Food and drink supply chain and transport industry: evidence report

Executive Summary

This report presents the outputs of a study investigating existing Scottish food and drink export logistics, and in particular the resilience of those logistics to ensure the reliable, timely delivery of products to markets. Our work has been based on evidence provided by representatives from the key food and drink markets and transport/logistics sectors and also informed by reviews of published information and studies.

It should be noted that many stakeholders engaged during this research are highly concerned about the post-Brexit lack of capacity available for customs checks and food standards checking, and resulting delays to transportation. This report does not focus on these customs and regulatory issues, as separate investigation of them is underway by the Scottish Government, and instead considers in detail only matters directly relating to the transport system.

The transport resilience of the main sectors of Scotland's food and drink industry can be summarised as shown in the table 1, overleaf. Table 1 Food and Drink Industry Summary

Food/drink sector	Whisky[1]	Seafood	Meat
Value of exports (2017)	£4,368M	£944M[2]	£99M[3]
Proportion of exports to EU27	32%	69%[4]	97.5% of beef sales[5]
Perishability of product	None	High for fresh produce	Limited pre-processing, high post-processing
Proportion requiring processing in England (for which direct exports from Scotland is less helpful)	Virtually none	Some processing undertaken around English east coast ports	A substantial proportion of Scottish red meat relies on slaughter and/or processing in England
Main transport modes and routes	Containerised loads, some leaving directly from Scottish ports, but most by truck or rail to English ports	EU fresh exports are almost all taken by road, through the Channel Tunnel. Non-EU fresh exports are mostly taken by road from Scotland to Heathrow, then airfreighted. Containers, moved by ship, used for frozen exports	Road vehicles, some making collections in England on their journeys to the continent from Scotland or originating in Northern Ireland/Republic of Ireland.
Main transport risk points	Rail freight network availability	M74/M6/M40 then Channel Tunnel route to EU markets: delays result in missed delivery windows Reliance on Heathrow for non-EU exports	Largely reliant on road transport, albeit with significant flexibility on route, but much dependent on English supply chain
Resilience of export potential to transport network shocks	Generally good: alternative routes can be found relatively readily	Weak: the sector is heavily reliant on just two transport routes	Moderate: transport flexibility is available, but the sector is almost entirely reliant on the EU for its export market

Our work has also reviewed the potential for Scottish ports and airports to cater for a greater proportion of food and drink exports. This has found that:

Container traffic:

• Food and drink (and particularly whisky) comprises a large proportion of current containerised exports from Scotland.
• Extant ports at Grangemouth and Greenock have capacity to handle more container traffic, potentially handling some of the traffic that currently travels to English ports by rail and road.
• However, some stakeholders questioned whether there could be sufficient demand to encourage more container vessels to call at Scottish ports.
• All non-EU-bound containers moved from Scottish ports are transhipped (at Rotterdam, Liverpool, Felixstowe or elsewhere), so some resilience risks remain even if the British port of exit is changed.
• Shipping routes and transhipment points are also determined at least as much by which company is transporting the cargo as its origin and destination locations, and are largely outwith the direct control of the customer.

RoRo^[6] traffic:

• Scotland has had no RoRo international ferry capacity since the cessation of the Rosyth-Zeebrugge service in 2018, though the infrastructure remains available for use.
• When operating, food and drink exporters made little use of Rosyth-Zeebrugge: the inflexibility of its relatively infrequent service (in comparison with the short sea crossings of Dover-Calais and the Channel Tunnel) and, especially for perishable fish produce much of which is heading for the main market in Boulogne-sur-Mer, longer travel time than driving south and using a short crossing, counted against it.
• No other extant Scottish ports offer more attractive locations for RoRo traffic to the main continental markets.

Airfreight:

• EU markets are currently mostly served by road freight, not air, and non-EU drink and frozen products mostly carried in containers by sea. Airfreight is instead suited to long-distance (non-EU), perishable food exports.
• UK airfreight is dominated by Heathrow: Scotland's top four airports for airfreight (Edinburgh, Glasgow, Prestwick and Aberdeen) between them combined carry only 4% of the freight carried through Heathrow.
• Heathrow benefits both from direct flight connections to many destinations and a mature network of facilities to handle freight.
• Most Scottish produce being exported from Heathrow is taken there by truck; this is typically more flexible than airfreight between Scotland and Heathrow, and often quicker.
• Scottish airports have capacity to handle more airfreight, but facilities at the airports and the accompanying services are much more limited than at Heathrow. This is a particular constraint for handing perishable food exports; of Scottish airports, only Glasgow currently provides any permanent refrigerated storage capacity. To address short term pressures Prestwick has previously hired refrigeration containers.
• The increasing number of flights from Scottish airports direct to non-EU destinations provides opportunities for more airfreight; there is, generally, spare capacity for freight on these flights.
• Scottish airports have the capacity to cater for charter freight flights, which could be provided in the event of disruptions to other networks. But some food and drink industry consultees questioned the effectiveness of these; the industry relies on getting a relatively small volume of its produce to many destinations on a regular basis; charter flights might swamp relatively few locations with large amounts of produce.

Option generation and appraisal

The research team undertook a high level option generation and appraisal based on the evidence gathered. Eight options regarding how to improve resilience in the food export sector have been identified as worthy of further investigation and are summarised below.

1: Modifying supplier/buyer expectations:

• Benefits to seafood industry: to build in resilience in the transport system, a review of the buyer/supply expectations and market destinations could be considered.
• Deliverability: Short term. Would require negotiation between processors and customers
• Investment required/affordability: Low level of investment but potential impact on market price and transport costs and negotiating terms may impact on the viability and attractiveness of Scottish produce.

2: Explore new markets and customers for seafood in addition to Boulogne sur Mer:

• Benefits to seafood industry: Would increase flexibility and routes to different markets and supplying other markets distributes the risk.
• Deliverability: A study has recently been commissioned to investigate internal UK transport issues and other destinations apart from Boulogne-sur-Mer which may address this option.^[7]
• Investment required/affordability: Low level of investment but potential impact on market price and transport costs. Increasing the routes to different markets will improve the resilience of the export market.

3: Incentives to increase HGV driver numbers in the UK:

• Benefits to all exports: The industry has an ageing workforce and an existing shortage of approximately 45,000 drivers UK-wide.
• Deliverability: Incentives to increase HGV drivers could include better driver facilities, raising awareness of the logistics sector and increased support for apprenticeships.
• Investment required/affordability: Low level of investment. Government or haulier incentives to attract and retain drivers.

4: Increased storage capacity at airports:

• Benefits to all exports: Improved storage facilities, including refrigeration, at airports could support exporting seafood and other goods by air.
• Deliverability: Short to medium term. Edinburgh Airport is starting a review of their facilities, including storage and refrigerated lorries could provide short term storage.
• Investment required/affordability: Medium level of investment by airports. Care would be needed to avoid giving unfair competitive advantage to one location.

5: Scottish Exports Working Group:

• Benefits to all exports: Regular Working Group with representatives from industry, hauliers, freight forwarders and Scottish Government. The group could respond quickly and provide details of issues faced and solutions in emergencies.
• Deliverability: Short term. Build on existing relationships to formalise a working group representing all aspects of the export market. Could provide an opportunity to develop pilot schemes to investigate and test new markets and routes.
• Investment required/affordability: Low level of investment. Would require a commitment from industry and Scottish Government.

6: New technology for transporting products:

• Benefits to seafood industry: New technology for seafood storage may extend the shelf life of products.
• Deliverability: Short term. Recent research includes monitoring of seafood in transit to ensure freshness with schemes piloted in Norway and Iceland.
• Investment required/affordability: Increased cost of transport.

7: Increased chartered flights or scheduled flights with bellyhold capacity for freight:

• Benefits to all exports: Increasing the range flight destinations and improved storage facilities and market development at Scottish airports could open up new markets and routes.
• Deliverability: Issues to be considered include: consolidating products, consistency and seasonality, the backloading implications and a large consignment might temporally flood a market, reducing the price it could command.
• Investment required/affordability: Medium level of revenue support required to pump prime what would hope to be a viable new export option for Scottish produce.

8: Enhanced Scotland – Europe rail freight capacity:

• Benefits to all exports: Direct connection to Europe and reduced requirement for in demand HGV drivers.
• Deliverability: Rail freight improvements could include a direct connection through the Channel Tunnel from Scotland and increased rail use for internal movements to England ports.
• Investment required/affordability: Medium level investment. Government funded pilot scheme to test the route.