The economic implications of Calais chaos

The goings-on at Calais are becoming a problem for the British economy. The public perception is focused on the apparent inability of the French authorities to keep order, however the effects on the economy may increase beyond the estimated £1bn if the chaos continues. In particular the road freight sector may be hit hard.

The problem has two facets. Firstly the strikes and sabotage by a small group of French ferry workers are disrupting operations at the Channel Tunnel and the Ferry terminals. This is compounded by the number of illegal immigrants trying to enter Britain, both on the ferries and now through the tunnel. This is not a problem restricted to the Calais area but the congestion caused by the strikes is aggravating the issue of immigrants jumping onto trucks.

The impact on different types of shippers has not been even. Vehicle manufacturers (VMs) generally rely on imports of a proportion of their components from continental Europe on a roughly just-in-time basis. Among manufacturers the companies operating low levels of inventory have been hit hardest with, for example, Toyota’s facility in Burnaston in Derbyshire having to halt engine production for several days. It is believed that other car assembly sites have also had problems, although certain major plants have options such as Nissan at Sunderland which can use the ferry service from the Netherlands into the port at Newcastle or Ford who have a dedicated service between Dagenham and Vlissingen.

For those who are not too low on inbound inventory the problem has been manageable so far, if time consuming. One VM commented to Ti that, “the consignments do gradually work their way through the queues, with around a 12 hour delay” and generally the VMs have been able to identify the key components whose lack of availability might stop production and manually plan around this. This has meant a lot more planning by the vehicle manufacturers logistics staff but it is by no means unsolvable. Whilst opinions differ on the implications of the disruption, most agree that “after 36-48 hours [from the start of the disruption] there was a resumption of parts-flow”.

Yet the efficiency of response has been varied. Neal and Gareth Williams of the emergency shipments provider Priority Freight, noted that the customers who have been most successful were those who had the best information systems in place providing visibility of inventory. They said, “We have seen big differences in the ability to understand where there material is. The better the information system the quicker the decision. The ones [the customers] with strong information are the ones who have managed the situation best”

What appears to be a favoured solution is the creation of what might be called an air/ land transhipment hub. For example the emergency logistics provider Evolution Time Critical established an ad-hoc facility at a European airport for an automotive client. Critical suppliers were identified and their components were trucked into the facility, consolidated and flown to the UK. Of course the effect of these sorts of solutions is to increase demand for air resources, as Brad Brenan, MD of Evolution Time Critical said, “I have never know more enquiries for time charter”. The consequence of this is an obvious increase in the cost of the relevant type of air freight, with some reports suggesting that prices have doubled or trebled.

So despite the problems, the damage to the sorts of engineering manufacturing operations that might be thought to be most vulnerable have proved to be limited, something that is in part due the flexibility of emergency logistics provision. The food retail sector is a different matter.

Although the criticality of food inventory might appear to be lower than that of the manufacturing supply chain, it is food cargo that has suffered hardest even to the extent that availability of certain products has been limited in grocery retailers. Of course the time-sensitive nature of the product has played a part, with trucks carrying fresh food-stuffs delayed for days in queues of trucks. However the illegal immigrants have also affected food logistics across the channel, with attempts to hide inside the vehicles or even within the consignments making the food unfit for consumption. Such are the supply chain integrity standards of the major grocery retailers that even slight interference with cargoes can lead to the whole vehicle load being written-off. Whilst engineering and automotive companies have reported to Ti that immigrants have damaged goods whilst inside the trucks, the affects have been minor. For food consignments, this has not been the case.  

Yet those who have suffered most from the chaos in Calais have been the truckers. It is they who have taken the brunt both of the delays and the predations of the illegal immigrants. Indeed so bad has the problem been that some smaller carriers are wary about offering services into the country. Tim Philips, CEO of FreightEx is in a good position to understand the overall picture of the situation. He reports that over the past few weeks certain continental European carriers have refused business into the UK out of a fear that they would not be able to get their trucks back-out rapidly. He also points out that fines for being found with illegal immigrants on board a truck are substantial at €10,000, even though these people often force their way onto the vehicles with or without the knowledge of the driver. Bearing in-mind the narrow profit margins that truckers suffer this can have severe effects on smaller companies and owner-drivers, “it’s just not fair and it must have a long-term effect on the market and prices in that market”, commented Tim Philips. It also illustrates that UK cross-channel road freight is a heavy user of continental European road freight resources, particularly central European truckers, with UK hauliers holding only around 20% of the market. These carriers therefore have a choice if they want to service flows into the UK or stay in mainland Europe, if they choose not to come it will definitely effect capacity and prices for UK inbound flows.

Whilst major shippers have been able to use alternative modes of transport like air freight for short periods, the options for the longer-term are more limited. The options for avoiding Calais do exist but they are not great. Ports such as Dunkirk, Dieppe and Ostend can be reached in a reasonable sailing-time from Dover but their capacity is limited. For example P&O point-out that Boulogne is not a 24 hour port and has limits on available pilotage. Even on the UK side the issue of capacity is a constraint, with the elaborate customs infrastructure that has been created to handle such volumes of traffic being hard to replicate.

Indeed the limited ability of other ports to respond to the problems in Calais illustrates the strategic importance of both Dover and of Calais to the logistics economy of the UK and indeed of Europe. Calais continues to receive significant investment with a new terminal for ro-ro ferries having just been announced by its owner, the French Department Du Nord, as it attempts to embed its leadership on the route. It’s possible that the UK might ask itself if the continued concentration of traffic into Calais is entirely wise. Bearing in mind how flexible ro-ro shipping operations can be and how many ports there are on the French, Belgian and Dutch coast, the dominance of Calais does appear to be a little surprising.

The prospects for an end to the disruption do not look good. The small trade-union involved in the industrial action has threatened to continue its activities until staff are given their jobs back, whilst some local politicians are making sympathetic noises towards the strikers. The issue of the illegal immigrants also does not appear to be resolved with local authorities making greater provision for them.

As Neal Williams of Priority Freight points-out the issue of Calais is simply not as great a priority for the French as it is for the British, “For Britain the Dover-Calais link is very important. For the French it is of lesser importance, with their land borders with Germany and Belgium heading east perceived to be larger”.