Boost for infrastructure spending

8 min read

The Government has announced it’s to invest £27.4bn in the UK’s roads network as ministers continue to look for ways to support the economy in the wake of the coronavirus pandemic and Brexit.

Boost for infrastructure spending

The investment, unveiled last week by Highways England, will include £14bn of spending on motorway and A road improvements, as well cash to improve access to leading ports. The programme includes improvements on links to the Port of Liverpool as well as a new road and tunnel under the Thames between Essex and Kent to speed up journeys to the Channel ports. The Trans-Pennine A66 route will also get support, along with improvements to the network around Felixstowe and Hull, and improved connections between ports in Scotland and Northern Ireland.

Highways England has allocated a further £11bn to improve everyday journeys, with plans to repair and replace parts of the road network. This will include the resurfacing of almost 5,000 miles of roads, and the installation or renewal of more than 1,000 miles of safety barriers on motorways and dual carriageways. Another £1bn is to be spent on broader road improvement projects, in areas such as conservation of cultural heritage, flood resilience, and improved access for walkers, cyclists and horse riders.

Alongside the investment, the Government is to launch a new ‘Acceleration Unit’ to tackle delays to infrastructure projects. A new team of specialists will join the Department for Transport (DIT) in September, and will be directly accountable to the Transport Secretary. The team will work with industry experts with experience of infrastructure project delivery.

Logistics UK has welcomed the announcements, of which you can see more detail here. ‘The logistics sector relies on robust transport connections across the country to ensure the strength and resilience of the supply chain, and this funding announcement is a positive step which will assist business to return to pre Covid-19 levels of activity and enhance the UK’s competitiveness,’ a spokesman says. ‘Our members look forward to supporting government in the development of this programme, to ensure that the UK’s economy is better prepared to face the challenges ahead.’

 

Confidence shows signs of recovery in logistics sector

Business confidence has fallen significantly across the logistics sector since the beginning of the year, but does now appear to be showing signs of recovery in some parts of the industry. Data from Logistics UK’s August Logistics Performance Tracker reveals modest improvements in certain areas.

Nevertheless, the survey shows that while disruption has diminished since the heights of the coronavirus lockdown in May, 11% of respondents are still suffering severe or extreme disruption to overall freight volumes. A third of respondents said the Government’s furlough scheme, due to end in October, should be extended until 2021 in order to enable their companies to continue or resume trading effectively.

To support businesses in the sector, Logistics UK has launched the Logistics Industry Panel, a new group open to its members irrespective of their size. The panel will provide feedback on their operations in order to inform Logistics UK’s approach to discussions with the Government. More details here.

Logistics UK has also announced the Future Logistics 2020 Conference, a virtual event that will take place on 13 November. Panellists and speakers will discuss the future shape of logistics in the UK and globally, with topics including new technologies, emissions, data, vehicles, fuels, Brexit, sustainability and communities, and business strategies. More details here

 

New vehicle registrations plummet

One illustration of the impact of the coronavirus pandemic is the plunging number of new vehicle registrations in 2020. The UK’s HGV production was down 72% in the second quarter of the year according to figures from the Society of Motor Manufacturers and Traders (SMMT).

The SMMT points out that comparisons with 2019 are a little misleading as last year’s second quarter was particularly strong as smart tachographs were introduced. Nevertheless, the fall in new registrations has been dramatic. Over the year to date, the market is down 51% on 2019, with 14,120 fewer vehicles registered.

Registrations of rigid trucks are down 72.5%, with the >6-16T and >16T segments reporting similarly sharp declines. Demand for articulated trucks is down 75% to 1,525 units sold. Tractor units continue to account for the most significant chunk of HGV registrations, some 36% of the market. More details here.

 

Freight costs continue to rise

Ocean freight rates have continued to rise as demand increases across the world as lockdowns are eased. The Shanghai Containerised Freight Index reveals that rates on Asia to Europe routes rose 7% last week and are now 54% higher than in the same period of last year. And while shipping lines are adding more services to cater for increased demand, the overall numbers are still lower than this time last year.

Against this backdrop, there are also concerns that service levels are declining. In the first half of 2020, the overall reliability of services was very low, with more than half of all vessels arriving late.

On air freight, meanwhile, the latest data from the International Air Transport Association (IATA) reveals that demand has stabilised but at lower levels than in 2019. IATA reports that July did see some month-on-month improvement, but at a slower pace than some leading indicators would suggest. It warns capacity constraints caused by the loss of belly cargo space on parked passenger flights continue to cause problems.

Overall, global demand for air freight was 13.5% down in July compared to the same month last year, a modest improvement on June. Global capacity was 31.2% down, again slightly better than June. IATA reports that overall belly capacity fell 70.5% year-on-year in July because of cancelled passenger flights, with only a 28.8% increase in freight liner capacity to counter this decline. More details here.

 

How Santander can help

All of the issues covered in this week’s update have the potential to impact our clients’ international supply chains. Please get in contact if you’re facing any supply chain difficulties because we work with a number of logistics companies with specialisms in particular markets or sectors who would be happy to provide advice on a range of potential solutions that might help you overcome such challenges.

To discuss how Santander can help your business please contact: ccbsectorinsights@santander.co.uk