Channel Tunnel freight services between Scotland and continental Europe: an examination of the opportunities and constraints

Applied Geography (1994)) 14,68-86

Channel Tunnel freight services between Scotland and continental Europe: an examination of the opportunities and constraints Alan C . McKinnon Department of Business Organisation, Heriot- Watt Business School, Riccarton, Edinburgh EH14 4AS, Scotland Abstract Recent research has revealed strong demand among Scottish manufacturers for improved international freight transport links. The development of new Channel Tunnel services will help to meet this demand. International road haulage, which currently handles the majority of Scottish unitized freight, will nevertheless derive relatively little benefit from the tunnel shuttle service. The new through-rail services will provide a much greater opportunity for Scottish exporters. Although not necessarily depressing freight rates, they should be able to offer shorter and more reliable transit times and thus strengthen the competitive position of the high-value, time-sensitive products which account for the majority of Scotland’s exports to Europe. The use of small-wheeled rolling stock on these services is likely to be sub-optimal, though, for Scotland, the enlargement of the rail loading gauge only as far as a London or Midlands railhead would prove more problematic. The paper assesses the likely utilization of the through-rail services and confirms, on the basis of new market research, that official forecasts are of the right order of magnitude. Doubt is expressed, however, about the ability of the Eurofreight terminal planned for North Lanarkshire to act as a nucleus for industrial and distribution development. The new Channel Tunnel freight services are likely to have a positive effect on the Scottish economy, though their influence on the volume and pattern of the region’s trade with Europe is likely to be modest. Scotland’s peripherality has been the subject of numerous studies over the past 30 years. Most of these have tried to establish whether Scottish manufacturers incur significantly higher transport costs than their counterparts in other regions (see, for example, Industry Department for Scotland 1981; Pieda 1984; Chisholm 1987). From this work has emerged a general consensus that Scottish firms are not materially disadvantaged by their freight transport costs, partly because these costs represent, on average, a small proportion of total industrial costs, but also because regional differences in average manufacturing expenditure on transport are relatively small. By concentrating on the costs of freight movement within the UK, however, earlier research is likely industrial competitiveness

to have in at

underestimated the least two respects.

effect

of peripherality

on

In the first place, little consideration has been given to the quality of freight transport services. Deficiencies in the availability, speed and reliability of these services can impair the competitiveness of manufacturing operations as much as higher costs. The late arrival of component supplies can disrupt a production line, while the slow delivery of finished products to customers can jeopardize sales. The sharp reduction in 0143-6228/94/01/0068-19

0 1994 Butterworth-Heinemann

Ltd

Alan C. McKinnon

69

inventory levels during the 1980s has reduced the tolerance of production and distribution systems to shortcomings in transport operations, particularly in the case of firms manufacturing higher-value goods (McKinnon 1992). Secondly, very few studies (for example, Tarry 1983) have attempted to measure Scotland’s peripherality at a European scale, despite the fact that Scotland exports a significantly larger proportion of its manufacturing output than the UK as a whole (CBI Scotland 1991). The creation of the Single European Market has made it necessary to reassess the region’s peripherality at a continental scale. Recent studies have indicated that, when more broadly defined to include transport links with the European mainland, Scotland’s peripherality is more of a problem than much of the earlier research suggested. A survey of around 300 Scottish manufacturers found that transport costs were considered to be the main barrier to marketing products in other European countries (Clarkson et al. 1989). In a more recent study, the Scottish Council Development and Industry (1992) discovered that roughly 50 per cent of Scottish manufacturers exporting to Europe considered freight transport to be a ‘significant barrier’. Particular concern has been expressed by firms in the electronics sector and this has led to the establishment of an organization called SPEED (Scottish Partnership in Electronics for Effective Distribution) to press for greater logistical support for Scottish electronics firms. Of the various measures that have been proposed to strengthen Scotland’s freight transport links with continental Europe, the development of new Channel Tunnel freight services is widely considered to offer the greatest potential. The remainder of this paper will examine the development of these services and assess the benefits they are likely to yield for both individual firms and the regional economy. Channel Tunnel freight services

Freight will move through the Channel Tunnel in two ways: 1. in lorries carried on shuttle trains operated by Eurotunnel; 2. in rail wagons travelling on through services between industrial centres in the LJK and other European countries,

Eurotunnel forecast that the shuttle services will handle around 55 per cent of the total freight tonnage passing through the tunnel. The proportion of freight with an origin or destination in Scotland using the shuttle, as opposed to the through-rail services, is likely to be much lower because Scottish firms, unlike their counterparts in southern England, will gain very little benefit from using them. In 1986, roughly 40 per cent of freight moved between Scotland and the European mainland in road trailers was routed via ports in Humberside and northeastern England (Department of Transport 1989). These ports can be reached comfortably within the legal driving day from most parts of Scotland and the crossing times, particularly on the Hull-Rotterdam and Hull-Zeebrugge routes, conveniently match the drivers’ obligatory rest periods. It is very unlikely that much of this traffic will divert to the Channel Tunnel shuttle services. Forecasts prepared by SETEC-Economic et al. (1985) suggest that, overall, the tunnel will displace only 12.8 per cent of roll-on roll-off (RoRo) traffic from North Sea routes to Belgium and Holland and 2.5 per cent from routes to northern Germany. As the probability of traffic being diverted will decrease with distance from the tunnel,

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Channel Tunnel freight services between Scotland and continental Europe

Scottish firms’ use of the North sea ferry services should be largely unaffected. An analysis of international road haulage costs, undertaken by Pieda (1989), supports this view. Using cost data supplied by the Freight Transport Association, and making generous assumptions about the likely effect of the Tunnel on cross-Channel freight rates, they concluded that routeing Scottish international road freight via Hull would retain its cost advantage over routeing via the English Channel. The ability of the services operated by North Sea Ferries to compete with the tunnel for Scottish lorry traffic will be enhanced by the introduction of new ‘superfreighters’ on the Hull-Rotterdam and Hull-Zeebrugge routes. These vessels will be larger, faster and more efficient, and will use a new coastal dock currently being constructed north of the Humber estuary which will permit direct access and accelerate turnaround times. The lorry traffic most likely to divert to the tunnel shuttle services is that which currently uses the short sea crossing via the Kent ports. In 1986, this constituted just over a quarter of trailer movements between Scotland and the European mainland (Department of Transport 1989). It is doubtful, however, whether many of the hauliers carrying this traffic will find it advantageous to use the tunnel. The time and cost savings resulting from the use of the tunnel shuttle service will be marginal for lorries moving the relatively long distances between Scotland and major European centres, though they should benefit from the greater reliability of this service. Time savings. The tunnel shuttle service’s time advantage over the ferries of around two hours represents a small proportion of the total transit time from central Scotland to places such as Paris (36 hours), Frankfurt (48 hours) and Genoa (65 hours). In practice, restrictions on drivers’ hours will prevent most Scottish hauliers from deriving any operational benefit from the reduced crossing times. The Channel ports are currently just within the daily driving range of factories and depots in central Scotland. On reaching the Channel, drivers must take their eight-hour rest period and would, therefore, be unable to translate the time saved on the check-in and crossing into productive driving time. The planned reduction in lorry speed limits to 90 kph (56 mph) across the EC will make it virtually impossible for lorries to travel legally between central Scotland and the Channel within a single driver’s shift. Average lorry speeds are also being reduced by mounting congestion on the motorway network, particularly in southeast England. For Scottish hauliers, these constraints could more than offset the time savings attainable on the Eurotunnel shuttle service and, coupled with the improvements to the North Sea Ferries’ operations outlined above, are likely to result in the Hull-Rotterdam and Hull-Zeebrugge routes capturing an increasing share of Scottish traffic. Cost savings. As Eurotunnel have as yet given no indication of the likely level of charges on their shuttle services, any estimates of possible cost savings must, at this stage, be fairly speculative. It has typically been assumed that Eurotunnel’s charges will be around 10 per cent lower than currently prevailing rates on the ferry services (SETEC-Economic et al. 1985; Pieda 1989; Spencer and Whitcombe 1992). On the basis of such an assumption, Pieda estimated that the potential cost savings for Scottish lorry traffic travelling to sample locations across Europe would be around 1.5-2.5 per cent (Table 1). It is doubtful that such a small proportional saving would attract much Scottish traffic onto the shuttle service. If savings of this magnitude were to materialize and were passed onto consignors, they would have a

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Alan C. McKinnon

Table 1. Estimated savings in international road haulage costs from the use of the Channel Tunnel shuttle service (1989 prices) for a 38 t driver-accompanied lorry with a two-axle tractor, a three-axle trailer and an overall length of 155 m

From Glasgow to:

Rome Marseilles Frankfurt K6ln Source:

Current cost (4)

Estimated cost using tunnel (S)

Saving (%)

1375 1030 930 790

135.5 1010 910 770

1.5 1.9 2.2 2.5

Pieda (1989)

negligible effect on the prices of the goods transported. When expressed as a percentage of the value of typical export consignments from Scotland, the savings appear minute (Table 2). Only if Eurotunnel’s shuttle charges drastically undercut the ferry rates on the cross-Channel routes, as hypothesized by Kay et al. (1989), will there be a major displacement of Scottish lorry traffic to the tunnel and will Scotland’s trade with Europe receive a significant boost. Through-rail services Much greater benefit should accrue to Scotland from the through-rail services to be operated by British Rail and its European counterparts. The through movement of rolling stock will yield substantial reductions in transit times and operating costs for freight travelling between Scotland and continental Europe. Time savings. British Rail claims that the Channel Tunnel will enable it to greatly accelerate its freight services between Scotland and the European mainland. Transit times between Glasgow and Paris, for example, will be reduced from over 100 hours at present to 22 hours. According to British Rail, its new services from Scotland will be able to provide much faster door-to-door delivery than driver-accompanied lorry services, particularly to more distant locations such as Table 2. Estimated savings in international road haulage costs expressed as a percentage of consignment value: one-way journeys from Glasgow to major European centre$

Type of product

Paper Whisky Computer equipment Average Scottish export consignment a Paris, Kiiln, Munich, Milan and Barcelona ’ Based on savings estimated by Pieda (1989)

Value of full trailer/container load (E)

Average saving as percentage of consignment valueb

20 000 60 000 110000

0.10 0.03 0.02

57 000

0.04

72

Channel Tunnel freight services between Scotland and continental Europe 90

80

B 0

Driver-accompanied lorry Channel Tunnel rail service

70

60

z 2 =

50

40

30

20

10

0 Paris

Figure 1. Comparative

Brussels

K&l-l

Avignon

door-to-door transit times from central cities. Source: British Rail

Scotland

Vienna

to five European

(Fig. 1). The reliability of international rail services should also be improved as the new Channel link will be free from weather restrictions and other port delays. Large reductions in transit times should be attainable despite the fact that freight trains will not run directly between central Scotland and major European centres. Even on the basis of the most optimistic traffic projections, Scotland, like most English regions, will not generate enough rail freight to justify direct, city-to-city services. It will be necessary, therefore, to consolidate Scottish freight traffic with that from other regions to build up adequately sized trains, or ‘train sections’, for particular destinations. Channel Tunnel freight trains travelling to and from Scotland will be ‘resectioned’ at an international terminal in Wembley. As these terminal operations will involve the interchange of train sections rather than the loose shunting of individual wagons, it should be much faster than traditional marshalling. To derive maximum benefit from the faster transit times, firms will want the timetabling of the new services to synchronize as closely as possible with production and distribution schedules throughout Europe. Where the transport operation is out of phase with the daily production and distribution cycle, the effective transit time can be extended by as much as a day. It will obviously not be possible to devise a network of Channel Tunnel services that are timed to satisfy equally the preferences of all regions. As peripheral areas like Scotland are typically at the ‘end of the line’ and the source of only modest amounts of traffic, firms located there are often given less convenient transport schedules than their counterparts in more central regions. As British Rail has yet to finalize its international freight timetable, it is too early to predict the regional impact of the new freight schedules. Vienna

Alan C. McKinnon

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Cost savings. The tunnel will eliminate the costs of shunting wagons on and off train ferries and enable the railway to exploit more fully its comparative advantage in the movement of long-distance freight. In theory, as distances to European centres are longer from Scotland than from other UK regions, British Rail should be able to maximize this long-haul advantage on international freight movements to and from Scotland. Reductions in operating costs may not be reflected in lower freight rates, however, because British Rail aims to price its new through-rail services in relation to the cost and quality of competing services. If, as it claims, it is able to offer shorter and more reliable transit times, it will undoubtedly charge premium rates in line with its commercial remit. Firms using through-rail services are therefore more likely to derive benefits indirectly through inventory reductions and faster customer delivery than directly through lower freight rates. Loading-gauge

constraint

Ideally, the physical integration of the British Rail network with that of mainland Europe should allow the free international movement of rolling stock. In practice, however, the dimensions of the British loading gauge (the amount of clearance at stations, bridges and tunnels) are smaller that those of other Euorpean rail networks, severely restricting the proportion of continental wagons that could travel safely on the British network. Several organizations, including the Scottish Association for Public Transport (1988), the Labour Party (Scotland) (1989) and NED0 (1991), have advocated the creation of a spinal route from the Channel Tunnel to central Scotland capable of carrying continental-sized rolling stock. This loading-gauge restriction can be eased by increasing track clearances, employing small-wheeled rolling stock or adopting a combination of these measures. The optimum strategy is determined primarily by two factors: 1. 2.

the types of traffic to be carried the cost of enlarging the loading

on the new international gauge.

freight

sevices;

These factors are interrelated because the investment in loading-gauge expansion would only be commercially justified if the larger types of rolling stock that could then be accommodated generated enough extra revenue to meet the capital costs. Railway vehicles have widely differing loading-gauge requirements: 1.

2.

Conventional wagons. It has been estimated that only around 1 per cent of all conventional wagons in use in Europe could travel safely within the UK loading gauge. This fleet of wagons built to the UK loading-gauge standard is, nevertheless, likely to meet the demand for conventional wagon services for the foreseeable future. It is anticipated that these wagons will simply transfer from the present Dover-Dunkerque train ferry to the Channel Tunnel. Containers. These are rigid, metal boxes, conforming to International Standards Organisation (ISO) dimensions. They are used mainly for deep-sea shipping operations, but also for longer-distance overland movements within Europe. British Rail has been able to carry the standard 8.5ft container on conventional flat wagons for many years. To be able to carry the new generation of 9 ft containers it has had to enlarge the loading gauge slightly and make use of small-wheeled, ‘low-deck’ wagons. To accommodate the larger containers, up to 9*5ft, within this enlarged SBl loading gauge, even smaller-wheeled vehicles would have to be used which would carry a significant speed and payload penalty.

74

3.

Channel Tunnel freight services between Scotland and continental Europe Swap-bodies. These are essentially vehicle bodies which can be easily transferred between ‘skeletal’ road trailers and railway flat wagons. Unlike containers, they are not stacked and therefore do not require a solid steel structure. This makes them much lighter and gives them a much higher ratio of payload to tare weight. They also come in various sizes, shapes and designs, giving carriers greater flexibility in the choice of unit (Smith 1992). Swap-bodies have been the fastest-growing intermodal unit in Europe in recent years and have been adopted by British Rail as the main unit for its new Channel Tunnel freight services. It will be able to accommodate swap-bodies up to 9ft high within the enlarged SBl loading gauge which now exsists on main lines to British Rail’s nine regional freight terminals. To fit within this expanded gauge, the swap-bodies will still have to be transported on ‘low-deck’ wagons.

The Department of Transport (1992) has estimated that lines raised to the SBl standard, including the west coast main line to Glasgow, will ‘accommodate over 90% of European containers and all commonly used European swap bodies’. They will not, however, be able to handle the remaining two types of vehicle: Accompanied

piggyback (also known as ‘rolling motorways’). The whole lorry, comprising trailer and tractor unit, is carried on a railway flat wagon. These combinations require the large clearances of the UIC C loading gauge. As this is a very expensive form of intermodal transport, it is confined to routes such as Alpine crossings, where movement by road is tightly controlled and where the rail leg of the journey is heavily subsidized. There is limited scope for developing this type of combined transport in the UK. Unaccompanied piggyback. Under this system only the trailer is carried on the rail wagon. The height of this combination is significantly lower than that of the accompanied piggyback vehicle as the trailer is generally lifted into a ‘well’ in the wagon. It can, therefore, fit within the lower UIC B+ loading gauge to which much of the continental rail network is built. Standard unaccompanied trailers cannot, however, be accommodated on the UK rail network, even on lines raised to SBl standard. This prevents British Rail from carrying conventional piggyback traffic. The main benefit of any enlargement of the loading gauge would be that it would open up new commercial opportunities for piggyback traffic. Both British Rail and the Department of Transport deny, however, that the potential revenue from this traffic would be great enough to justify the necessary capital outlay. British Rail has estimated this outlay to be around f3-4 x 10” for the conversion of routes from London to the West Midlands, the North West and Yorkshire. Further extension of the UIC B+ gauge to central Scotland would cost substantially more (Department of Transport 1992).

It has been suggested that loading-gauge expansion could be achieved much more economically. Steer, Davies and Gleave (1989), for example, proposed the development of a ‘Berne gauge’ route to Scotland which they estimated, on the basis of doctoral research by Backler (1987), would cost only f100 x 106. Their route is, however, largely non-electrified and highly circuitous, passing through Oxford, Birmingham, Newcastle and Kilmarnock. A more recent study by Dick et al. (1993) has estimated that a strategic network for piggyback services to all the main industrial regions, including central Scotland, could be created for only f300 x 106. They base their calculations on the assumption that, to cater for

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unaccompanied piggyback traffic, only vertical clearances need to be raised and to a lower piggyback (or ‘PB’) gauge rather than the full UIC B+ gauge. Dick et al. argue that, contrary to British Rail’s market projections, there would be a large potential market for piggyback services, sufficient to justify the investment in loading-gauge enlargement. They may, however, be overestimating the demand for international piggyback services. After all, on the European mainland the share of intermodal freight traffic carried by unaccompanied piggyback services has been declining, while that of the swap-body has been increasing (UIRR 1991). It is also doubtful whether piggyback services would achieve significant market penetration on routes to more peripheral areas, such as Scotland. The carriage of road wheels and lorry chassis in piggyback combinations imposes a signficant weight penalty relative to the swap-body. This gives the swap-body a cost advantage which increases with the length of haul. There may not, therefore, be enough demand for piggyback services to and from Scotland to justify even the much cheaper loading-gauge modifications advocated by Dick et al.

Concern has been expressed in Scotland over the possibility that lines of Berne gauge standard will be established only as far as London or the Midlands. This would be likely to result in the development of a major railheading operation at the break-of-gauge point where Channel Tunnel freight moving to and from more northerly regions would be transhipped between road and rail. Through-rail services to these regions would then lose potential traffic, reducing their frequency and perhaps even undermining their viability. In April 1992, the Department of Transport announced that the new high-speed Channel Tunnel rail link through Kent would be designed to carry freight as well as passenger traffic and probably be built to the UIC B+ gauge. British Rail (1991) had earlier acknowledged that this ‘could encourage railheading at the London terminal to the detriment of through freight services to and from the regions’. This would, however, be quite a long-term development as the high-speed rail link is unlikely to be completed before the end of the decade. The relatively long hauls between southern England and Scotland would also allow the through-rail services to compete effectively with domestic road haulage on this route, minimizing the extent to which Scottish traffic would be railheaded at London.

Utilization of the new through-rail

services

Several attempts have been made to forecast the freight volumes likely to be handled by the new Channel Tunnel freight services to and from Scotland. Most of these forecasts have been based on data collected in ‘1986 in a survey of the origins and destinations of UK international trade, hereafter referred to as the ‘1986 O/D survey’ (Department of Transport 1989). This survey, which was based on a O-5 per cent sample of customs and excise returns, monitored the movement of around 150000 international consignments. Table 3 summarizes the earlier forecasts made by the Scottish Freight Working Party (SFWP) (1989), Pieda (1989)) Pieda/ Maritime and Distribution Systems (1990), British Rail (1989) and TecnEcon (1991) on the basis of the 1986 figures. These forecasts differ significantly, despite the fact that they were extrapolated from the same traffic data for the base year (1986). The differences are attributable mainly to variations in two parameters: the projected rate of traffic growth and the proportion of traffic likely to use the through-rail services.

76

Channel Tunnel freight services between Scotland and continental Europe

Table 3. Forecasts of the volume of freight traffic likely to be carried by through-rail services between Scotland and the European mainland (both directions) Source

Year

Freight tonnage

Scottish Freight Working Party Pieda British Rail PiedaiMaritime and Distribution TecnEcon

1989 1989 1989 1990 1991

392 000 370 000 500 000 500 000 762 000”

Systems

Uincludes 550 000 t of unitized and 212 000 t of non-unitized traffic

Growth of international

traffic

The initial, national-level forecasts of Channel Tunnel rail traffic, prepared by MVA consultants for British Rail, assumed that there would be no growth in unitized freight between the UK and the near Continent between 1984 and 1993 (British Rail 1988). These forecasts were soon invalidated by the 25 per cent increase in this traffic by 1989 (McKinnon 1990). The first regionally disaggregated forecasts anticipated a substantial growth in traffic volumes. Pieda (1989), for instance, projected a 40 per cent growth in total Scotland-EC traffic between 1986 and 1993, which they raised to 50 per cent in a later study. TecnEcon’s (1991) estimate of future traffic growth was more conservative, averaging 2 per cent per annum between 1987 and 2000. These forecasts were little more than guesstimates and made no special allowance for the likely impact of the Single Market on trade volumes. They also failed to take account of changes in the average value: weight ratio of Scotland’s exports to Europe. It is possible to monitor the changing composition of Scottish exports of manufactured goods using survey data compiled annually by the Scottish Council Development and Industry (SCDI) (1991). Although these measure only the value of exports, it is possible to translate the monetary values into tonnages using conversion factors derived from the 1986 O/D survey data. Comparison of the value and tonnage of manufactured exports in the two years indicates that, while their value rose by 46.7 per cent, their weight increased by only 6 per cent. The main reason for the disparity was that most of the export growth over this period was of products with high value:weight ratios, particularly electronic and data processing equipment. This trend, coupled with the depressed state of the European economy in the early 199Os, makes it very unlikely that the total Scotland-EC freight market, in terms of tonnage, will expand at the rates assumed by the Pieda forecasts. A lo-20 per cent growth over 1986 volumes would seem more credible. Rail’s share of international

traffic

British Rail has predicted that its Channel Tunnel rail services will capture 15-20 per cent of all unitized freight moving between Britain and continental Europe by the year 2000 (British Rail 1993). This proportion is likely to be subject to regional variation, primarily because rail’s comparative advantage increases with length of haul. British Rail is, for example, anticipating that it will secure 25 per cent of the

Alan C. McKinnon

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Scotland-EC freight market by 2000. The railway’s share of international traffic to and from a particular region will not simply be a function of distance from the tunnel. It will also be influenced by the composition of the region’s trade, the pattern of its European trading links and the relative quality of its through-rail services. Pieda and TecnEcon have made widely divergent predictions of the proportion of Scottish-EC freight traffic likely to be carried on the through-rail services in the early years of Channel Tunnel operation. Pieda’s (1989) initial traffic forecast assumed a 15 per cent market share, though this was raised to ‘in excess of 20 per cent’ in a study undertaken the following year. Unlike Pieda, TecnEcon (1991) has estimated the proportions of traffic likely to be displaced onto Channel Tunnel rail services from existing routes. When aggregated, these estimates constitute a total market share of approximately 41 per cent. Both the Pieda and TecnEcon forecasts are highly subjective and must, accordingly, be treated with great caution. It has been possible to derive a more empirically based forecast using data compiled in 1991 to establish the preferrred location for British Rail’s new Channel Tunnel rail freight terminal in Scotland. By pooling the results of three market research studies [conducted by TecnEcon, John G. Russell Ltd and McKinnon and Lean (1991)], export flow data were obtained for a total of 89 plants/warehouses operated by 74 firms. Integration of data from the three separate studies was complicated by the different sampling frames, survey methods and questionnaires employed. (Approximately 20 per cent of the firms were resurveyed to improve the consistency of the combined database.) These firms were responsible for over half of all Scottish manufactured exports to Europe in 1991. They were selected from a total sample of around 160 manufacturers chiefly on the basis of three criteria: involvement in exporting, suitability of products for rail transport and willingness to use the new Channel Tunnel rail service. These firms are likely, therefore, to be the main sources of export traffic for this service. For each of the 89 export-despatch points operated by these firms, European export flow data were obtained, expressed as number of full loads per annum (40-ft trailers/containers). These figures were converted into tonnages assuming a standard payload of 15 t. (Unpublished data from the Department of Transport’s Continuing Survey of Road Goods Transport for 1991 indicate that the average load size for articulated lorries with a gross weight under 33 t was 14.2 t, and for articulated vehicles over 33 t, 16.6 t.) They were also scaled down to take account of the fact that the Channel Tunnel rail services from Scotland are only likely to be competitive in the case of traffic bound for the southern half of Europe (France, Belgium, southern Germany, Switzerland, Austria, Italy, Spain and Portugal). roughly 63 per cent of Scotland’s According to the 1990 SCDI survey, manufactured exports to Europe were sold within this Channel Tunnel ‘hinterland’. In the absence of information about the rates and transit times for the new rail services, the firms were unable to specify what proportion of their European traffic they would send by rail. The share of export traffic likely to be handled by the new rail services was therefore estimated subjectively. This was done on an individual company basis with respect to four criteria: 1. 2. 3.

firms’ responses to questions about their willingness to use the new services; results of a survey undertaken by PiedaiMaritime and Distribution Systems (1990) of the modal preferences of Scottish firms in key export sectors; the extent to which firms currently used rail for either internationl or domestic freight movement;

78 4.

Channel Tunnel freight services between Scotland and continental

Europe

sectoral averages for the proportion of international unitized freight exported from Scotland in containers or rail wagons, calculated on the basis of the 1986 O/D survey data.

This exercise yielded a weighted average rail share of 38 per cent. This figure cannot be compared directly with the proportions estimated by Pieda and TecnEcon as they related to the entire Scotland-EC freight market, whereas this weighted average applies to the subset of firms that have actually expressed an interest in using the new Channel Tunnel rail services. Figure 2 shows the 89 export-dispatch points weighted in relation to the estimated volume of European export traffic that they might contribute to the new Channel Tunnel rail services. The total annual volume of rail traffic likely to be sourced from these firms, 245000 t, is slightly higher than the export volumes forecast by the SFWP in 1989 on the basis of macro-level assessments (212000 t). The figure of 245000 t may, nevertheless, underestimate the potential traffic in 1993 as it makes no allowance for the growth in exports between 1990 and 1993 or for additional traffic from firms that did not participate in the survey. It is not possible to confirm the forecasts of import volumes on a similar empirical basis as the market research did not enquire about import traffic. Only the forecasts

Figure 2. Location of major export-dispatch

points included in the market research studies

Alan C. McKinnon

79

prepared by the SFWP provide separate figures for exports and imports. They indicate that rail traffic levels will be reasonably well balanced, with import tonnage representing approximately 85 per cent of export tonnage. In 1986, however, the amount of unitized freight exported from Scotland to the EC exceeded the volume of direct imports by roughly 27 per cent (Scottish Development Agency 1990). The main reason for this imbalance appears to be that many of the foreign-produced goods sold in Scotland are channelled through warehouses in other parts of the UK. In the case of these ‘indirect’ imports, the final leg of the journey into Scotland is deemed to be a domestic freight movement. It appears that international flows have been particularly unbalanced in the case of British Rail’s container services to Europe. It is understood, for example, that over the first six months of 1991, the ratio of export to import traffic on services between central Scotland and France was around 100: 1. Two developments may strengthen import flows on the new tunnel rail services and help to redress this imbalance: the diversion of direct import traffic from other modes and routes, and the conversion of indirect imports into direct imports. Diversion of direct import traffic from other modes and routes. Steer, Davies and Gleave Ltd (1987) forecast that 106-206 lorry loads a day moving between Scotland and continental Europe will be transferred to the Channel Tunnel rail services. This is proportionally a much larger modal shift than in the case of other UK regions. Pieda (1989) believe that the unitized import traffic most likely to divert to through-rail services is that currently carried in unaccompanied trailers on cross-Channel routes. Consultations with several Scottish freight forwarders have suggested, however, that while the new rail service is likely to win some of this traffic, any modal shift will probably be marginal. As most of these imports are purchased by Scottish firms on a delivered price (‘delivered domicile’) basis, their movement into the UK is tightly controlled by foreign freight forwarders who tend to have a strong commitment to road haulage. The deregulation of international road haulage within the EC may also constrain any modal shift by depressing haulage rates (Cooper et al. 1991). Conversion of indirect imports into direct imports. The creation of the Single European Market and development of the Channel Tunnel is encouraging manufacturers to restructure their European logistical operations. Some foreign manufacturers currently holding stock in the UK, often at warehouses in southeast England or the Midlands, are likely to centralize their inventory in northern France or the Low Countries and distribute their products from there to the UK market via regional transhipment depots. Such firms could employ the new through-rail services and use British Rail’s Channel Tunnel freight terminals as bases for regional distribution. This would result in both a modal switch from road to rail and the conversion of indirect imports via a central UK warehouse into direct imports from a foreign distribution point. Even allowing for these developments, however, the SFWP forecasts of import flows on Scottish Channel Tunnel rail services appear optimistic. A shortfall of international traffic in the inward direction will make it necessary to recover a larger proportion of operating costs from export traffic in higher freight rates and inhibit the longer-term development of the services. To summarize, the combined results of the three market research studies suggest that the SFWP forecasts underestimate the volume of export traffic likely to use the

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Channel Tunnel freight services between Scotland and continental

Europe

new international rail services. Uncertainties about the future volume of import traffic make it very difficult to predict the overall utilization of the new services. Even if the ratio of inbound to outbound traffic were as low as 1:2, however, British Rail’s forecast of 500000 t a year would be of the correct order of magnitude. British Rail estimates that to be viable a daily Channel Tunnel freight service will require freight flows in excess of 150 000 t annually in each direction. This suggests that even if the actual flows fall significantly short of 500000 t, there will still be sufficient traffic to generate at least one dedicated Channel Tunnel train each working day, the minimum frequency of service demanded by most of the larger industrial customers. In forecasting freight volumes, both Pieda and the SFWP assumed that British Rail would maximize the operating advantages of the new services and market them vigorously. It was also recognized that British Rail’s ability to win international traffic would partly depend on the nature of the terminal facilities provided within Scotland for Channel Tunnel rail freight. Terminal

facilities

The development of Channel Tunnel freight facilities has generated considerable debate in Scotland in recent years. Discussion focused initially on the number of depots required. In 1988, British Rail indicated that it wished to preserve the status quo and handle Channel Tunnel rail freight at the existing network of railhead depots scattered across Scotland (McKinnon 1990). This would have enabled it to continue distributing and collecting international freight traffic by rail within Scotland and to maintain the relationships that it had built up with the road hauliers operating many of the railside depots. Given British Rail’s chronic lack of capital and uncertainty about future volumes, such a low-investment and low-risk strategy was clearly appealing. In sharp contrast, several organizations, most notably the Scottish Council Development and Industry and the Convention of Scottish Local Authorities, advocated the establishment of a new Channel Tunnel freight terminal in central Scotland at which road-rail interchange facilities and related activities would be concentrated. They feared that, in the absence of such a terminal, a significant quantity of Scottish export traffic might ‘leak south’ to the new international rail terminals being proposed for Wakefield and Doncaster. This, it was claimed, could constrain the growth of through-rail services from Scotland and deny the region the development benefits likely to accrue from the establishment of a major rail terminal. The radical restructuring of British Rail’s rail freight operations in 1990-91 effectively resolved this issue. It involved the closure of the loss-making Speedlink service and its consequent withdrawal from the wagonload freight business. As much of the rail freight moved on the Scottish rail network, particularly on lines north of the central belt, was tendered by the wagonload, the demise of the Speedlink system has had a major effect on freight operations north of the border, as predicted by the Centre for Local Economic Strategies (1990). It has resulted in the run-down and, in some cases, closure of the general railhead depots that catered primarily for wagonload traffic and which had been considered to be possible road-rail interchange points for Channel Tunnel traffic. The Speedlink closure also confirmed that British Rail no longer wished to provide an intraregional rail feeder service for wagonload traffic. The transhipment of consignments between road and rail is now concentrated at a small number of railhead terminals, with most of their traffic collected and delivered by road.

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Road-rail interchange is being facilitated by greater use of intermodal units such as swap-bodies and bimodal trailers capable of traveliing on both the road and rail networks. Following the adoption of this new rail freight strategy, British Rail reversed its earlier policy on Channel Tunnel terminal provision in Scotland and proposed the development of a new centralized facility, one of the nine regional ‘Eurofreight’ terminals to be set up in the UK. Given the concentration of Scotland’s industrial capacity in west central Scotland, British Rail decided to locate the new terminal in the Strathclyde region, in the vicinity of Glasgow. According to the SFWP (1989), around 44 per cent of Scotland’s Channel Tunnel rail freight would have an origin or destination in this region (Table 4). Although the choice of region was uncontroversial, the selection of a location within Strathclyde proved much more contentious. The two main candidates were Mossend, near Motherwell, beside British Rail’s principal Scottish marshalling yard, and Hillington, to the west of Glasgow, adjacent to Deanside Transit, Scotland’s largest railhead terminal. Research undertaken for British Rail found that the difference in the cost of delivering exports by road to these two locations would represent a very small proportion of the total cost of European distribution and a minute fraction of the value of typical export consignments (McKinnon and Lean 1991). Differences in road delivery times would also have been very marginal. This study concluded that, given the relative proximity of Hillington and Mossend, their general suitability as terminal locations and their acceptability to the majority of Scottish exporters and freight forwarders, the choice of site would have little bearing on the likely usage of the new Channel Tunnel rail freight services. In October 1991, British Rail announced its decision to establish the Scottish ‘Eurofreight’ terminal at Mossend. One of the major attractions of this site was the availability of 800 acres of prime development land on an adjoining site, enabling the developer, Amec Regeneration, to fund the construction costs of the new rail terminal out of the projected development gain. It has also made the terminal a key element in the economic regeneration strategy for north Lanarkshire, following the closure in June 1992 of the Ravenscraig steel mill. The Lanarkshire Development Agency (1991) has forecast that the Eurofreight terminal and adjoining industrial/distribution development will create around 8000 jobs over the next 15-20 years. Very few of these jobs, probably no more than 30, will be created directly by the rail terminal. The remainder will be created in the adjacent ‘freight village’ and industrial estate. The empioyment forecast, which was derived from the TecnEcon (1991) study, assumed that all the available land will be developed, and was based on ‘typical employment densities for different types of land uses, incorporating a mix of manufacturing, distribution and service companies’. Table 4. Forecast volumes of freight traff% for Scottish through-rail breakdown ( lo3 t) Strathclyde

Exports Imports Total

Lothian

N. Scotland

services (1993): regional

S. Scotland

Total 212 180 392

80

21

88

23

94

28

51

7

174

49

139

30

Source: Scottish Freight Working Party (1989)

82

Channel Tunnel freight services between Scotland and continental Europe

In press reports and publicity material, it has been claimed that the new Mossend terminal will be an important nucleus for industrial and distribution development in north Lanarkshire. Similar claims have been made about the comparable Eurofreight terminal being planned for Wakefield. In its evidence to the public inquiry on the ‘Port Wakefield’ development, Wakefield District Council (1992) cites Coca Cola and the Japanese electrical goods manufacturer Pioneer as examples of firms whose decision to locate at Wakefield was influenced by the prospect of a Channel Tunnel rail terminal being located there. These firms are considered to be ‘just the tip of the iceberg’ (Wakefield District Council 1992: 11). Proximity to an international rail terminal is, however, only one of a wide range of factors that will influence future industrial location decisions, and is probably a fairly minor one. Even among firms with little immediate requirement for rail services, however, the presence of such a terminal may be taken as a sign of confidence in the area and confirmation that it is a strategic location. In assessing the likely locational attractions of Eurofreight terminals, such as those planned for Mossend and Wake~eld, it is impo~ant to consider the types of international traffic likely to use these facilities. Channel Tunnel freight traffic to and from Scotland will fall into three categories. 1.

2.

3.

Zntermodal units. Most of the traffic will be conveyed

in intermodal units moved on small-wheeled wagons. The daily intermodal service will cater for a wide range of manufactured goods, particularly more valuable, time-sensitive products that require a quick transit. As the essence of any intermodal system is to provide a fast and efficient transfer of sealed units between road and rail, it would seem that firms dispatching or receiving such traffic should derive little operational benefit from locating factories or warehouses beside the terminal. At present, the maximum permitted weight of intermodal units carried by lorry is much lower than the weight that can be transported on the rail network. If this difference in maximum weights were maintained, firms transporting products of high density would find it advantageous to locate beside the rail terminal. Intermodal units with payloads in excess of the legal maximum weight on public roads could then be transported over private on-site roads to however, is proposing to increase the their premises. The government, maximum weight of lorries carrying intermodal units to and from rail terminals to 44-t, in line with current practice in other EC countries (Department of Transport 1993). If implemented, this measure may reduce the locational attaction of an intermodal terminal such as Mossend. Conventional wagons. Some international freight, such as white goods from Italy and fruit from Spain, may continue to move in conventional wagons and require off-loading and transhipment at railside depots. Since British Rail no longer offers a rail-based collection and distribution service for wagonload traffic throughout Scotland, firms relying heavily on this type of traffic will have a strong incentive to locate close enough to the terminal to install a direct rail siding. It is anticipated, however, that only a relatively small proportion of Scottish Channel Tunnel traffic will be carried in conventional wagons, Trainload traffic. The main, and possibly only, example of such a service likely to materialize in Scotland, is of imported cars destined for a new car distribution centre, whose location has yet to be determined. This traffic will bypass the new terminal.

It is questionable, therefore, whether the new Eurofreight terminal will exert as strong a pull on industrial and distribution development as currently claimed by the

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development agencies. On the basis of the available evidence, the most that can be said is that the terminal will enhance the development prospects of north Lanarkshire by offering firms locating there an extra transport option and encouraging businesses to perceive the area as being well integrated into the European rail freight network. Wider benefits to the Scottish economy In a discussion of the regional impact of the Channel Tunnel, Vickerman and Flowerdew (1990: 69) observe that ‘identifying a specific independent Tunnel effect is always going to be difficult even in the most affected regions. In more distant regions it becomes virtually impossible.’ Nevertheless, they concede that the tunnel could promote a ‘lessening of concentration and a renaissance of the peripheral regions of Europe’. Hart (1990), on the other hand, outlines the school of thought which sees the ‘the Tunnel as almost irrelevant for Scotland’ and contends that Scotland might derive greater benefit from the development of direct, roll-on roll-off links with mainland Europe. Only Pieda (1989) have so far made a wide-ranging assessment of the likely effect of the Channel Tunnel on the Scottish economy. They note that while, overall, the tunnel will have greater impact on the movement of passengers than on freight transport, the opposite will apply in the case of Scotland, with most of the gains resulting from the development of the new international rail freight services. To maximize the regional benefit from the tunnel, Scottish firms must therefore increase their relative use of these services. In some cases, this may entail the readjustment of marketing and logistical strategies (McKinnon 1989). It may, for instance, involve increasing the proportion of exports sold on a delivered price basis, altering order cycles or relocating inventory. Even allowing for a significant transfer of European exports to rail, however, Pieda still expect the net effect of the tunnel to be marginal. They recognize that improvements in the transport of exports to Europe will be at least partly offset by the easing of import flows both into the Scottish market and into ‘third markets’, such as southeast England, from which they might displace Scottish-produced goods. Overall, Pieda’s ‘mid-estimate’ of the net effect of the tunnel on the Scottish economy is that it will add &20 x lo6 (at 1989 prices) to the regional GDP, equivalent to an increase of only 0.06 per cent (Scottish Office 1992), and create around 1000 extra jobs. This estimate is highly speculative and based on the assumption that firms located in Scotland will adapt their European logistical operations to take advantage of the tunnel. No attempt has been made to forecast the amount of additional inward investment, if any, that will be attracted to Scotland as a result of the Channel Tunnel. One of the disadvantages of the Pieda study is that it assessed the impact of the tunnel in isolation, ignoring the effects of the Single European Market and general improvement of European transport links. In a study of the regional impact of the Channel Tunnel sponsored by the European Commission, ACT Consultants et al. (1992) examined the combined effects of the tunnel and the upgrading of other strategic European routes. They concluded, with reference to Scotland, that while ‘the Tunnel is making it less peripheral . . . the extension of the network on the continent is likely to benefit more central regions and to further increase the gap between core and periphery’. Their economic development model suggests that, within the context of overall transport improvement, the tunnel should have a very marginal effect on Scottish industry, with only the beverages sector (mainly whisky) deriving any significant benefit.

84

Channel Tunnel freight services between Scotland and continental Europe

Conclusion The benefits that Scotland will obtain from the Channel Tunnel are likely to differ from those enjoyed by other, more central regions. It will derive much less benefit from improvements in cross-Channel passenger services and from the lorry shuttle service, but considerably more from the new international rail freight services. These should offer significant time savings, particularly on transits to central and southern Europe, and be a very welcome development for manufacturers of the high-value, time-critical products which now constitute the majority of Scottish exports to EC countries. In 1992, only 15 per cent (by value) of exports of electronic equipment from Scotland were transported by rail (SPEED Ltd 1992). It is predicted that the value of electronics exports handled by rail will increase by around 20 per cent over the next five years, partly as a result of the development of new Channel Tunnel services. It seems very likely that Scotland will generate enough European freight traffic to support at least one train of intermodal units a day. If the current directional imbalance in unitized traffic persists, it may constrain the future expansion of this service, though changes in the pattern of import flows may help to correct the imbalance. The development of through-rail freight services will also be inhibited by the restricted loading gauge on the British Rail network. It would undoubtedly be preferable for Scotland to be connected to the tunnel by a line upgraded to UIC B + standard. It is doubtful, however, whether the required investment in loadinggauge expansion would earn an adequate rate of return. Enlargement of the loading gauge along only part of the route could have an adverse effect on the development of rail freight services from Scotland. As there is very little prospect of any change being made to the loading gauge in the foreseeable future, the success of the new rail freight operation will depend much more on its cost, quality and marketing. It is extremely difficult to assess the impact of the new Channel Tunnel freight services on the Scottish economy. As any reduction in international freight rates is likely to be small and represent a tiny fraction of consignment value, the price competitiveness of Scottish exports will be largely unaffected. Export sales may receive more of a boost from increases in the speed and reliability of delivery. Scotland’s integration into a high-speed European rail freight network should also help to promote inward investment. Against these benefits, however, must be set any resulting increase in import penetration or tendency for the tunnel to centralize economic activity in southeast England and on the European mainland. The effects of the Channel Tunnel will also be felt at a smaller spatial scale in the vicinity of the new Eurofreight terminal at Mossend. Although British Rail’s terminal strategy and choice of location are in keeping with Scottish industrial requirements, the terminal’s local development potential has probably been exaggerated. Only when the tunnel opens and the freight begins to flow, however, will its true impact become apparent. References Consultants, IRPUD and Marcia1 Echenique and Partners Ltd (1992) The regional impact of the Channel Tunnel throughout the Community. Brussels: DGXVI, Commission of the European Communities. Backler, G.C. (1987) The relationships between railway loading gauge constraints and mode split in the Anglo-European unitised freight market. Unpublished PhD thesis, University of Leeds. ACT

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British Rail (1988) Unpublished evidence presented to the Scottish Freight Working Party. British Rail (1989) International services for the United Kingdom. London: British Rail. British Rail (1991) British Rail’s comparison of routes: report to government. London: British Rail. British Rail (1993) Private communication. CBI Scotland (1991) Just in time to meet the transportation and communication needs of Scotland in the 1990s. Glasgow: CBI Scotland. Centre for Local Economic Strategies (1990) R avenscraig, Speedlink and the future of Scotland’s railways. Manchester: Centre for Local Economic Strategies. Chisholm, M. (1987) Regional variations in transport costs in Britain, with special reference to Scotland. Transactions of the Institute of British Geographers, 12, 303-314. Clarkson, A.H., Stone, M.A. and Shaw, N. (1989) The Peat Marwick McLintock survey of Scottish manufacturing. Glasgow: Peat Marwick McLintock. Cooper, J., Browne, M. and Peters, M. (1991) European logistics: markets, management and strategy. Oxford: Basil Blackwell. Department of Transport (1989) Origins, destinations and transport of UK international trade, 1986. London: Department of Transport. Department of Transport (1992) M oving freight by rail: loading gauge. London: Department of Transport. Department of Transport (1993) H eavier lorries for combined roadlrail transport: a consultation document. London: Department of Transport. Dick, A., Baker, D. and Garrett, M. (1993) The loading gauge issue. Report prepared for Eurotunnel, London. Hart, T. (1990) Transport options for an autonomous Scotland. Glasgow: Scottish Centre for Economic and Social Research, Calton Series Paper No. 3. Industry Department for Scotland (1981) Transport costs in Scottish manufacturing industry. Scottish Economic Bulletin, 22. Kay, J., Manning, A. and Szymanski, S. (1989) The Channel Tunnel. Economic Policy, 8, 212-34. Labour Party (Scotland) (1989) It’s a long way to Dover: Scotland and the Channel Tunnel-what must be done. Glasgow: Labour Party (Scotland). Lanarkshire Development Agency (1991) Mossend: Scotland’s Channel Tunnel freight terminal. Motherwell: Lanarkshire Development Agency. McKinnon, A.C. (1989) Scotland’s freight links with Europe in the 1990s. Royal Bank of Scotland Review, 163, 33-43. McKinnon, A.C. (1990) The development of Channel Tunnel freight services to and from Scotland. In The significance of the Channel Tunnel for Scotland (T. Hart, ed.), pp. 18-26. Glasgow: Scottish Transport Studies Group, Occasional Paper No. 1. McKinnon, A.C. (1992) Manufacturing in a peripheral location: an assessment of the logistics penalties. International Journal of Logistics Management, 3(2), 31-48. McKinnon, A.C. and Lean, D. (1991) European intermodal terminal for Scotland. Unpublished report prepared for Railfreight Distribution, London. NED0 (1991) Freight lines to Europe. London: National Economic Development Office, Construction Industry Sector Group. Pieda (1984) Transport costs in peripheral areas. Edinburgh: Industry Department for Scotland, ESU Research Papers No. 9. Pieda (1989) Channel Tunnel: the impact on Scotland. Glasgow: Scottish Development Agency. Pieda/Maritime and Distribution System ~(1990) Transport and distribution in Scotland. Edinburgh: British Rail/Scottish Development Agency. Scottish Association for Public Transport (1988) Eurorail North: rail routes to the Channel Tunnel from Scotland and Northern England. Glasgow: Scottish Association for Public Transport. Scottish Council Development and Industry (1991) Scottish manufactured exports in 1989190. Glasgow: SCDI.

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