EMCC dossier on the European transport and logistics sector
Transport and logistics are the ‘lifeblood’ of the European economy: levels of growth in transport and levels of economic growth are strongly associated. However, the expansion of transport and logistics activities has resulted in increased congestion on Europe’s roads, cities and ports, undermining the capacity of companies in the sector to reliably deliver goods and services on time, and limiting the possibilities for further expansion. Furthermore, growth in transport has led to rising CO2 emissions, posing a challenge for policymakers who seek to foster economic growth while meeting Europe’s targets for greenhouse gas reductions. These challenges are being faced against a background of uncertainty over rising oil prices, a shrinking labour force and ongoing technological change. This dossier explores the current state of the sector generally, and the situation as experienced by four key companies in the sector. It examines the role that location plays in transportation and logistics, through an analysis of location decisions, and through studies of two major transport clusters. It also presents a number of possible future scenarios for the development of the sector over the next decade.
The transport and logistic sector deals with the transport of people and goods by rail, road, water and air, and includes such supporting activities as warehousing. The sector is an important one in the European economy: economic growth and growth in the level of transport are closely linked. Transport also enables the mobility – of people, goods and services – that is central to European integration. Moreover, the sector is an important player in terms of employment: almost eight million people work in it – around 5% of the total workforce. Transport receives substantial attention in terms of policymaking: the EU is promoting major transport infrastructural projects across the borders of Member States, one key initiative being the trans-European network for transport (TEN-T). This consists of 30 road, rail, air and water routes. Continually expanding, it currently carries half of all freight and passenger transport.
However, the growth of transport brings challenges in terms of pollution (with its consequent health impacts), CO emissions, traffic accidents and congestion. In particular, the threat of climate change indicates that today’s transport patterns are not sustainable: transport is responsible for 28% of emissions of CO in the EU, and 84% of these come from road traffic. Sustainability is becoming increasingly important in European policymaking – both in terms of reducing CO emissions and securing energy supply. For instance, policymakers are looking at incentives to get people out of cars and onto trains, bikes and buses.
Deregulation in the sector has resulted in competition, which has exerted downward pressure on wages. In addition, technological change, relaxation of work rules and smaller crews has resulted in the sector becoming less labour intensive. Mobile workers in the road transport sector are now covered by Directive 2002/15/EC on the organisation of the working time of persons performing mobile road transport activities. For an assessment of the impact, see Impact of the working time directive on collective bargaining in the road transport sector. After a long period of restructuring in the sector, it appears that employment is stabilising, to the extent that shortages of skilled personnel have appeared in some subsectors. A key challenge for the future is the ageing of the workforce: many workers are due to reach retirement age in the not-too-distant future, with obvious consequences for labour supply.
Trends and drivers of change
The mapping report for the dossier (pdf, 297kb) explores the current situation in the European transport and logistics sector, and identifies key trends and drivers of change affecting the sector.
Political developments are a key driver: liberalisation in the sector, such as the US–EU Open Skies Initiative, is especially significant in terms of its likely encouragement of more traffic, and greater competition. International liberalisation of trade has also boosted growth in transport, as the greater outsourcing of production requires transport of goods and materials. Concerns over the environmental and social effects of this transport growth has, however, led to a greater emphasis on sustainability.
Environmental concerns themselves constitute drivers of change. The sector is responsible for 28% of the EU’s CO emissions. In order to meet targets for reducing emissions, EU policymakers are investigating less-carbon intensive alternatives to road transport. Growth in transport has also resulted in severe congestion on many routes, which hampers both passenger and commercial transport.
Economic drivers are, clearly, important. A central economic driver addition is the price of oil, which has been rising steadily. Furthermore, the growth in levels of transport is closely associated with levels of economic growth. For instance, higher income levels have resulted in a rise in car ownership. The issue of economic growth is particularly relevant in light of the high rates of growth currently seen in the NMS.
Sociodemographic drivers play a role in, for instance, debates over the ageing of the European workforce. A shrinking labour force is forcing companies in the sector to recruit from groups – in particular, women – not previously represented in the sector’s labour force. The growing emphasis on technology also requires a reskilling of the workforce and recruitment into positions requiring greater overall skills levels.
Technological change is itself a driver: rising fuel prices and environmental concerns are encouraging research into alternative transport technologies. Meanwhile, greater efficiency is being sought in the transport of goods by the adoption of such technologies as radio frequency identification (RFID).
Company case studies
Four companies – key players in the European transport and logistics sector – are studied as part of the dossier. These case studies highlight the challenges experienced by companies in the sector, and illustrate how companies are responding to changing circumstances.
- Air Berlin (pdf, 275kb) is the second-largest airline in Germany after Lufthansa, and the third-largest ‘low fares’ airline in Europe, after Ryanair and easyJet. Most of Air Berlin’s growth comes as a result of mergers with other airlines, such as FlyNikki and Condor. The liberalisation of air markets represents an opportunity for the company, making it easier for it to tap into new markets. Conversely, rising oil prices threaten the company’s development: aviation fuel represents around 22% of the company’s overall costs. In order to ease planning and minimise the effects of price fluctuation, the company systematically hedges the price it pays for fuel.
- Andreas Andresen A/S (pdf, 291kb) is a Danish market leader in the transport of temperature-controlled goods and logistics solutions. The company has grown enormously since its inception in 1916, in part a response to the growth of its clients in the food production and supermarket retail sectors. The transition from a small, local company to a global operator has been a challenge, as have road congestion, labour shortages and difficulties in instilling a sense of loyalty in some of its drivers. Andreas Andresen has made extensive investment in new technology to better plan routes, communicate with drivers and manage corporate financial affairs.
- PKP Group (pdf, 442kb), the Polish State Railways, comprises the dominant railway operators in Poland. The largest employer in the country, the Group was established in 2001 following the restructuring of the formerly state-owned railway company. The company faces a range of challenges, including large inherited debts, falling passenger numbers and adapting to a new regime of competition, liberalisation and EU legislation. However, the company stands to benefit should predictions of the creation of rail links between China and Europe come to pass.
- Netherlands-based Samskip (pdf, 245kb) is one of Europe's largest container transport companies, transporting goods by land, sea and air. In response to growing traffic congestion on the roads, Samskip has begun – for shorter intra-European journeys – to switch some of its freight traffic to short sea trips. It is also seeking to shift more of its traffic to railways, in light of the rising price of oil. In order to boost efficiency, the company is running pilot projects to investigate the feasibility of implementing ‘track and trace’ systems, whereby the location and status of freight in transit can be continuously monitored.
Transport clusters – Denmark and the Netherlands
Clusters are particularly relevant in the transport and logistics sector, for which access to key transport nodes is crucial. The dossier examines two clusters in detail.
Padborg cluster, Denmark
The Padborg cluster, on the Danish–German border, hosts around 200 transport companies and service-related enterprises. It is a major hub for the transportation of goods – primarily by road – between Denmark, Scandinavia, and the rest of Europe. The companies in the cluster are all engaged in continuous change: just as many of their clients have done, these companies have consolidated into larger enterprises. They have also outsourced much of their driving work to Germany and eastern Europe. Padborg offers a number of significant advantages for companies operating in the sector. It has a large concentration of warehouse and terminal facilities, considerable ‘know how’ in the staff working in its constituent companies and an ideal location on the main E45 European motorway. Companies working in Padborg see the skills profile of employees changing in the future, as more complex projects for larger clients become the norm.
The Padborg cluster study (pdf, 536kb) is available online.
Rotterdam cluster, the Netherlands
The Port of Rotterdam is the largest port in Europe, with around 58,000 people being employed in various aspects of transport and logistics. Companies choose to locate in the port because of its central location in Europe, the proximity of other companies, suppliers and clients, and the opportunities to readily create networks with them. Aside from its importance to the European transport and logistics sector, the Port of Rotterdam is essential to the health of the European economy generally. The port is facing a number of challenges, such as lack of space to meet growing demand for transport of goods, rising oil prices, and a shrinking European labour force. In part, this last challenge is being met by the recruitment of more workers from Asia and the Middle East. The port authorities have made sustainability a priority for development, and are encouraging the use of alternative energy technologies as well as greater energy efficiency.
The Rotterdam cluster study (pdf, 689kb) is available online.
The study drew up four scenarios (pdf, 362kb) that project the possible future development of the transport and logistics sector between now and the year 2017. The possible future scenarios outlined in the dossier derive – in part – from an extrapolation of current trends. The scenarios are based on two key variables: the state of the global economy, and the policy priority accorded to sustainability versus mobility. Regardless of what happens in terms of these variables, the scenarios report sees some outcomes as being certain. For instance, greater reliance will be placed on technological innovation, enabling better energy efficiency, the tracking of goods and vehicles in transit, better communication and navigation across dispersed transport networks, and automation of manual tasks; in turn, this will require an upgrading of the skills of the workforce.
- Scenario 1: Take the A-train Slow economic growth, a growing emphasis on sustainability by both policymakers and the public, and high fuel prices lead to an increased diversion of public funding towards maintaining railways and a growth in rail freight traffic.
- Scenario 2: I’m in love with my car Economic stagnation, much of it due to high oil prices, combines with low priority being given to sustainability policies. The expense of rail has led to long-distance railways being largely abandoned in favour of road freight traffic and regional bus passenger transport.
- Scenario 3: Riding the rainbow Strong economic growth and a high priority on sustainability has led to the creation of a high-speed rail network connecting all major European cities, for both passengers and freight. Short-hop air journeys are too expensive for most people to contemplate, while conventional cars have been replaced by electric vehicles that can also travel on special electric rails.
- Scenario 4: Moonlight ride in a diesel Economic growth is strong, but mobility has been prioritised over sustainability. ‘Super highways’, connecting European cities, automate vehicular traffic, making it faster, safer and more efficient than today’s road transport. Magnetic levitation (‘maglev’) trains are built by private investors. However, traffic congestion remains an intractable problem.
Transport is a crucial factor in the location decisions of companies, both for businesses generally and for companies operating in the transport and logistics sector. A report giving an overview of the factors influencing the location decisions of companies (pdf, 179kb) in the sector is available.
Further information sources
A number of other information sources on the transport and logistics sector are available.