The UK Transport Sector: next stop growth?
70 per cent. That is the rise recorded by the FTSE100 index in the last two years since touching a nadir of 3460 on March 9 2009. During that period we have seen the panic induced by the financial crisis recede and, despite the bailouts of Greece and Ireland and ongoing concern over the solvency of other European peripherals, markets around the world continued their rise throughout 2010.
As the strains of Auld Lang Syne rang out across the UK, the double dip naysayers were in the minority, the Coalition’s “harsh medicine” of tax rises and spending cuts to tackle the deficit was being applauded and, having broken through the 6,000 barrier in the final days of December, analysts were asking whether the FTSE100 index could make it to 7,000 before 2011 was out.
However, the first quarter of 2011 has bought those dreaming of a V shaped recovery sharply back down to earth. From the woeful GDP figures for the final quarter of 2010 and the sharp rise in inflation since the turn of the year to the ongoing uncertainty in the UK housing market and further weakness in the Eurozone, negative macro economic data is once again buffeting UK companies.
Add to this the ongoing instability in North Africa and concern that this could spread to oil rich neighbours such as Saudi Arabia and it is clear that the nascent economic recovery remains fragile.
For transport companies, the risks are clear: brittle consumer confidence, rising unemployment and a sharply increasing oil price are all headwinds that the sector could do without coming so soon after the disruption caused by the heavy snow at the end of 2010, not to mention the disruption for international businesses caused by the ash cloud earlier in the year.
However, those of a glass half full disposition could be forgiven for seeing a silver lining. Constrained household spending and rising fuel costs are likely to see travellers shun their cars in favour of public transport, while the disruption caused by bad weather last year gives companies a low base from which to build in 2011.
Concern over the strength of the wider economic recovery are likely to remain with us for some time and few companies can lay claim to being immune from the vagaries of consumer confidence, rising raw materials and ongoing geopolitical uncertainty.
The transport sector however is better able than most to mitigate the impact of these factors. As passenger numbers continue to recover from their recession lows, it is fair to say that the near term outlook for the industry is more positive than most.