According to Norton Rose Third Way Ahead Transport survey of global 1,100 respondents
- Almost half (44%) of shipping respondents estimate business volumes have fallen by over 5% since 2008, compared with almost a quarter (24%) of rail respondents and a fifth (20%) of aviation respondents
- 63% of all respondents believe that general economic instability is the factor most responsible for restricting the availability of funding for transport
- Two-thirds (67%) of all respondents state that they are implementing or will implement operating cost reductions in preparation for further economic uncertainty
- 23% of all respondents expect private equity to provide their primary form of funding over the next two years, whilst 16% expect capital markets to provide their principal source of funding
- 57% of all respondents believe that a merger or joint venture will form a key part of their strategy over the next 12 months
According to “The Way Ahead”, a global survey by international legal practice Norton Rose Group, shipping has seen the largest decrease in business volumes since 2008 in comparison to aviation and rail. Almost half (44%) of shipping respondents estimate business volumes have fallen by more than 5% since 2008, compared with almost a quarter (24%) of rail respondents and a fifth (20%) of aviation respondents.
The survey suggests that a reduction in bank liquidity is driving the transport sector as a whole to look at alternative forms of finance. Nearly a quarter (23%) of all respondents anticipate that their primary source of funding will come from private equity over the next two years, with the highest demand for private equity funding anticipated by the shipping sector (31%). It is anticipated that capital markets will provide a primary source of funding for 16% of all transport respondents.
Almost two-thirds of all respondents (63%) to the Norton Rose Group survey believe that general economic instability is the cause of limited funding to the transport sector.
To remedy this, the industry as a whole (39%) cites greater investment in infrastructure as the most helpful form of government support for their sector, increasing to almost three-quarters (71%) of rail respondents. Just over a quarter (27%) of all respondents expect their principal form of funding to come from government over the next two years, down from 45% at the end of 2010.
The industry is taking strategic measures ahead of further anticipated economic uncertainty, with two-thirds of all respondents reducing, or intending to reduce, operating costs and 41% of all respondents planning to retain cash. Over half (57%) of all respondents expect a merger or joint venture to form a key part of their strategy over the next 12 months.
Harry Theochari, global head of transport, Norton Rose Group, commented:
“Shipping is facing a number of challenges, reflected in the fact that business volumes are felt to have dropped more significantly than aviation or rail in this survey.”
“The key strategic findings of this survey, from a purely business perspective, are that cash and the availability of cash is fundamental, and keeping operational costs down is imperative. In this time of highly developed economic modelling and sophisticated economic theory, basic business principles continue to apply.”
Gordon Hall, partner, Norton Rose LLP, said:
“With an economic recovery being possibly still some way off, the transport sector is showing pragmatism. A considerable proportion are making substantial efforts to overcome further threats to the stability of their businesses by drawing on the experience of the past three years, where getting closer to customers, maintaining cash reserves and seeking opportunities in new markets are key.”
The survey, entitled “The Way Ahead” is the third transport report released by Norton Rose Group. It details the views of 1,100 international respondents from a range of companies involved in transport including financiers, owner/operators, manufacturers, government entities and professional services firms.
Copies of the Norton Rose Group “The Way Ahead” survey can be downloaded here
For further information please contact:
Jane Lougher, PR manager, Norton Rose LLP
Tel: +44 (0)20 7444 2063; Mob: +44 (0)7595 886 200