Fares up by a third and fewer sailings are among
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the dire predictions if duly-free is abolished within the European Union.
When ferry workers brought the French Channel ports to a standstill on 20 March, the inconvenience it caused to British hauliers was more justifiable than usual. For once this was not just a French issue: they were protesting over the proposed abolition of taxand duty-free goods within the EL' on 30 June 1999. UK hauliers will certainly be counting the cost
The effects will go far beyond a price increase on the booze and fags their drivers buy while crossing the Channel. Ferry operators have always found it hard to make ends meet given the seasonal fluctuation in demand, and the Channel Tunnel has done little to help. But their one saving grace is the high profits (up to 35%) to be made on dutyfree sales. This revenue has helped ferry operators to keep fares competitive and to invest in new vessels.
But the European Commission sees the duty-free system as an anachronism in the EU single market so it has to go, even though we are years away from tax harmonisation and monetary union is proving problematic.
The effect on the ferry industry will be a sharp fall in revenue, which will inevitably lead to higher fares and less choice of routes.
A report commissioned by the European Travel Research Foundation last year looked into the impact of the abolition of duty-free allowances on ferry services between Great Britain and the Continent. It predicted: • A dramatic reduction in customer choice through the potential closure of routes; • A fall in investment in new and updated ferries and port infrastructure; • An additional 1.5 million vehicle movements, one-third of them trucks, to add to congestion in south-east England.
The research, by MDS Transmodal, forecasts the closure of up to 13 routes from the UK as the duty-free revenue lost will not be recovered by ticket price increases. Particularly vulnerable to closure are six of the nine routes in the Western Channel; four out of nine in the North Sea; and up to three from the six in the Dover Straits.
If this happens, more trucks will be forced on to the shorter, more competitive routes, such as Holyhead-Dun Laoghaire and Larne-Stranraer on the Irish Sea, and Dover-Calais on the Channel. This will result in a shift of traffic, involving longer road journeys on already congested roads in northern Europe and higher costs.
The report pulls no punches: "Freight transport costs will be adversely affected and this could reduce the competitiveness for some firms trading in Europe. Regions likely to be hit hard are Scotland, the North and the South-West."
But the real issue for British hauliers is the higher cost of ferry travel. The report says: "The probability is that Dover fares would have to increase by about 35% to recoup lost revenue and fares would have to rise by about 20% on the Western Channel. A price rise of this size will almost certainly contract the market by a similar amount, creating the need for a route rationalisation programme and further price rises, creating a multiplier effect."
A spokesman for P&O North Sea Ferries says: "The loss of duty-free will have an impact on freight and passenger rates."
Sue Kirk, communications manager at Stena Line, admits fares are likely to increase. "No single company is going to stand up now and say routes will close, but if we lose 25% of revenue we will have to gain it in some other way," she says. "We are likely to see increases in ticket prices rather than line closures."
So would the end of duty-free signal the end of on-board shopping? "We'll still sell goods but not at the same volume," says Kirk. "We'll look at what we sell and how we can make the offer attractive to create similar levels of spend —but we don't have a lot of options. Without duty-free the main effect will be increased fares, but it's too early to put a figure on this."
by Carolyn Londer-Ward VOICE YOUR CONCERN • Hauliers wishing to express their concerns over the impact of the loss of duty-free should write to their MPs or MEPs. For details of your local representative call the Duty Free Hotline on 0800 174109. EVOLUTION OF THE DUTY-FREE INDUSTRY • In March 1947 the Customs Free Airport Act was passed in Dublin, establishing Shannon Airport as an international distribution centre. Goods and aircraft were exempt from normal customs procedures.
• Br.an O'Regan, head o sales and catering at Shannon Airport, spotted the potential of duty-free status to sell goods to passengers at lower prices and set up a kiosk selling souvenirs and Irish linen.
• Since then duty-free has mushroomed into a global industry worth $20.5bn, with annual turnover of 24.5bn across Europe. It has outlets in 260 countries, in airports, on board ferries and aircraft, and on some land borders.
• The duty-free industry has created 140,000 jobs across Europe; more than 30 million customers a year make use of duty-free facilities in UK outlets.