotland for full trainload freight, our rail freight growth is now consolidated loads of consumer goods.

Delivery of goods is of paramount importance if sales are not to be lost, irrespective of whether transport is by road or intermodal. This standard has not been attainable recently on rail and customer confidence must be restored. We now have had 44 tonne vehicles approved for operation, which will benefit certain traffics, whilst others have weight limitations due to volume. It does have substantial capital investment needs in new trailer equipment for some of our operations e.g. tankers but it is a welcome move and should encourage a move to more road friendly suspension.

Digital tachographs should be introduced in the next year or so, again a valuable tool for management, but, Mr. Russell pointed out, little is being achieved in the integration of the various in cab systems, e.g. engine management, digital tachograph, communications, and tracking devices. These should be integrated because we seek the ability to download all these systems to our central control. We seek real time information to achieve and report deliveries with better use made of the reduced driver's time that will be available to us, wasted time is no longer acceptable, it is too expensive and will only make us uncompetitive. Intermodal equipment is expensive, we need assurance of service reliability, service continuity and stable cost to make such investments.

Security is a constant threat and the threats come in many guises. Illegal immigrants are a major problem and operators can be fined £2,000 per illegal immigrant. He thought that protection of our frontiers should be a national responsibility not a carriers responsibility. Passenger Transport also has serious safety and security problems from vandalism and colossal avoidable costs that must be tackled or the future of public transport could be jeopardised. Freight Transport has had a serious problem with duty evasion and smuggling of tobacco and alcohol. Again, the onus is on the consignor and carrier and the problem arises due to outdated methods used by Customs and Excise which only encourages dishonest operators and reputable carriers can be duped unknowingly into participation yet with liability.

Mr. Russell felt that his views on the globalization effects on the UK economy also apply in the smaller scale to the day to day transport and logistics business. He thought that many members of the Institute in the past may have viewed their interests in somewhat differing terms depending to which sector of transport and logistics they belong. It is probably fair to say that passenger transport in the past operated in a much more regulated and controlled manner than freight, this has diminished over the years with all transport businesses operating in a more regulated manner and that trend will not change.

What has changed in the past ten years for all transport modes is the importance of the customer who is undoubtedly king and now demands to be satisfied or they will readily take their business elsewhere. This should make members realise there is now a far more closer resemblance, interest and tie between the varying sectors of transport and logistics. We have the same aims - safety and security, standards of maintenance, that we are aware of and abide by all relevant legislation, reliability of service, cost effectiveness, our image in the market place, how we meet our environmental responsibilities, the importance of our public awareness, what training we provide to employees, how we treat our employees and our pensioners, our approach to quality in its broadest context focusing on management improvement at all times.

It is vitally important how we relate with each other within the Institute, we as members and fellows, if we have differing views, they must be discussed internally but then we must reach universally agreed understandings and views of all aspects of logistics and transport and display a solid organisation with a clear and unambiguous strategy. Only then are we able to convey convincing and powerful messages to Government to influence legislation, ensuring that we not only enhance the future of our industry, also our ability to provide the high standards of service our customers rightly expect.

Report by John Fender.