TUESDAY 31 OCTOBER 2000

MR MARK BRADSHAW AND MS BRIDGET ROSEWELL

  120. You will all do that, otherwise you would be out of business. (Ms Rosewell) They cannot put prices up, so they have not gone up as a result of these increases in costs. What is happening is that margins are being squeezed.
  (Mr Bradshaw) What you now have is a position where we are facing such a range of increased operating costs, plus our customers' expectations that prices will be at an everyday low price, that obviously margins are being squeezed and our ability to reinvest is equally being squeezed.

  121. You can only do that for so long.
  (Mr Bradshaw) It is big concern that our ability to reinvest is also being squeezed at the same time.

  122. You cannot go on cutting costs indefinitely.
  (Ms Rosewell) Indeed, not.

  123. Many retailers obviously use hauliers to deliver their goods. Hauliers' transport costs are going up. Do they simply pass those through as on-cost to the retailer?
  (Ms Rosewell) That would be a matter of negotiation in those individual contracts between the retailer and the haulier, and different contracts will have different terms as to when costs can be renegotiated and they will have different periods for renegotiation. I do not think there is a generalisation that one can make of those contracts. They differ.

  124. Are there any particular sectors, for example, food and drink, that particularly suffer as a consequence of high road taxation costs or is this something which goes right across the sectors?
  (Ms Rosewell) It does go right across the sectors. Those which are dependent very much on the retailer version of just-in-time delivery, which is perishable products, have less flexibility. Either you deliver it now or you do not deliver it. They are certainly more subject to difficulties in this area than those which can be more flexible and, maybe, change their delivery structures more easily.

  125. Is not one of the difficulties that we all have in this that, in a sense, part of the Chancellor's taxation policy is to try and reduce road usage. You say that in practical terms your members have little alternative but to use the road, but there is quite a lot of dead running time, is there not, quite a lot of time when delivery vans are running around empty or not particularly full? Can anything be done to make that whole process more efficient?
  (Mr Bradshaw) An awful lot is being done because retailers want to run the most efficient fleet and a lot of vehicles back-haul. They back-haul packaging, they back-haul products which are unsold to distribution centres or recycling centres. Even when a retailer is delivering a new fridge to someone's home, they will normally take the old fridge away with them. There is lot of efficient use of vehicles. It is not in our members' interests to have empty vans going around which are extremely expensive to run. We are looking at sophisticated ways of getting goods to the shops and people's homes, but with the lack of any real alternative, any plausible alternative to road use.

  126. We have heard of cases of cabotage where companies in this country have been using foreign hauliers because they find they are cheaper. Have you come across anything like that?
  (Mr Bradshaw) I have no evidence of that, I am afraid.

  127. No evidence at all?
  (Mr Bradshaw) I have no evidence of that. It is not a point that we have asked our members about and we have no information from them about this.

  128. Are you aware of any of the larger retailers registering their vehicles in other European countries as a way of avoiding higher charges in the United Kingdom?
  (Mr Bradshaw) Again, this is not a question that we have asked our members. We are also members of the Freight Transport Association and on such issues as the management of fleet a lot of our members tend to work through the FTA.

  129. Do you have any soft evidence that that is happening?
  (Mr Bradshaw) No.

  130. So it is not an issue?
  (Mr Bradshaw) It is not an issue that we have addressed at the BRC. It could well be an issue that others have addressed. Our primary focus has been on the efficiency of road transport and the costs that are being incurred.

  131. In your submission you mention a couple of times about the taxation of motor fuel on environmental grounds adding to costs and causing damage. I see a lot of company reports where they sometimes issue an environmental report as well to say what they are doing towards the environment. Is this generally said to be the view of most of your members, because if you are not being seen to be environmentally friendly, is that a disadvantage or would you put the caveat that public transport must be improved first?
  (Mr Bradshaw) I think time and again we have found that environmental improvement, improving the efficiency of vehicles actually has environmental gain, and the two sometimes go hand in hand. We see much more efficient vehicles being used now, quieter vehicles and fewer vehicles actually being used. There is a perception that the roads are full of retail trucks going around. Actually, there has been a reduction in the number of vehicles being used and the number of drops that they have to make to individual stores because of just-in-time and much more efficient use of those vehicles. So, actually, cost savings, greater efficiency and environmental improvement can be linked quite closely. Obviously, when you are delivering to a store in a town there is pressure for quieter vehicles, so a lot of innovation has gone in to reducing the actual noise made by vehicles.
  (Ms Rosewell) The other side to that which we need to bear in mind is the environmental issue is bigger than simply the delivery of goods, and there are some quite complicated trade-offs, which I am not sure are particularly well understood by any of us. So, for example, if you want to encourage people to shop locally and to walk to their shops there would need to be more smaller shops and more deliveries to those smaller shop. That would impose a different balance to the cost structure of getting a package of goods from manufacturers on the one hand, to people on the other hand, than the current one. People on the whole have voted with their feet over the years to get in a car, drive to the car park, fill the car and go home again, and retailers have responded to that by trying to organise deliveries to those stores as cheaply, effectively, efficiently and with as little energy use as possible. So the logistics of all of that, using out-source contractors so that you can get more reuse of lorries on different trips and so on, is all part of that system. If we say that we want people to use their cars less and, indeed, people are incentivised to use their cars less because they become more expensive, that will change the way they wish to shop. If you want them to go to town centres and increasingly in town centres there are difficult delivery systems and very serious restrictions on the hours in which you can deliver, that will impose greater costs and greater complexity of delivery, and also make things like more efficient use of vehicles much more difficult if there is only a very small window in which you can deliver and that is it for the rest of the day, you run into restrictions on driving hours and a whole variety of other things which are going to raise costs to retailers if those changes are put in place. It is quite important that as a country we understand more of the implications of, if you do something here, it make changes down there.

  132. I wanted to pursue this in principle, you were not sympathetic to fuel taxes being made on environmental grounds. I appreciate the explanation you have made, but that is what came through from your submission.
  (Mr Bradshaw) We did not think that actual taxes were a truly effective means, we thought there were other things that could be done and there is a lot of innovation within retailers, within the partners that retailers have, such as vehicle manufactures and so on, and we believe quite strongly that more money ought to be targeted at encouraging that and encouraging some of the benefits of that work to cascade down to smaller operators and SMEs.

  133. Can I just try and sum it up a wee bit here? Would I be right in saying that the impact of most fuel taxation on your industry has in many respects been absorbed, the costs have been absorbed by your retailers and they still seem to be able to perform reasonably well as a consequence? Would that be an over simplification of it?
  (Ms Rosewell) That would be an over simplification.

  134. I do not get the impression that Tesco were bursting through that door his morning desperate to tell us how hard this was. With the greatest respect to yourselves, if there had been a problem maybe some of your members would have been along here as well as yourselves as the officials of the organisation. Is that being cynical?
  (Ms Rosewell) I think it is being very cynical.

  135. I do not for a moment suggest that you are not good advocates on their behalf, but sometimes they like to come and see us personally and when they do it is because they have a gripe.
  (Ms Rosewell) I do not think you should take the absence of any direct employees of a retailer at this hearing to suggest that this is not a matter of concern to retailers. Nor should you take it to mean that rising prices of fuel can simply be absorbed by retailers and they do not really care about it and it does not really matter to them. That would be wrong. The whole of the retail environment is, at the moment, a fairly difficult one. Sales are certainly increasing, but not very dramatically. Prices are under pressure, and what retailers are actually doing is sitting in their offices, trying to solve the day to day problems of making sure that the businesses stay on track and that they are able to make acceptable levels of margin to satisfy their shareholders and keep prices down at the same time. That means they are actually rather busy. So the fact that they are not here means that they are trying to solve some of these problems, not that they do not care. Chairman: We will wait and see if these problems can be solved by that method. Thank you very much for coming this morning.