United Kingdom Freight Transport Report 2011

The Corporate Licence price of this report includes 3 additional quarterly updates during the year. In October 2010 the UKs coalition government announced its plans to divest up to a 90% stake in stateowned postal and parcel delivery company Royal Mail. The government would sell the stake either through an initial public offering or a private trade sale. At least a 10% share of the company will be reserved for staff members under the terms of the Postal Services Bill. This was revealed by business secretary Vince Cable during the publication of the governments controversial privatisation bill. He added that foreigners were very much invited to acquire the 360-year-old company. The government confirmed plans to take over the companys pension deficit, worth as much as US$16.3bn, in order to attract potential bidders.

The UK continues to emerge from the deep recession of 2009 on a slow growth path, as it seeks to wrestle with an overhang of fiscal and debt problems. Prospects for the freight transport sector in 2011 will be affected by this weak recovery scenario. However, the UK economy may perform better than the bearish consensus suggests. The authorities retain the possibility of a second round of quantitative easing in their policy armoury, that the pound can be pushed lower to help exports, and that the Conservative-Liberal Democrat coalition government has an explicit electoral mandate to pursue fiscal austerity, which places in a better position than a number of other European governments.

We believe that the government will stay the course on fiscal reform. As a result of our analysis, we estimate 2010 GDP growth of 1.0% in the UK (after a 4.7% contraction in recession-dominated 2009). Our outlook for 2011 is for a moderate recovery to continue despite the double dip slowdown across Europe, with UK growth accelerating to +2.3%, and then moving up slowly to 2.6% in 2012.

In the five years to 2015, we expect growth to average 2.6% a year, implying that the UK will return to a reasonably steady rate of expansion bearing in mind the overhang of structural and debt problems inherited from the 2009 crisis.

After a trough in 2008 and 2009 when British air cargo volume dropped by 1.3% and then by 10.6% respectively, we saw a partial recovery in 2010 (estimated growth of 6.4%) which we forecast will lose vigour going into 2011, with growth of 2.0% to 2.34mn tonnes. Pre-2008 airfreight volumes will be reached again during our forecast period only in 2013, five years later. Over the next five years, we expect annual average air cargo volume growth will be 2.1% a year, lagging a little GDP growth.
Against the background of a weak recovery in European trade, the UKs main bulk port at Grimsby and Immingham (POGI) will see tonnage growth of 3.3% in 2011 to reach a total of 64.529mn tonnes. We expect annual average cargo handled growth at POGI between now and 2015 to be 3.5%, ahead of GDP expansion. The UKs biggest container port is Felixstowe, and there we forecast a contraction of 2.7% to 3.041mn TEUs in 2011. In the period to 2015 the annual average box handling contraction at Felixstowe will be 1.2%. In contrast, Southamptons container terminals will see average growth of 10.2%.

In terms of cargo volume, the UKs railway system experienced three years of consecutive declines culminating with a very sharp drop in 2009 (with a contraction of 17.6%). We estimate a recovery made itself felt in 2010 with growth of 11.1%. For 2011, we expect the pace to slow, with volume growing by 5.2% to 114.98mn tonnes. Our forecast to 2015 is for annual average cargo volume growth of 5.2%, ahead of GDP. Freight carried (volume x distance) is projected to grow by 4.8% to 23.587bntkm in 2011. Average freight carried growth in the next five years will be of the order of 4.9% a year.

In 2011 we expect total tonnage volume carried by road to grow by 1.6% year-on-year to 1.829bn tonnes, following a 23.3% gain in 2010. Growth over the two years will however not be quite enough to offset the 7.0% and 17.8% drops in volume in the two recession years of 2008 and 2009. In fact the 2007 tonnage peak of 1.908bn tonnes will not be exceeded until 2014, seven years later. Over the five years to 2015, road freight volume will grow by an annual average of 1.7%, lagging behind GDP (reflecting in part the congestion of the road system). Freight carried by road (volume x distance) is forecast to grow by 1.0% in 2011 to 168.924bntkm, and to average 1.1% growth a year up to 2015.

In real terms UK foreign trade slumped by 7.3% in 2009, had a recovery in 2010 (estimated growth of 1.8%) and is set to expand again at a slightly slower rate in 2011 (+4.2%). Looking ahead, trade will experience moderate growth in the five years to 2015 (+4.9% per annum). In nominal terms, we are expecting imports to total US$669bn in 2011, with exports trailing a little behind at US$607bn. The UK will therefore continue to register its habitual trade deficit. In the period to 2015, average import growth in real terms will be 4.8% per annum, with exports growing at the higher rate of 5.1%."