The productivity gap is one of the most serious and vexing economic problems facing the UK, says Geoff Lippitt of PD Ports
If we close the productivity gap between the most and least successful areas of the UK then the GDP of UK PLC will invariably rise. Allowing it to remain at the current levels or, even worse, letting the gap widen will mean that not only will the UK’s place in the world rankings suffer, but it will also affect the UK’s economy, infrastructure, educational standards and health.
Put simply, productivity fires the engine of our economy. Compared with other OECD countries, the UK has had low productivity performance since the 1970s. The UKs productivity growth has been negative (-1.1 per cent per year for 2007–9) or very low (0.4 per cent per year from 2009–13), and the gap with other OECD countries has increased again despite employment rates remaining relatively strong, leading to the so-called productivity maze. Figures from the Office for National Statistics showed that labour productivity in 2016 was significantly above the UK average in London (33 per cent) and the southeast (six per cent), but below average in all other regions and nations, and particularly low in the northeast (-11 per cent), the West Midlands (-13 per cent), Yorkshire (-15 per cent), and Wales and Northern Ireland (-17 per cent).
To address these imbalances should be a priority and infrastructure will have a significant part to play in the solutions. But it needs a new way of thinking and behaving; collaboration and cooperation across entities to solve the urgent needs of rebalancing the UK. Often talked about but not so easily undertaken, is the need to stop silo mentality thinking and this is something that has certainly been done at PD Ports.
We embraced and took portcentric logistics to a new level and are still pushing the boundaries to raise it even further. A great example is Teesport which today, is very different to even two years ago, blending container, Ro-Ro and bulk services harmoniously together.
In the world of transport planning, there are concerns about this silo mentality and rarely do we see road, rail passenger and freight, sea and air working together to share information, knowledge and tackle infrastructure needs in the UK. In fact, whether it’s a government departments or industry there is a disconcerting attitude within these entities of not working together in an effective and pragmatic way for the wider good.
There has always been a trade-off between freight needs and those of passengers: in the way cars are built, in the construction of ships and in particular, in the way the passenger and rail freight services are distinguished.
One recent cause for concern is the reported decision to upgrade the 76-mile Trans-Pennine route between Leeds and Manchester at a cost of £3 billion without any provision for freight traffic. This suggestion is both unwelcome and deeply troubling for the economy and businesses in the North of England.
In 2016 Paul Maynard MP, then Rail Minister, said in the Department for Transport’s Rail Freight Strategy document: ‘All too often, rail freight may feel it has been forgotten. This is understandable when the emphasis inside and outside the industry is very often focussed on passenger needs. But we must not lose sight of the very important role that freight plays in our railways. That is why I am delighted to welcome the Rail Freight Strategy which seeks to make sure freight plays a full role in our railways.’
The demands of passengers are compelling and understandable but the necessity of pure passenger services on fixed routes fails to recognise the ongoing debate about taking freight off the road and putting it onto rail. Removing freight from the road network is as much a case of environmental protection as it is a productivity solution. Around ten per cent of domestic shipping is carried out using the rail network and over the past six years, rail freight in the UK is estimated to have saved two million tonnes of pollutants, by removing 31.5 million HGV journeys and saving almost four billion HGV miles.
The much needed productivity improvement means we must embrace the demand for freight in the North which is clear and measurable. Teesport experienced more growth in volume than any other UK port in 2017 with a number of record-breaking results at its container terminal facilities, handling more than half a million TEUs (20-foot equivalent unit) a year. In November 2014, a £3 million+ intermodal rail terminal opened at the port, initially designed to service existing container business which has delivered consistent growth in volumes of some twelve per cent year-on-year for the last seven years.
This growth was a catalyst in PD Ports’ decision to build the rail terminal, which continues to see a significant modal shift amongst customers with rail volumes surpassing 40,000 units mat (moving annual total) with an anticipated 50 per cent uplift by 2029.
Failing to invest in additional rail freight capacity on the Transpennine route, could seriously damage the economic aims of the Northern Powerhouse. Frans Calje, CEO of PD Ports, sees the issue of transport infrastructure as a vital element in any resilient solution.
‘There is a significant demand from our customers to be able to move freight east to west through this Northern corridor allowing shorter distances to be covered by rail. Without a viable alternative route for rail freight with the necessary capacity and gauge, the growth we are experiencing will be limited and at risk of reducing due to transport restrictions.’
So back to our silo mind-sets: by not working on a solution collectively and allowing freight on this route, it will leave an even greater reliance on the heavily congested M62, a motorway that cannot cope with present demands, let alone the additional volumes we believe will be put onto it by this decision.
This is why we need a resilient transport structure that works for business. At the moment it is clear that the ongoing lack of HGV drivers is impeding supply chains in the UK and constraining the growth and development of our ports.
So, this proposed decision to remove an alternative option of rail transport for freight and adding to road haulage on the M62 and northern motorways, could have a devastating affect on freight distribution and productivity. Already the M62 has the highest share of road relative to rail freight (around 98 per cent road share) of any of the freight routes identified in a recent report by the UK Major Ports – Identifying the multimodal strategic freight network.
PD Ports is calling for a collaborative approach where we look at the whole, sea, road and rail infrastructure to make the Northern Powerhouse a real productive area which embraces the needs of the environment and goes a long way to meeting these needs.
We can bring together all those needed to design a solution that can only be good for the North, UK and the planet, working together collaboratively instead of as individual elements disjointed from each other.
Geoff joined PD Ports as Group Business Development Director in 2011. He has over 30 years’ experience in the logistics and transport industry with a background in operational and general management, as well as in business development. In his role at PD Ports, Geoff is responsible for driving the commercial business development activities across the Company. He has been instrumental in driving forward relationships with Transport for North and continues to play a key role in lobbying for critical improvements to UK transport infrastructure as part of the Northern Powerhouse agenda.