Does the Autumn Statement bring crumbs of comfort for logistics sector
There are few occasions that we look back on as pivotal in the political and economic short term future of the UK. George Osborne’s Autumn Statement is definitely one of them. He told everyone how serious it is; the economic challenges from the Eurozone on the UK economy, the global slowdown, lack of confidence in UK consumer spending and the caution by banks to lend to business. Not a pretty picture for 2012. Being an avowed Keynsian, I was relieved that he did not slam on the borrowing brakes any harder otherwise we will be in deep recession in 2012 without doubt.
But were there crumbs of comfort for the logistics and transport sector? The most obvious short-term gain, if you can call it that, is the cancellation of the 3p rise in fuel duty. This will at least allow hauliers to plan their operations over the next six months with a little more certainty in an area that represents over 35% of their total costs. However, it does strike me as odd having driven round the country a lot of over the last three weeks that petrol at Asda in Bolton was £1.27.9p, Yorkshire £129.9p, the West Midlands £131.9, other regions £134.9-£138.9 and of course at motorway service areas £1.42. This range of prices is playing into the hands of the Government’s fuel duty policy advisers . As it clearly indicates a low elasticity of demand for fuel. A high elasticty of demand would mean a 5% rise in prices leading to a 5% drop in sales. Not happening. So don’t hold your breath on fuel duty not going up later in 2012.
A high quality infrastructure is vital for UK plc. Bringing forward 500 projects, including many road improvement schemes, in an infrastructure plan should also help improve efficiency of supply chains throughout the UK and reduce haulage and distribution costs. Sounds great on paper but can much of this be delivered over the next two years? Not a lot if our recent experiences tells us anything. Let’s go for the low hanging fruit. Bringing forward de-congestion schemes on 10 of the biggest bottle necks on UK motorways by using the hard shoulder as on the M42. This is a cost effective and achievable medium term gain. So let’s get on with it.
Infrastructure plans in the past have often foundered on problems of short term financial constraints binning capital expenditure plans. What the country needs is an independent Infrastructure Responsibility Board, independent of Government proposing infrastructure needs of the economy not what is politically expedient at the time. We must not waste this infrastructure window of opportunity that is supported by most politicians and build the wrong things!
However, one major piece of infrastructure that is going full steam ahead, unencumbered by government interference by being privately financed is the brand new port on the Thames, called London Gateway. Funded by DP world, the new port is the size of the whole of the City of London and is due to open (phase1) in October 2013. it is an impressive development. I have been taken round. It will be capable of unloading up to six of the largest containerships being built at the same time. But even though it was a brown field development on the old site of the Shell Haven oil refinery, London Gateway still had to re-locate many thousand water voles and develop other habitats to meet environmental concerns and keep warehouse schemes within strict planning guidelines.
The associated logistics park, several times larger than the current Magna Park, will be an attractive location for retailers and manufacturers that can see portcentric operations as their solution for their 21st century supply chains.
With Memorandums of Understanding already signed with shipping lines two years before it opens, demonstrates that London Gateway is meeting the needs of the customer base and will relieve the pressure on other South East Ports as imports continue to grow.
Let us hope ‘Boris Island airport’ in the Thames estuary to replace Heathrow is carefully thought through, otherwise it could kill the UK as a major air hub stone dead. Infrastructure improvements are too important to leave only in the hands of politicians!!