Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Memorandum by Tibbett & Britten Group plc (CHT 06)



  1.  Tibbett & Britten Group plc (TBG) is a UK-based international logistics service provider. The FTSE 250 company has 36,000 employees in 34 countries; around half of them in the UK. It provides supply chain management for many of the world's leading retailers and manufacturers.

  2.  TBG offers a full range of logistics services. In 1996 it added rail freight to its portfolio through the acquisition of the Daventry and Doncaster rail terminals, then owned by Applied Distribution Limited. Rail was seen by TBG as an area of great potential for shipments between mainland Europe and the UK (and vice-versa) and as an opportunity to meet both its own environmental responsibilities and those of its clients.

  3.  The Group was recently awarded a Queens Award for Enterprise: International Trade-but is seriously having to question the role that rail can play in supporting international trade in the light of the current state of Channel Tunnel rail freight. While reluctant to withdraw from the market it has to recognise that with accumulated losses approaching £2 million there is now considerable and increasing commercial and shareholder pressure to withdraw.

  4.  Had it not been for the disruption to Channel Tunnel traffic that began in the autumn of 2001 the Group's view of rail freight would be more optimistic. By the middle of 2001, and largely as a result of the improved service levels of the trains entering the UK and the decision by EWS to transfer much of its Channel Tunnel freight from Wembley to Daventry, there was every reason to expect that the Group's rail activities would be in profit for the first time. In such circumstances the losses that had been borne in the previous years might have been justified.

  This is no longer the case. The losses being endured as a result of the current disruption could well prove to be the death knell for rail freight at Tibbett & Britten.


  5.  TBG operates two intermodal rail freight terminals in the UK-Doncaster and Daventry.

  6.  Doncaster handles mainly port traffic from Felixstowe. It does not currently handle any Channel Tunnel trains, even though it is certified by Transec under the 1994 Channel Tunnel Security Act.

  7.  Daventry is one of the largest privately constructed and owned rail freight terminals in the UK and handles more Channel Tunnel intermodal freight traffic than any other terminal in the country. Prior to the current disruption the terminal was handling the equivalent of one six-mile long train every day. During 2001 it is estimated that the terminal handled in excess of 600,000 tonnes of rail-borne freight. The majority of that freight is now back on the roads and will be difficult to win-back to rail. (See 9.1 below for annual volume comparison 1997-2001).

  8.  The Group also owns the intermodal freight company "Haulmark". This company is currently not trading, however, having incurred losses in excess of £500,000 as a result of the difficulty of competing with continental road hauliers operating on the same routes, and the poor service levels provided by the French and Italian railways.


  9.  To demonstrate to the Committee the impact of the current disruption we have set out below a number of charts relating to the Daventry Railport.

  9.1  Activity Levels-Containers Handled

  Since 1997 there has been a steady growth in the number of intermodal containers handled by the terminal each year, rising from 6,000 in 1997 to 23,000 in 2001 (despite the problems in the latter months). A 35% reduction in traffic is anticipated for 2002, but this assumes something approaching a resumption of "normal service" by the middle of the year.

Channel Tunnel Activity Growth 1997-2002

1997 199819992000 20012002
Actuals 000's611 162023 15

  The spectacular decline in activity levels as a result of the current disruption since October 2001 is shown in the chart below:

Channel Tunnel Activity Growth September 2001-April 2002

Sep-01 Oct-01Nov-01 Dec-01Jan-02 Feb-02Mar-02 Apr-02
Actuals 000's2,0212,360 1,3481,1801,241 968907939

  9.2  Channel tunnel Generated Revenue

  The two charts below show the steady increase in revenue generated by Channel Tunnel intermodal activity between 1997 and 2001 and the downturn since October 2001, together with the detailed position (monthly) since September 2001. As can be clearly seen the current monthly revenue is significantly below the levels that were beginning to be achieved in October 2001 when it appeared that the operation was moving towards profitability.

Total Channel Tunnel Revenue 1997-2002
19971998 19992000 20012002
Actuals £000's153 292513628 722542

Total Channel Tunnel Revenue September 2001—April 2002
Sep-2001Oct-01 Nov-01Dec-01 Jan-02Feb-02 Mar-02Apr-02
Actuals £000's58 66252841 372439

  9.3  Profitability (Lack Of)

  As stated earlier, TBG made a commitment to rail freight in 1996 in the knowledge that in the early years there would be a need for considerable investment and an absence of profit. But there was the expectation, endorsed indirectly over time by Government strategy and the pronouncements of the SRA, that the medium to long-term prospects would be good.

  The chart below demonstrates how, between 1997 and 2001, as a result of the steady growth in activity levels and close attention to operating costs, Daventry Railport was moving towards profitability. The trend was such that the draft budget for 2002 showed an annual operating profit for the first time.

  This optimism has been dashed by the enduring events since Autumn 2001, and the latest estimate is that in 2002 Daventry Railport will lose more than £300,000—the biggest annual loss since the terminal was opened.

Daventry Railport Costs v's Revenue 1997-2002
19971998 19992000 20012002
Costs    £000's851 8911,0091,177 1,2501,376
Revenue  £000's553 6518271,102 1,1891,088
Contribution/Loss-299 -240-182-75 -61-288

  To try to minimise its losses TBG has done all that it can to cut costs without destroying its experienced skills base. Members of staff have been seconded to other parts of the business to retain their skills (a new staff member takes a minimum of 16 weeks to train in all the appropriate duties) and keep them motivated. But with costs now at an effective minimum the only means of making further cuts would be to close the railport.

  9.4.  Damage

  In addition to the problems associated with the loss of traffic and revenue, there is the added problem of damage suffered by the intermodal units and their contents when illegal immigrants gain access to them. As can be seen from the chart below, since February 2002 the level of damage has increase 15-fold over the comparable period in 2001:

Damage to Containers/Contents Caused by Stowaways 1997-2002
SeptOct NovDec JanFebMar AprMay
2000-0113 212 4213
2001-0235 2072 12354952

  In many respects this is having a greater effect on potential clients than the delays in service. Whereas clients will perhaps accept a delay in delivery as part of the price of using rail they will never accept their cargo being damaged or contaminated. Much traffic (existing and potential) has been lost for this reason alone, and as a result we know of one major user of rail freight which is planning to withdraw from the market and move to short sea freight.


  10.  At the present time TBG finds that its commitment to rail freight is being severely challenged. As a provider of quality logistics services we consider ourselves currently unable to advise prospective clients to use rail for transferring goods from and to mainland Europe. This is despite the fact that we know that there are thousands of loads-such as the transfer of fresh produce from Spain-that could be taken off the road.

  11.  Whereas clients would, in less turbulent times, return to rail after (say) one of the annual strikes by SNCF staff, the current circumstances surrounding illegal immigrants are likely to have a more far-reaching effect on the use of rail for freight transfer. It is not simply the issue of Sangatte, but of the resolve/ability of the appropriate national authorities to prevent illegal immigrants gaining access to UK-bound freight trains anywhere in mainland Europe. Until freight trains can enter the UK on time and immigrant-free there will continue to be considerable reluctance on the part of prospective and former clients to use rail freight when road freight is demonstrably more reliable and secure.

  12.  TBG's ability to continue our rail terminal operations is also being compromised by the difficulty of retaining skilled staff as a result of the crisis. Because it has gone on for so long staff are worried about their future and are leaving the industry as their confidence in the sector declines. Without knowledgeable and experienced staff we will have no terminals.

  13.  TBG, along with many others in the industry, have lobbied for Government intervention in this crisis. Meetings have been held with John Spellar MP, letters have been sent, and the implications for our Daventry railport have been well rehearsed in the local and national media.

  All so far to no avail. There appears to be a reluctance (inability ?) on the part of Government to intervene in any meaningful or effective manner. This is a crisis that affects an industry employing many thousands, has the ability to make a significant impact on road congestion and is said to form a key part of the Government's 10-Year Transport Strategy. Yet seven months after problems first arose nothing substantive has been achieved.


  14.  As committed as Tibbett & Britten is to the development of rail freight it has to be recognised that unless there is a speedy resolution of the current crisis and a rapid return of intermodal traffic to rail the company will have no option but to close its rail operations and withdraw from the sector. That decision could be made within weeks.

  15.  The industry is in urgent need of financial support if businesses are not to close and services be withdrawn. What applied to the airline industry post 11 September is equally applicable to Channel Tunnel freight in the current crisis. It is easier to support an existing business today than to build a replacement one sometime in the future.

  16.  The demanding requirements of the 1994 Channel Tunnel Security Act on UK rail freight and terminals need to be applied across mainland Europe. Only by this means will the flow of illegal immigrants be staunched and the resumption of normal services be made possible.

  17.  Channel Tunnel rail freight needs to become fully part of the Government's strategy for rail with the objective of improving co-operation with our European counterparts, encouraging the use of rail freight, and actively discouraging road freight over long distances.

Michael Sweet and Steve Blencowe

May 2002

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