Tuesday, April 3, 2012

Decoupling of Road Freight Transport and Economic Growth Trends in the UK


Introduction:

In this article, Alan McKinnon uses economic trend analyses to attempt to explain why GDP in the United Kingdom was growing while road freight, measured in tonne-km, was not. This trend, called positive decoupling, hypothetically represents a positive economic shift as GDP grows without the need for costly transportation. This theory goes against prior theories that state that, as wealth and economy grow, transportation needs and costs will grow with them. From 1997 to 2004, the United Kingdom experienced decoupling according to its statistics, and McKinnon set out to use trend analysis to explain why.

Summary:

McKinnon’s task is to explain why decoupling appears to be occurring and, to some degree, forecast the future of this factor, especially as road traffic accounts for an important amount of pollution that European states were trying to reduce to counter climate change. In order to find out how road freight in the United Kingdom was not increasing while the economy was growing, McKinnon studied trends in several key factors from the 1970s up to 2004.

The 12 primary factors McKinnon considered were:
1. Change in the systems of statistical accounting (changes in the way statistics were counted)
2. Dematerialization (a “reduction of material resources required per unit of GDP” by either seeing decreased weights or increased values of goods)
3. Change in the composition of GDP (an increase in the services sector over other sectors)
4. Decline in road’s share of the freight market (more use of railway or waterway transportation)
5. Increase in the penetration of UK markets by foreign operators (Foreign operators went uncounted in UK statistics of road freight)
6. Displacement of freight from trucks to vans (Vans were not counted in UK statistics)
7. Reduction in average number of links in the supply chain (Fewer stops meant a lower tonne-km figure)
8. Diminishing rate of spatial concentration (Due to a number of factors, companies could have been reducing concentration, expanding out of centralized locations to include smaller subsidiaries, reducing transportation times and distances)
9. Improvement in the efficiency of vehicle routing (Fewer vehicles or shorter routes to save time and money)
10. Domestic supply chains becoming fully extended (There is nowhere left for road freight to expand to)
11. Erosion of industrial activity to other countries (As industry is outsourced, the transportation needs linked to that industry are outsourced as well)
12. Increase in the real cost of road freight transport (Increasing costs to transport using roads could force companies to consider alternatives)

McKinnon looks in detail at trends in each of these factors. While some, such as declines in Road’s share and increases in penetration of UK markets by foreign operators are relatively easy to follow or provide accurate figures, others are much more difficult to track or carry incomplete data sets. Nonetheless, the article looks back to the 1970s as a start point for many figures and statistics while comparing the United Kingdom to similar economies, especially in Europe, to find comparisons and related research. The trends are intended to indicate which factors have been growing, declining, or unchanging over the years, especially from 1997 to 2004. The trend analyses give baselines of what should be expected in growth and change in the market to help account for the changes McKinnon was investigating.

Conclusion:

After throwing out some reasons as either too limited in data or simply impractical reasons, McKinnon finds that many of these reasons must have some effect on the change in road freight growth – to – economic growth ratio he set out to study. However, only three factors have actual quantifiable figures to back these findings. They are increased penetration of foreign operators, railways and waterways increasing their share of the freight market, and increasing real costs of road freight transportation. Statistics collected by other institutions proved that these three factors accounted for two-thirds of the decrease in tonne-km growth. While one-third remained attributable by hard figures, McKinnon suspects that trends point to erosion of domestic industrial activity and a diminishing rate of spatial concentration play significant roles.

While this article uses market trend analysis to account for the diminishing growth of the statistic in question, there are a few key weaknesses in the method. First, while the method can address a variety of issues, it is heavily quantitative and often relies on the collection key statistics and data over long periods of time by outside sources, such as censuses collected by the USCB. Second, even McKinnon realizes the limited forecasting ability of the technique. Citing an earlier analysis, the author points to the dangerous assumption that trends will continue. In the prior study, a 1970s report stated that the United Kingdom would experience 3% growth in GDP “in perpetuity,” resulting in a society of millionaires by 2200. The technique presents the dangerous assumption that future trends will be like the present and past, and does not account for “Black Swan” events.
Source:
McKinnon, A. C. (2006). Decoupling of road freight transport and economic growth trends in the UK: An exploratory analysis. Transportation Reviews, 27(1) pp 37-64.

13 comments:

  1. I dont think they included airline freights. Airline freights have increasingly become cheaper since the 1970s, which likely had some influence over roadways freights having decreased.

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  2. i think puru is right. the study is interesting but i think it might lack a few variables

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  3. It's depend on them. But i think they have not include air freights.

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  4. Air freight was disregarded in the study as it looked only at internal freight within the United Kingdom. While air freight may be very large in international and U.S. traffic, it appears to be much less prevelant in the United Kingdom. This is due to the smaller space of the UK, as the author notes that geographic differences mean different needs for the US and EU than the UK alone.

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  7. Thanks for explaining about decoupling concept.Very nice article.

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  8. Nice blog.... I really appreciate your contribution. You have beautifully covered Decoupling of Road Freight Transport and Economic Growth Trends. In Freight and Logistics business, everyone should focus on making the best strategies to facilitate their clients.

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  9. Freight travel is what really galvanizes economies, no matter what the GDP. Furthermore, it provides a geographic function of linkage; in UK's case, connection to a European heartland that has been integrating fully of late. Both of these attributes are what the citizens currently need, to veer them away from the usual focus or targets when it comes to this sort of thing.

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  10. This comment has been removed by the author.

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  11. I could definitely understand the hesitation with road freight that this article is implicitly espousing. Pollution is a major problem and accounts for a lot of the unwanted pressures on the market as well as in the society. However, the solution is never to, say, wipe out cars. We can change car fuel, for example. Furthermore, the physical merit of road freights cannot be underestimated; moreso the industries and human labor that gain sustenance from their continued operation. Current economic policies need to be re-evaluated, so that transportation wouldn't cost so much to begin with. We cannot act as if we can go on without them.

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