UK Distribution Industry

UK Distribution Industry

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.

Key Note estimates 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, Key Note forecasts 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.

Executive Summary
1. Industry Overview
REPORT COVERAGE
REPORT BACKGROUND
ECONOMIC TRENDS
MARKET SIZE
MARKET SEGMENTATION
Domestic and International
Domestic Freight Transport
International Freight Transport
Intra-EU Freight Transport
Intercontinental Freight Transport
By SIC Code
Rail (SIC code 60.10/9)
Domestic
International
Road (SIC code 60.24)
Pipelines (SIC code 60.30)
Water (SIC codes 61.10/2 and 61.20/9)
Inland Waterways and Coastal Shipping
International Transport by Sea
Air (SIC codes 62.10/9 and 62.20/9)
Domestic
International
Cargo Handling, Storage and Warehousing (SIC codes 63.11 and 63.12)
Other Supporting Transport Activities (SIC codes 63.21, 63.22 and 63.23)
Activities of Other Transport Agencies (SIC code 63.40)
National Post Activities and Courier Services (SIC codes 64.11 and 64.12)
INDUSTRY STRUCTURE
MARKET POSITION
KEY TRENDS
LEGISLATION
KEY TRADE ASSOCIATIONS AND PROFESSIONAL BODIES

2. PEST Analysis
INTRODUCTION
POLITICAL FACTORS
State Ownership and Economic Deregulation
The UK
The EU
Road Pricing
ECONOMIC ISSUES
Interaction Between the Distribution Sector and the UK Economy
Taxation of Vehicle Users
Road Pricing and Congestion Charging
SOCIAL ISSUES
TECHNOLOGICAL ISSUES
Historical Background
Information Technology
Technological Aspects of Road Pricing
E-fulfilment

3. Key Note Primary Research
INTRODUCTION
INCIDENCE AND FREQUENCY OF ORDERING
PROMPTNESS OF DELIVERY
INTENTION TO ORDER GOODS OVER THE INTERNET
IMPLICATIONS FOR THE DISTRIBUTION SECTOR

4. Competitive Structure
THE MARKETPLACE
MARKET LEADERS
Royal Mail Group PLC
Wincanton PLC
Tesco Distribution Ltd
Exel Europe Ltd
TNT UK Ltd
Exel UK Ltd
English Welsh & Scottish Railway Ltd
TNT Logistics UK Ltd
Salvesen Logistics Ltd
TDG (UK) Ltd
OTHER COMPANIES
Associated British Ports Holdings Ltd
British Airways PLC
Eurotunnel PLC
Kuehne+Nagel (UK) Ltd
Network Rail
Peninsular and Oriental Steam Navigation Company
OUTSIDE SUPPLIERS/CONTRACTORS
Vehicle Suppliers
Suppliers of Equipment and Engineering Services
Fuel Suppliers
MARKETING ACTIVITY
Main Media Advertising Expenditure
Other Marketing Activity
DHL
UPS
Exhibitions, Conferences and Trade Shows

5. Rail Transport
INTRODUCTION
KEY TRENDS
Competitiveness of Rail Freight
Domestic Rail Network Charges
Cross-Channel Rail-Freight Charges
The Second Railway Package
Corporate Activity
English Welsh & Scottish Railway Ltd
Freightliner Group
MARKET SIZE
SUPPLY STRUCTURE
MAJOR PLAYERS
English Welsh & Scottish Railway Ltd
Eurotunnel PLC
Freightliner Group
BUYING BEHAVIOUR
FORECASTS 2007 TO 2011

6. Road Transport
INTRODUCTION
KEY TRENDS
Declining Freight Intensity
Traffic Congestion
Night Deliveries by Lorry
UK Government Policy Towards Road Pricing
The Industry View
Congestion Charging
Road Pricing
Burns Inquiry
Corporate Activity
Salvesen Logistics Ltd
Wincanton PLC
MARKET SIZE
SUPPLY STRUCTURE
MAJOR PLAYERS
Exel UK Ltd
Salvesen Logistics Ltd
Tesco Distribution Ltd
Wincanton PLC
BUYING BEHAVIOUR
FORECASTS 2007 TO 2011

7. Pipelines
INTRODUCTION
KEY TRENDS
Health and Safety
Risk of Terrorist Attack and International Conflict
Corporate Activity
National Grid Gas
Shell
MARKET SIZE
SUPPLY STRUCTURE
MAJOR PLAYERS
British Pipeline Agency Ltd
Esso Petroleum Company Ltd
Government Pipeline and Storage System
BUYING BEHAVIOUR
FORECASTS 2007 TO 2011

8. Water Transport
INTRODUCTION
KEY TRENDS
Shipping Cartels
Global Demand for Shipping
Freight Rates
Freight Strategy — UK Inland Waterways
MARKET SIZE
SUPPLY STRUCTURE
MAJOR PLAYERS
BUYING BEHAVIOUR
FORECASTS 2007 TO 2011

9. Air Transport
INTRODUCTION
KEY TRENDS
Services Provided by Scheduled Airlines
Other Services
World Air Cargo Growth
MARKET SIZE
SUPPLY STRUCTURE
MAJOR PLAYERS
British Airways PLC
British Midland PLC (bmi)
Virgin Atlantic
BUYING BEHAVIOUR
FORECASTS 2007 TO 2011

10. Supporting Transport Activities
INTRODUCTION
KEY TRENDS
EU Port Services Directive
UK Ports Policy Review
Rail Freight Infrastructure
UK Airports
MARKET SIZE
SUPPLY STRUCTURE
MAJOR PLAYERS
Associated British Ports Holdings Ltd
BAA Ltd
Eurotunnel PLC
Kuehne+Nagel (UK) Ltd
BUYING BEHAVIOUR
FORECASTS 2007 TO 2011

11. National Post Activities and Courier Services
INTRODUCTION
KEY TRENDS
Royal Mail `Deregulation'
EU Postal Market Liberalisation
Online Shopping
MARKET SIZE
SUPPLY STRUCTURE
MAJOR PLAYERS
Deutsche Post World Net
Royal Mail Group PLC
Royal Mail
Parcelforce Worldwide
UPS
BUYING BEHAVIOUR
FORECASTS 2007 TO 2011

12. A European Perspective
EU INTERNATIONAL TRADE BY MODE OF TRANSPORT
EMPLOYMENT IN TRANSPORT SERVICES
THE UK'S POSITION IN THE EU MARKET
EU TRANSPORT POLICY
The 2001 White Paper
The 2006 Mid-Term Assessment
Areas of Slow Progress
Areas of Significant Progress
Transport Security
Future Demand

13. The Future
INTRODUCTION
FORECASTS 2007 TO 2011
MARKET GROWTH
FUTURE TRENDS
Demographics
EU Expansion
EU Transport White Paper Mid-Term Assessment
Liberalisation of Transport
Pricing
Trans-European Transport Networks
Technology
Freight Transport Operators' Concerns
Costs
Congestion Charging Schemes
Low-Emission Zones
Information Technology
Freight-Sector Convergence

14. Consumer Confidence
METHODOLOGY
KEY FINDINGS THIS QUARTER
THE WILLINGNESS TO BORROW
Confidence Slips Slightly
Significantly More Adults Are Willing to Borrow
SPENDING FROM SAVINGS
Little Change in Spending from Savings
Saving Grows in Relative Importance

15. Further Sources