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KEY NOTE FREIGHT FORWARDING : October 2004

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This report covers: freight forwarding, transport agencies, cargo handling, cargo storage, courier activities, European distribution, air forwarding, deep sea forwarding, multimodal forwarding, international seaborne trade, trade through the Channel Tunnel, international air cargo, transport enterprises, purchases by sector, trade by commodity, integrated freight forwarding, consolidation, e-booking, EDI,

Companies covered include: Allport, EGL Eagle Global Logistics (UK), Exel Freight Management (UK), Frans Maas (UK), Fritz Companies (UK), GeoLogistics, Kamino, Kuehne & Nagel, Nippon Express (UK), Panalpina World Transport,

EXECUTIVE SUMMARY

Key Note estimates that the UK international freight services market was worth £17.3bn in 2003, of which £13.3bn was attributable to freight forwarding. Since then, this activity has increased at a rate that is likely to produce a greater level of turnover in 2004.

In addition to freight forwarding — which is broadly defined to include related warehousing, storage and customs clearance activity — the international freight services market is defined to include international freight transport operations by rail, road, air and sea. Of these, freight forwarding has been among the most volatile sectors but also the one showing the strongest growth overall since 1999.

Freight forwarding has been subject to many influences since 1999, including the trend towards outsourcing of non-core business activities, the rising complexity of international trading relationships and a heightened awareness of security considerations. All these trends are likely to have increased the benefits to clients using the services of a professional forwarder. Influences working in the opposite direction have included the consolidation of the single European market and other steps towards market liberalisation together with the enlargement of the EU to include a further ten countries in central and eastern Europe and the Mediterranean. Such measures have had the effect of reducing or eliminating entirely the need for customs clearance and related services in these markets.

Other influences affecting the industry over the past few years have included many items of legislation, notably those concerning terms and conditions of employment that have had a disproportionate impact on the many smaller firms operating in the sector. The smaller firms have also had to face the challenge set by many of the larger companies which are now 'one-stop-shops', offering a wide range of services. From the viewpoint of the customer, whether an operator is described as a forwarder or a global logistics provider is not as important as whether or not the operator can deliver consignments in a timely and secure fashion.

As well as the difficulties suffered by the international freight transport industry as a whole, attributable to a slowdown in economic activity in 2001 and 2002, the international rail freight sector has been beset by a number of problems of its own over the past 5 years. Road transport has in part produced the phenomenon that the UK economy continues to be less 'freight intensive', as freight transport grows more slowly than gross domestic product (GDP), a situation particularly noticeable in the international sector for a number of reasons. However, it remains the dominant mode for international freight transport. International air freight carried by UK airlines consists largely of high value items, while sea freight consists largely of the import and export of bulk materials, with the balance consisting largely of container and roll-on/roll-off traffic. Key influences for the future include continuing trends towards market globalisation, offset to some extent by the persistence of barriers to trade in some areas, a heightened awareness of security and environmental issues and the continuing development of IT applications to enhance the value of the freight forwarding product.

TABLE OF CONTENTS

Executive Summary

1. Market Definition

REPORT COVERAGE

MARKET SECTORS

Freight Forwarding

MARKET TRENDS

Globalisation

Market Liberalisation

Changing Customer Needs

MARKET POSITION

The UK

Table 1: The UK International Freight Services Market and the UK Transport and Communication Sector by Value at Current Prices (£m and %), 1999-2003

OVERSEAS

UK Market Position

Table 2: UK Shares of EU Freight Moved on National Territory by Mode of Transport by Country (billion tonne kilometres, million and 000 square metres), 2001

2. Market Size

THE TOTAL MARKET

Table 3: The Total UK International Freight Services Market by Value at Current Prices (£m), 1999-2003

Table 4: The Total UK International Freight Services Market by Turnover at Current and Constant Prices (£m, index 2000=100 and %), 1999-2003

2004

BY MARKET SECTOR

Rail Freight

Table 5: The UK Rail Freight Sector by Value at Current Prices (£m and %), 1999-2003

Road Freight

Table 6: The UK Road Freight Sector by Value at Current Prices (£m and %), 1999-2003

Air Freight

Table 7: The UK Air Freight Sector by Value at Current Prices (£m and %), 1999-2003

Sea Freight

Table 8: The UK Sea Freight Sector by Value at Current Prices (£m and %), 1999-2003

Freight Forwarding

Table 9: The UK Freight Forwarding Sector by Value at Current Prices (£m and %), 1999-2003

3. Industry Background

RECENT HISTORY

Transport Liberalisation

Current Industry Structure

Number of Companies

Table 10: Number of UK VAT-Based Enterprises Engaged in the Freight Forwarding and Other Transport Agencies Sector by Turnover Sizeband (£000 and %), 2003

Employment

Table 11: Number of Employees in the Supporting Transport Activities Sector (000), June 1999-June 2003

REGIONAL VARIATIONS IN THE MARKETPLACE

Table 12: Number of UK VAT-Based Transport Enterprises† by Employment Sizeband and Population Distribution by UK Region (number of enterprises and %), 2003

HOW ROBUST IS THE MARKET?

LEGISLATION

Employment Legislation

Safety Legislation

KEY TRADE ASSOCIATIONS

British International Freight Association

Representation and Lobbying

The Provision of Information and Advice

Training

Promotion

The International Federation of Freight Forwarders Associations

The European Association for Forwarding, Transport, Logistics and Customs Services

The Freight Transport Association Ltd

Other Trade Associations and Professional Bodies

4. Competitor Analysis

THE MARKETPLACE

MARKET LEADERS

Leading Ten Companies

Table 13: The Leading Ten Companies in the UK Freight Forwarding Market by Turnover (£m and %), 2003

Allport Ltd

Company Structure