The European road freight market is projected to show positive growth in 2021, expanding by 4.7% in real terms.
Although this marks a recovery from 2020, Ti’s COVID Recovery Tracker (CRT) shows the market is expected to be smaller in real terms than in 2019 by 1.5%. In 2020, the market contracted by 5.9%.
The market was primarily damaged at the beginning of 2020 by the COVID-19 outbreak across Europe, which led to national lockdowns and government-imposed restrictions on everyday life. Volumes related to the manufacturing sector suffered as a result of factory shutdowns during the first wave of infections. Border congestion and restrictions further compounded the difficulties manufacturers saw in international supply chains. Meanwhile, bricks-and-mortar retail was hit as shops were forced to close, severely curtailing the sectors’ main sales channel. As a result, demand for road freight services plummeted in the early part of the year.
As the year progressed, pent up demand was released after household savings were effectively enforced during lockdowns. This led to the start of a recovery in the latter half of 2020.
Into 2021, the manufacturing sector appears to be showing signs of continued recovery. Positive year-on-year growth was seen in EU industrial production in January, with business confidence much higher than during the initial phases of the pandemic. This bodes well for related road freight volumes across the domestic and international segments.
Meanwhile consumer spending is likely to remain strong, with a continuation in the unwinding of household savings expected in the year ahead. However, there are a number of challenges facing the market. Although employment schemes, such as the EU’s SURE, proved useful in 2020, the current labour market is expected to remain depressed over 2021. This is synonymous with weaker spending, which will likely impact growth, hampering the ability of the market to return to pre-COVID-19 levels.
The current rate of vaccinations across mainland Europe could also inhibit growth. Although public health restrictions have often led to a switch in consumer expenditure towards goods and away from services, such as hospitality and tourism, the further economic damage caused by public health restrictions is likely to inhibit aggregate demand.
Brexit is also likely to hamper the market recovery. Delays and confusion regarding new procedures appear to have resulted in trucks crossing the English Channel with a higher proportion of empty runs as trade plunged. UK government statistics showed empty lorries accounting for 50% of the total in mid-February, up from 30% in normal times. Until traders and customs authorities can get used to the new measures, border issues are likely to continue, which will hamper the recovery, forcing some shippers to consider avoiding UK-EU trade. Nonetheless, the EU-UK Trade and Cooperation Agreement deal reached still allows for tariff-free trade in the majority of instances and some traders will witness only relatively mild effects. Growth is still expected in the UK international road freight market compared to 2020, where the pandemic caused havoc in international trade. However, its international market is not expected to recover to pre-pandemic levels by the end of the year, or even by the end of 2025.
These conditions will hamper the market’s recovery in 2021. Despite real growth being at its highest rate over the past decade, the effects of the pandemic are likely to linger for some time to come.
Source: Transport Intelligence, April 6, 2020
Author: Andy Ralls
Ti’s latest European Road Freight Market Sizing data is now available on the Global Supply Chain intelligence (GSCi) platform, available exclusively to GSCi subscribers. This includes historical growth rates, market sizes, 1-year growth projections and 5-year forecasts. To read more about the growth of the market please download Ti’s latest whitepaper: The COVID Recovery Tracker: European Road Freight Market Forecasts for 2021.
Or, for more detailed market forecast data, please contact Ti’s Head of Commercial Development, Michael Clover about GSCi at [email protected]