Excuse us for going all “Little Englander” today, but considerable confusion currently reigns about the state of the UK economy. Not the fact that it’s flat – no, there the only question is whether it is still technically in recession or not, because non-technically everyone knows that it is in a deep recession, and there is little prospect of us coming out of it anytime soon, because confidence is so wretched.
One director of a large trucking and logistics company told The Loadstar: “Imports into the UK are down, by quite large levels in some places – 5-10%. It’s pretty worrying but it’s also understandable. I think that people just don’t have any money to spend on anything at the moment.”
If that perception needed to be underlined by evidence, a cursory look at Danish ro-ro operator DFDS’s first quarter results, out this morning, should suffice, which begins with the following: “As expected, market conditions were challenging, especially in the North Sea. This was due to the recession in several European countries, including the important UK market.”
Volumes on the North Sea between the UK and mainland Europe (bar one service between Gothenburg and Ghent and not including the cross-Channel services) – were down 6.4%, and with the introduction of a competitor midway through the quarter, North Sea Ro-Ro, there was an impact on utilisation and rates – revenues were down 34% and earnings before interest and tax down 27%.
Additionally, competitors Cobelfret and Stena both added capacity in the corridor out of Rotterdam to the UK’s east coast ports.
Results on the cross-channel services – Dover-Dunkirk and Dover-Calais – are distorted by the fact that DFDS launched its Dover-Calais service in a joint-venture with LD Lines, partially into the quarter, following the demise of SeaFrance. Year-on-year volumes were up 36.6% and are likely to continue rising as it expands its Dover-Calais service with the addition of a second ship.
(What that ship will be is an interesting question that may be answered next week when a French court decides which of DFDS, Stena and Eurotunnel is entitled to buy the SeaFrance assets. DFDS and Stena have both bid for some of the vessels, while rail company Eurotunnel has placed a bid for the entire assets, which is presumed to be more attractive to French authorities (and it’s a French company). But it could face some competition issues given Eurotunnel’s current market share. DFDS chief exec Niels Smedegaard remained sanguine: “We have confidence in our offer. It’s been a long process with several unforeseen developments and twists and turns over the past 18 months. I’m sure that this is not over yet, even after next week.”)
However, the silver lining is the growth in exports coming out of the UK. Unsung among the wider media, exports have been growing at Chinese-style rates for the past couple of years (the latest research from manufacturers’ association EEF shows that manufactured exports have grown 36% since 2009), principally as a result of the decline in sterling’s value against the euro. Just one example from Dachser’s UK arm: 2011 saw UK-Europe volumes up 36% in terms of turnover; 30% in terms of number of shipments; and 31% up in terms of tonnage, compared with 2010.
Around the turn of the year, Dachser UK MD Nick Lowe told The Loadstar that as long as £1 = €1.25 or below, UK exporters would remain competitive on the continent. Today, the pound is €1.24, and the Eurozone is in a considerably worse state.
So UK exporters have to look further afield – to Asia and the other Brics, Civets and so on. Another recent EEF survey has found that developing markets account for 25% UK exports now, compared with 15% a decade ago, while the Brics now account for 8% compared with just 2% a decade ago.
And finally it appears that the government is actually doing something to help industry. Last week agriculture minister Jim Paice signed a £50m pork export deal with China, with the first shipment from the UK’s largest producer, Tulip, currently being prepared.
Pork is big stuff in China. The following stats might be a surprise: the average Chinese eats 37.8kg of the stuff per year compared with 5.1kg for the average Briton (the average German eats 39.7 kg while Austrians top the list, with an astonishing per capita consumption of 69.2kg) according to Euromonitor. Last year China ate 50.7m tonnes of pork.
And it’s good news for the air freight industry, because the deal also includes a provision for a trade in live pigs, which are flown – 900 to a 747 freighter.
UK exports making a comeback? Pigs might fly, as the saying goes.