Executive Summary

Activity in the road haulage sector has recovered substantially since the economic downturn at the start of the 1990s. Key Note estimates that in 1996, the amount of road freight moved in the UK increased by 4.9% to a record 157 billion tonne kilometres. Despite this increase in turnover, however, trading conditions in the industry remain difficult.

The road haulage market has changed significantly over the last 15 years. During this time, the industry has evolved from generally being one of low-level, `trunking'-style operations, to one of considerable sophistication. The emphasis in the industry is now on providing a wide range of integrated supply chain management services, such as warehousing and stock control. A parallel trend has been the growth in the outsourcing of distribution functions. The development of the third-party distribution sector, however, has not been without its difficulties.

Another factor contributing to the upheaval in the distribution market is the rapid pace of technological development. The advent of affordable technology has revolutionised the industry by increasing the quality of communication between supply chain members. One particularly important development is Electronic Data Interchange (EDI), which allows intensive information sharing by formatting and packaging information in a standardised form. The effect of technological advance has been to favour those companies, generally the major players, which are prepared to invest heavily in information technology (IT).

The road haulage industry is also encountering difficulties in the environmental arena. Improvements to road infrastructure are unlikely to keep pace with traffic growth due to opposition to continued road building, and this is likely to result in future in increased charges for road use. While road freight operators can make a limited response to this problem through an expansion in truck capacity and a move towards 24-hour and weekend working, it is inevitable that freight operators will be forced to make greater use of the rail system.

The outlook for road haulage firms is, at best, mixed. Steady domestic economic growth, international expansion opportunities and a continued shift to outsourcing will underpin industry growth. Nevertheless, customer pressure will ensure that margins in the industry remain competitive. It seems likely that the outcome will be greater industrial concentration, as economies of scale in terms of both capital and expertise become increasingly critical for corporate success.

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