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United Kingdom Freight Transport Report 2014 - New Market Report

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2014-01-03 13:57:27 - Fast Market Research recommends "United Kingdom Freight Transport Report 2014" from Business Monitor International, now available

The UK Recovery Is On its Way

After stagnation in 2012 and weak growth in 2013, there are signs that the UK economy may in 2014 be shaking off its torpor and beginning to stretch its legs. Since around mid-2013, BMI has been detecting a change in sentiment, reflected principally in the services purchasing mangers' index (PMI) which in August 2013 soared to 60.5, close to the previous high recorded seven years earlier. Manufacturing PMI also improved. With something of a lag, the real economy showed signs of following the sentiment. UK GDP rose by 0.8% quarter-on-quarter (q-o-q) in Q313, the fastest pace of growth in three years. The hard-hit construction sector showed signs of recovery, reflecting public investment and the

residential housing Help to Buy scheme. We have some reservations about how strong this recovery will be. We want to see further confirmation that the real economy is following the sentiment (they have become decoupled in the past). We also want further evidence on whether the recovery is being driven by investment and exports (good news in terms of how sustainable it will be) or by household and government spending (less good news because it is likely to be more short term). That said, BMI feels sufficiently bullish to have raised our 2013 GDP estimate to 1.5% growth; we forecast that the economy will gather pace thereafter with growth of 1.8% in 2014 and 2.2% in 2015.

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This macro-economic outlook for the UK is moderately positive for the freight transport sector. We believe cargo volume growth will range from the low single percentage digits (road freight, air freight, some ports) to higher single, and in one case double-digit growth (ports such as Southampton and rail freight, which will achieve double digit expansion). We also note that UK real trade is expected to grow by 4.5%, its highest rate since 2010. Exports will lead the way (+5.1%) with imports growing by 3.8%.

Headline Industry Data

* UK air freight volume to grow by 1.6% to 2.49mn tonnes in 2014, up from 0.9% growth in 2013.
* Tonnage handled at Port of Grimsby and Immingham will grow by 5.0% in 2014 to 66.386mnt, comparable to the 5.2% growth recorded the preceding year.
* 2014 tonnage growth at the Port of London will be 1.4% to 44.533mnt.
* Rail freight will grow by 15.8% to 153.579mnt, slightly above the 15.1% growth in 2013.
* Road haulage will remain one of the slowest growing transport modes in 2014, rising 1.1% to 1.806bnt.
* The real value of UK foreign trade will expand by 4.5% in 2014, up from 2.9% in the preceding year.

Key Industry Trends

London Gateway Is Open For Business

DP World's newly opened London Gateway facility will be a positive development for the UK's freight transport sector. The facility boasts Europe's largest logistics park plus intermodal transport links to the country's largest consumer market, London. The London Gateway port opened for business on November 6 with the arrival of Japan's Mitsui O.S.K. Lines' MOL Caledon, a 5,000TEU container ship. The US$2.4bn port is a deep-water terminal that will be able to handle 18,000TEU mega vessels. DP World is also building a 9mn sq ft logistics park on land near the port, which is set to become Europe's largest logistics park. One berth is currently in operation, with five more coming online over the next few years. Initially London Gateway will have an annual handling capacity of 1.5mn TEUs with a final capacity of 3.5mn TEUs.

IAG Cargo Invests In Freighter Fleet

IAG Cargo, the freight operation run by the merged British Airways and Iberia, has announced plans to purchase a new fleet of 18 next-generation Airbus A350-1000s long-haul aircraft by 2018, subject to shareholder approval. The new fleet will have three more pallets of cargo space apiece, providing a maximum payload of around 30 metric tonnes. IAG said the move is part of its wider fleet modernisation programme, which will also see an order for 24 Boeing 787s and an option for 18 more.

Retailer Marks & Spencers Builds New Distribution Centre

UK-based mass grocery retailer Marks & Spencer (M&S) is set to construct a new major distribution centre at DP World's London Gateway. London Gateway is the new deep-sea container port and logistics park just 25 miles from Central London. The 900,000ft2 new distribution centre will enable M&S to transport millions of products directly from ships to the company's hi-tech warehousing facility at the adjacent London Gateway Logistics Park. M&S will generate approximately 700 jobs as well as employ hundreds of additional workers in the construction phase as part of its investment valued at GBP200mn (US $311.5mn) at London Gateway.

Key Risks To Outlook

The main downside risk to our freight transport forecasts in 2014 comes from still-present doubts over the sustainability of the UK recovery. BMI is aware of a number of scenarios in which the recovery could prove to be short-lived. The first is that a still weak banking and financial sector will fail to provide the necessary credit to keep the recovery on track, because it is still trying to deleverage after the financial crisis of 2008/2009. Secondly, the recovery in household consumption may also be undermined by still-stagnant real wages. Thirdly and perhaps most importantly, we believe that the UK economy needs to transition away from a consumption-driven growth model to one that is increasingly powered by investment and exports. We do not yet see hard evidence that the transition is underway: if it does not happen we expect the recovery to lose steam rather earlier than would otherwise be the case.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

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