Rail freight subsidy poses bigger questions about UK logistics

Rail freight subsidy poses bigger questions about UK logistics

The recent announcement that the UK government is cutting the subsidy for rail freight is undoubtedly worthy of debate, although not necessarily for the most obvious reasons.

As reported in The Loadstar, the Department for Transport (DfT) has reduced the annual Mode Shift Revenue Support grant from £19.7m to £15.7m, with a further £500,000 reduction expected next year. The article goes on to say that more than a million journeys were transferred from road to rail last year but that new budget cuts will likely result in rail proving economically unviable and 200,000 journeys returning to road.

Naturally enough, the decision is being opposed by rail freight organisations for a variety of reasons.  However, the real interest is arguably in what it means for strategic-level decisions about the movement of goods in and around the UK.

To be clear, Peel Ports recognises the value of a mix of modes. There is a place in UK logistics for road, rail, air, inland waterway and short-sea shipping. We don’t believe one-size-fits-all. Nor do we believe that the issue of rail freight subsidies is a simple binary question between shipping by truck or shipping by train.

We believe that shippers – and indeed the whole supply chain - should take a step back and look at the bigger picture.

The vast majority of goods arriving in the UK do so through ports with 75% of containers brought into the country arriving in the south-east (90% if you include just deep-sea shipping). Yet the demand for this cargo is spread across the land.

In fact, around 60% of the need for containerised cargo is closer to Liverpool than traditional south-east ports. Despite this, thousands of containers are transported by road and rail every day, instead of being shipped to the port closest to the end destination. This creates huge inefficiencies in the UK logistics market and increasing congestion and pollution en route.

Shipping by sea to the nearest port is – all other things being equal - the most efficient, most reliable and least polluting way of getting goods to where they need to be. Our estimates show that UK plc could save up at least £200m per year by moving away from south-east ports to Liverpool.

Of course, onward transport is still required, and Liverpool is unique in offering three options: the Manchester Ship Canal, the extensive local motorway network and direct rail connections from the port.

We created the Cargo200 campaign to showcase these benefits. We are delighted to have more than 150 supporters, from Bentley to B&M Stores. However, there is more work to be done to secure the range of direct shipping services that will allow UK importers and exporters to reduce costs, congestion and carbon emissions. Such gains are essential for the whole economy, creating the productivity and competitiveness gains that we need to thrive, especially in an uncertain post-Brexit world.

Sometimes, positive change only results from a threat. Whether or not thousands of extra road freight journeys result from the cut in rail subsidy is a moot point. There are bigger gains to be had if the situation prompts shippers into a fundamental review of their supply chain, providing benefits to businesses, communities and the environment alike.

Blog by Peel Ports Commercial Director, Stephen Carr.

For more information on our Rail services click here.

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