NATIONAL INFRASTRUCTURE COMMISSION: FUTURE OF FREIGHT DEMAND Final Report January 2019 Ref: 218038R Final Reportv4 FUTURE OF FREIGHT Evidence Base This report by MDS Transmodal was commissioned as part of the evidence base for the National Infrastructure Commission’s study on the future of freight. As with all supporting evidence commissioned by the National Infrastructure Commission, the views expressed and recommendations set out in this report are the authors’ own and do not necessarily reflect the position of the Commission. April 2019 CONTENTS EXECUTIVE SUMMARY ........................................................................................................... 1 Section 1 Introduction ............................................................................................................................. 1 Section 2 Key drivers of freight demand.............................................................................................. 1 Section 3 Scenario development .......................................................................................................... 3 Section 4 The modelled scenarios ....................................................................................................... 5 Section 5 Conclusions ............................................................................................................................ 9 1 INTRODUCTION .............................................................................................................. 11 1.1 Study objective and scope .............................................................................................................. 11 1.2 Overall approach .............................................................................................................................. 12 2 KEY DRIVERS OF FREIGHT DEMAND ......................................................................... 13 2.1 Introduction ........................................................................................................................................ 13 2.2 Overall trends in freight transport since 1918 .............................................................................. 14 2.3 Road freight transport ...................................................................................................................... 18 2.4 Rail freight.......................................................................................................................................... 19 2.5 Shipping & ports ............................................................................................................................... 22 2.6 Air freight ........................................................................................................................................... 26 2.7 Other modes...................................................................................................................................... 27 2.8 Relationship between economic activity and road freight tonnes ............................................. 28 2.9 Current freight demand .................................................................................................................... 30 2.10 Trends in retail logistics ................................................................................................................... 41 2.11 Conclusions on the drivers of freight demand .............................................................................. 44 2.12 Conclusion ......................................................................................................................................... 47 3 SCENARIO DEVELOPMENT .......................................................................................... 50 3.1 Introduction ........................................................................................................................................ 50 3.2 Review of previous freight demand forecasts .............................................................................. 50 3.3 The scenario development process ............................................................................................... 51 3.4 Economic scenario variants ............................................................................................................ 53 3.5 Consumer behaviour & retail supply chains ................................................................................. 58 3.6 Technological variants ..................................................................................................................... 60 3.7 Policy scenario variants ................................................................................................................... 61 3.8 Summary of scenario variants ........................................................................................................ 62 3.9 The qualitative scenarios for 2050 ................................................................................................. 63 4 THE MODELLED SCENARIOS ...................................................................................... 68 4.1 Introduction ........................................................................................................................................ 68 4.2 Methodology & assumptions ........................................................................................................... 68 4.3 Aggregate freight demand to 2050 ................................................................................................ 70 4.4 Modal split.......................................................................................................................................... 72 4.5 Ports and shipping ............................................................................................................................ 76 4.6 Geographic impacts ......................................................................................................................... 82 4.7 Change in user and non-user costs ............................................................................................... 97 4.8 Local case studies ............................................................................................................................ 98 5 CONCLUSIONS ............................................................................................................. 139 5.1 Implications for policy and infrastructure development ............................................................. 139 5.2 Overall conclusions ........................................................................................................................ 140 APPENDIX 1: COMPARISON BETWEEN HISTORIC GVA & ROAD FREIGHT TONNES BY SECTOR .......................................................................................................................... 143 APPENDIX 2: REVIEW OF FREIGHT FORECASTING ..................................................... 150 © MDS TRANSMODAL LIMITED 2019 The contents of this document must not be copied or reproduced in whole or in part without the written consent of MDS Transmodal 1 Rail Freight Forecasts .................................................................................................................... 150 2 Port traffic forecasts ....................................................................................................................... 166 3 Road Traffic Forecasts .................................................................................................................. 173 4 Sub-national freight forecasts ....................................................................................................... 177 APPENDIX 3: LIST OF ‘MAJOR’ PORTS IN EACH PORT REGION ................................ 181 APPENDIX 4: ASSUMPTIONS FOR QUANTIFED MODELLING OF SCENAROS ......... 182 END NOTES .......................................................................................................................... 185 © MDS TRANSMODAL LIMITED 2019 The contents of this document must not be copied or reproduced in whole or in part without the written consent of MDS Transmodal National Infrastructure Commission: Future of Freight Demand FINAL REPORT Page 1 EXECUTIVE SUMMARY Section 1 Introduction The National Infrastructure Commission (NIC) commissioned MDS Transmodal (MDST), in association with Cambridge Econometrics (CE) and Bearing Point, to provide an evidence-based analysis for the future of freight transport demand up to 2050. Given the inherent uncertainty involved in this exercise, it has been undertaken by developing scenarios which seek to incorporate a range of views on how demand for freight transport might develop in the very long term. The approach to the study involved desk research and data analysis to develop a view of the key drivers of change in freight demand, both in aggregate and in terms of sourcing and mode of transport. Qualitative scenarios were developed and were then quantified by developing input assumptions for each scenario using a macro-economic model of the global and UK economy called E3ME to forecast aggregate demand and a freight demand simulation model - the GB Freight Model- to model the transport impacts. Section 2 Key drivers of freight demand The analysis of long-term trends suggests there has been a gradual de-coupling of aggregate freight moved/lifted and GDP from the early 1980s onwards due to the decline of heavy industry