THE IMPACT OF THE CHANNEL TUNNEL ON KENT AND RELATIONSHIPS WITH NORD-PAS DE CALAIS

FINAL REPORT

BY

CENTRE FOR EUROPEAN, REGIONAL AND TRANSPORT ECONOMICS UNIVERSITY OF KENT

AUTHORS:

ALAN HAY KATE MEREDITH

ROGER VICKERMAN

June 2004

ii

Acknowledgments We are grateful to those from Kent and further a field that have assisted us in our search for data relevant to this study. In particular Dr Daniel O’Donoghue and John Hills of Canterbury Christ Church University College, Cheryl Mvula of Tribal Voice Communications, Tim Martin, Tony Trilsbach and colleagues from Kent County Council, Fiona Pender, Mandy Bearne and

colleagues from Locate in Kent, Howard Holt from Port of Dover and John Keefe and colleagues at Eurotunnel for their guidance.

iii

Table of Contents Page List of Figures and Tables Kent Impact Maps Executive Summary

v

vii ix

1 1.1 1.2 1.3

Introduction Background Methodology Background: Change in Kent 1980 to 2003 1.31 Demographic and Economic Change 1.32 Sectoral Change 1.33 Planning and Land Use Change

1

1 1 6 6 7 9

2 2.1 2.2 2.3

Preliminary Expectations The Construction Sector The Transport Operations Sector Enterprise Sectors 2.31 Tourism 2.32 Retailing 2.33 Manufacturing 2.34 Distribution, Road Freight and Wholesaling

11

11 11 14 14 15 15 16

3 3.1 3.2 3.3 3.4 3.5

The Construction Sector Tunnel Construction 3.11 The Channel Tunnel Act Associated Road Construction Associated Rail Construction Employment Impacts of the Construction Sector Land Use and Environmental Impacts of the Construction Sector

17

17 17 17 19 20 21

4 4.1 4.2 4.3 4.4 4.5 4.6

The Transport Operations Sector The Overall Market for Cross-Channel Movements 4.11 Historical Perspective 4.12 The Cross-Channel Passenger Markets 4.13 The Cross-Channel Freight Markets 4.131 Rail Freight 4.14 Low-Cost Airlines Flows 4.21 Cross-Channel Passengers 4.22 Cross-Channel Freight Services 4.31 Cross-Channel Services 4.32 Passenger Services 4.33 Freight Services 4.34 Scheduled Coach Services Impacts on Road Traffic Employment Impacts of the Transport Operations Sector Land Use and Environmental Impacts of the Transport Operations Sector

22

22 22 22 27 31 32 33 33 35 37 37 37 37 38 39 41 42

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4.7 Conclusions

44

5 5.1 5.2 5.3 5.4 5.5 5.6

Enterprise Sectors and Growth Locations Investment In Kent - Overview 5.11 French Companies in Kent 5.12 Foreign and UK Companies in Kent Tourism Retailing Manufacturing Road Freight, Warehousing & Logistics Growth Locations

46

46 47 48 49 51 53 60 64

6 6.1 6.2 6.3

The Future Future Transport Sector Changes and their Impacts 6.11 Technical and Operational Integration 6.12 Implementation of the EU’s 2nd and 3rd Railway Packages 6.13 A Shift in Transport Costs and Regulation against Road Transport 6.14 Restructuring of Ferry Operators from Dover 6.15 Financial Restructuring of Eurotunnel 6.16 Restructuring of Eurostar 6.17 The Impact of CTRL 6.18 The Role of the Low-Cost Airlines 6.19 The Impact of M25, M20, M2 Congestion Changes in the Broader Context 6.21 The Differences in Retail Prices across the Channel 6.22 The Intensification of Security and Illegal Migrant Precautions 6.23 Integration of the Cross-Channel Housing and Labour Markets 6.24 Expansion of Ashford 6.25 Development at Ebbsfleet and Thames Gateway 6.26 A Change in Kent’s Position in the UK Economy Most Probable Future

66

66 66 66 67 68 68 69 70 70 70 71 71 71 72 72 72 73 73

Annexes Sources

77 80

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Maps, Figures and Tables

Maps Page Map 1: Map 2:

The Kent and Medway Districts Sites of Interest

vii vii

Figures Page Figure 1: Figure 2: Figure 3: Figure 4:

Relative Change in Population (1981 – 2001) Rates of Employment - % Working Age in Employment (1994 - 2003) GVA per Capita: Channel Corridor and Dover (1991 – 2000) Geographical Distribution of Planning Permissions for Employment Land Uses in the Channel Corridor (1991 +)

6 7 7

10

Figure 5a: Figure 5b: Figure 6:

The Channel Tunnel Rail Link, Section 1 The Channel Tunnel Rail Link, Section 2 SIC 45 - Construction Employment (1991 – 2001)

19 19 20

Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18: Figure 19: Figure 20: Figure 21: Figure 22: Figure 23: Figure 24: Figure 25: Figure 26:

Historical Perspective - Cross-Channel Passenger Numbers through Dover (1985 -1994) Trips Made by UK Residents (1993 – 2002) Travel to the EU - Market Share of Main SE Ports and Airports (1993 – 2002) Travel to Near EU - Market Share of Main SE Ports and Airports (1993 – 2002) Travel to Belgium - Market Share of Main SE Ports and Airports (1993 – 2002) Travel to France - Market Share of Main SE Ports and Airports (1993 – 2002) Travel to Germany - Market Share of Main SE Ports and Airports (1993 – 2002) Travel to the Netherlands - Market Share of Main SE Ports and Airports (1993 – 2002) Powered Vehicles leaving the UK - Percentage Share by UK Port Group (1988 – 2003) Unaccompanied Trailers - Percentage Share by UK Port Group (1988 – 2003) Powered Goods Vehicles leaving UK Ports - Percentage Share of Traffic by Country of Registration (1992 – 2002) Powered Goods Vehicles to Mainland Europe by Country of Disembarkation (1988 – 2003) Unaccompanied Trailers to Mainland Europe by Country of Disembarkation (1988 – 2003) Cross-Channel Passenger Numbers (1995 – 2002) Cross-Channel Car Numbers (1995 – 2002) Cross-Channel Coach Numbers (1995 – 2002) Cross-Channel Freight Vehicle Numbers (1995 – 2002) Cross-Channel Rail Freight Tonnage (1995 – 2002) SIC 601 - Transport via Railways Employment (1991 – 2001) SIC 61 - Water Transport Employment (1991 – 2001)

22 23 24 24 25 25 26 26 29 29 30

30 31 34 34 35 35 36 41 42

Figure 27: Figure 28: Figure 29: Figure 30: Figure 31: Figure 32: Figure 33: Figure 34: Figure 35: Figure 36: Figure 37: Figure 38: Figure 39: Figure 40: Figure 41: Figure 42: Figure 43: Figure 44: Figure 45: Figure 46:

Overseas Companies in Kent by Year of Registration (1984 – 2002) Sectors of Activity by French Owned Companies (SIC 2003) LIK Success by Nature of Enquiry (1997 – 2003) SIC 55 - Hotels & Restaurants Employment (1991 – 2001) SIC 633 - Activities of Travel Agencies & Tour Operators Employment (1991- 2001) SIC 52 - Retail Trade Except for Motor Vehicles (1991 – 2001) Manufacturing Employment in the Channel Corridor (1991 – 2001) Relative Change in Manufacturing Employment (1991 – 2001) SIC 244 - Manufacture of Pharmaceuticals Employment(1991 – 2001) SIC 35 - Manufacture of Transport Equipment Employment(1991 - 2001) SIC 31 - Manufacture of Electrical Machinery and Apparatus Employment (1991 - 2001) SIC 25 - Manufacture of Rubber and Plastic Goods Employment (1991-2001) SIC 33 - Manufacture of Medical/ Precision Instruments etc Employment (1991 – 2001) B2-B7 - General Industry and Manufacturing Floor Space, Gross Completions (1991-2002) B2-B7 - General Industry and Manufacturing Floor Space, Net Completions (1991-2002) SIC 6024 - Freight Transport by Road Employment (1991 – 2001) Employment in Cargo Handling and Storage, Other Supporting Transport Activities, Activities of Other Transport Agencies (1991 – 2003) Hectares of B8 (Warehousing and Distribution) Land Granted Planning Permission (1991 – 2003) B8 - Warehousing & Distribution Floor Space, Gross Completions (1991-2002) B8 - Warehousing & Distribution Floor Space, Net Completions (1991-2002)

46 47 49 50 51 53 55 55 56 57 57 58 58 59 60 61 62

62

63 64

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Tables Page Table 1: Table 2:

Location Quotients by Sector (1991-2001) Employment Land Uses (m²) - The Channel Corridor (1991 – 2011)

8

10 Table 3: Table 4: Table 5: Table 6: Table 7: Table 8:

KIS Predictions - Construction Employment (1990) Estimates of the Passenger Traffic Market - Million Trips per Annum Relative Importance of Types of Freight for Kent Estimates of the Freight Traffic Market - Million Tonnes per Annum Estimated Port and Ferry Employment in Kent Ports (1991 – 1994) Estimated Kent Employment Gains from Manufacturing Firms (1986-96)

11 12 12 13 14 15

Table 9: Kent Road Improvements Associated with the Tunnel 18 Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19:

Port Traffic by Cargo Type as Percentage of Total (1991 – 1999) Share of Ro-Ro Traffic - Ports Serving the English Channel Routes Share of Road Goods Vehicles between UK and Continental Europe by Port Group Percentage Change in Cross-Channel Freight Vehicle Numbers by Mode (1995 – 2002) Percentage Change in Cross-Channel Rail Freight (1995 – 2002) Scheduled Passenger Services by Port (1987 & 2004) Scheduled Cross-Channel Freight Services (1987 & 2004) Number of Scheduled Eurolines Coach Services Crossing the Channel by Carrier Trunk Road Traffic (1996 – 2002) Eurotunnel Employment since the Opening of the Tunnel

27 28 28 35 36 37 38 39 40 41

Table 20: Table 21: Table 22: Table 23: Table 24: Table 25:

LIK Projects and Jobs Created (1997 - 2003) Currency Exchange Rates (1994 – 2004) Number of Applications Granted for Retail Planning Permission (1991 – 2004) Number of Manufacturing Firms - Size Band by No. of Employees (2003) Number of Planning Applications Granted for B2 Land (1991 – 2004) Number of Planning Applications for B8 Land (1991 -2003)

48 51 53 54 60 63

Table 26: Table 27:

Transport Sector Issues – Future Outcomes and Probabilities Issues in a Broader Context – Future Outcomes and Probabilities

74 75

Annex Page 1 2 3 4 5

KIS Predictions for Construction Employment, 1986 – 1993 KIS Estimates of Employment Growth in Wholesaling & Road Haulage, 1986 – 1996 SIC 45 – Construction Employment (1991 – 2001) Location of French Owned Companies and Employment in Kent by District (2003) French Firms in Kent by Sub-Region (2003)

77 77 78 78 79

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Kent Impact Area Maps Map 1: The Kent and Medway Districts

Map 2: Sites of Interest

viii

ix

Executive Summary

The first chapter outlines the methodology of the study in the form of four sub-models focussing on the Construction Sector, the Transport Operations Sector, the Enterprise Sector and Outcomes. It then sketches the changes in the demography and economy of Kent since 1980 to provide a context for subsequent chapters. The second chapter reviews the impacts of the Channel Tunnel project which were predicted at early stages of the project with specific references to impacts on the Construction Sector, the Transport Operations Sector and four Enterprise Sectors (Tourism, Retailing, Manufacturing and Distribution). The main expectations identified were:

• Substantial temporary increases in Construction Sector employment. • An expansion of the cross-Channel passenger market. • Significant numbers of passengers using Tunnel services. • An expansion of the cross-Channel freight market, especially Ro-Ro. • Direct employment gains from operation of the Tunnel. • Substantial employment losses in the ferry industry. • Growth and employment gains in the Enterprise Sectors.

The Construction Sector is reviewed in the third chapter with reference to the construction of the Tunnel itself, associated road construction and associated rail construction. The resulting impacts are reviewed in terms of employment, land use and the environment: they are shown to be temporary in duration and modest in scale. The chapter on the Transport Operations Sector outlines the overall market for cross-Channel movements of passengers and freight before analysing changes in the flows and the services provided. The main conclusions are:

• That though cross-Channel movements have in general increased in the period since the Tunnel was opened, the share of traffic flows won by Tunnel-related operations has in most cases been between one fifth and one third of the total (about half in the case of car movements)

• These relatively modest (and less than predicted) shares have been reflected in continuing financial problems for operators: in contrast the Ferry Sector (including speed ferries) Dover-Calais has successfully responded to competition and continues to provide a level of service similar to that offered in the 1980s.

• That (as predicted in the 1980s) there has been an increased concentration of flows through Folkestone (the Tunnel) and Dover at the expense of other locations. The impact of these changes on road traffic, employment, land use and environment are summarised.

The fifth chapter examines the recent history of investment in Kent before examining the four sectors (Tourism, Retailing, Manufacturing and Road Freight, Warehousing and Logistics):

• There is little evidence that the Tunnel has resulted in expansion of Kent’s Tourism Sector in investment, turnover or employment.

• It is argued that the Tunnel has not led to increased retailing activity and may indeed have resulted in leakage of consumer spending to Nord Pas de Calais due to differences in prices and taxation.

• There is no clear evidence that the Tunnel has attracted inward Manufacturing investment to Kent from either the rest of the UK or from abroad.

• There is some evidence (from employment and planning data) that the period after the Tunnel opened saw increases in activity in the Road Freight, Warehousing and Logistics Sector but this was not sustained beyond 2000.

A brief account is given of the two growth locations (Ashford and Ebbsfleet) which are (or will be) served by Eurostar. Overall the chapter suggests that to date the impacts of the Tunnel

x

have been small even in those sectors and at those locations which were expected to benefit most. The final chapter reviews a number of possible futures for the cross-Channel transport industry and the economy of Kent. It suggests that the most likely future is one in which:

• There is some limited increase in the integration of the transport system, assisted to some extent by the EU’s 2nd and 3rd Railway packages.

• Little change is expected in the relative costs and regulatory constraints on road transport.

• The provision of ferry services from Dover is expected to remain at current levels, though there may well be operator turnover and periods of competitive instability.

• The two key Tunnel operators (Eurotunnel and Eurostar) are expected to continue in their present forms though a greater focus of Eurostar on the St Pancras route and Ebbsfleet is expected.

• The role of the CTRL track is expected to be limited to Eurostar and franchised Kent services.

• The operations of both Eurotunnel and Eurostar services are expected to be limited by the competition from low-cost airlines and by congestion on the road network.

More broadly expectations are that:

• Harmonisation of prices across the Channel will reduce shopping trips • Concerns about security and illegal migration will continue to inhibit free movement

of passengers and goods. • Levels of commuting across the Channel will remain minimal. • Economic development in Kent will focus on Thames Gateway (especially Ebbsfleet)

but with no special cross-Channel dimension (Ashford is not expected to develop a cross-Channel role).

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1. Introduction 1.1 Background Assessing and evaluating the wider impacts which can be attributed to new transport infrastructure or improved transport services poses many problems. Even where such changes are large and provide possible connections which did not hitherto exist it cannot be automatically assumed that there will be more than minor impacts. Whilst ex ante analysis of such projects has been problematic, there has been little or no development of ex post studies to assess what the impacts have been. The tenth anniversary of the Channel Tunnel’s opening provides a useful opportunity to reflect on the changes which have happened, assess the determinants of these changes and explore what future changes may occur. This is not just as a check on the accuracy of previous forecasts, but also as means of understanding where supporting policies and actions have been beneficial, or could have been more effective, and where such policies could be improved in the future. The decision to construct the Channel Tunnel, the largest single infrastructure project ever, at least in terms of cost, raised many questions of the impacts on the neighbouring regions of Kent and Nord-Pas de Calais, on the UK and France more generally and indeed on the European Union as a whole. A large number of studies were carried out in the period between the announcement of construction and the completion of the Tunnel and its opening for service in 1994. These showed a variety of possible impacts, but the common consensus was that the impacts on the immediate regions would be limited since they would suffer from the potential loss of employment in the competing port and ferry services and from the reduced need for services to support traffic transferring onto such services. There would be direct benefits from the creation of the new services, but these were expected to accrue more to locations more distant from the Tunnel. There could also be indirect and induced benefits arising from both the objective improvements in accessibility and the perceived improvement in the relative locations of the adjacent regions which could be seen as less remote and peripheral. Undertaking a study of ex post impacts is however just as fraught as an ex ante study. Although it is possible to document the changes which have happened since the opening of the Tunnel, ascribing these to the Tunnel in a period which has seen many other changes in the economy is more difficult. Since the commencement of construction in 1987 we have witnessed the moves to complete the Single European Market by the removal of remaining barriers to trade, but also of duty-free sales on intra-EU movements, as well as the opening up of the EU to the east following the collapse of the Berlin Wall in 1989 and the enlargement of the EU in May 2004. The introduction of the euro for 12 of the EU member states has also had an impact on the development of trade. However, the economies of the EU did not continue to grow as was expected in 1987. Changing policies towards transport, with the privatisation of the rail network in the UK and the growth of low-cost airlines, have also had impacts on the growth and pattern of traffic. 1.2 Methodology In seeking to model the effects of the Channel Tunnel the first task is to define the nature of the project itself. At first sight it might be thought possible to define the project narrowly as the Tunnel itself and its terminals at Cheriton and Coquelles, but clearly there is a broader possible definition which encompasses the complementary facilities which have been provided as terminals (Ashford, Waterloo, and more recently Ebbsfleet and St Pancras) and railway track (CTRL) which would not have been developed without the Tunnel itself. The definitions might also be broadened to include the shuttle services provided through the Tunnel and over the complementary facilities (Eurostar etc). In this study the project is defined as the fixed investment in facilities (both the Channel Tunnel and Associated Developments), while the services through those facilities are treated as the impacts of the project. The second set of issues concerns the nature of the impacts. This study seeks to combine two conventional approaches: investment impact studies and transport impact studies. In the

2

first of these it is usual to distinguish the direct effects of a project (the project’s own generation of employment and household incomes) from the indirect effects (in enterprises supplying the project with goods and services) and from induced effects (the economic multipliers in employment and incomes arising from the spending of incomes arising from direct and indirect effects). Transport impact studies conventionally focus on the two traffic effects of a new facility: diversion of traffic to a new facility and thus away from any pre-existing facilities, and generation of traffic as productive activities and households respond to changes in generalised costs occasioned by the new facility. In studying the impact of the Channel Tunnel these various effects are seen to be inter-related. Traffic diversion may itself have direct (negative) effects as the loss of traffic to the new facility results in reduced revenues, employment and incomes in the existing facilities. These effects will be even more acute if the competition from the new facilities results in classic competitive behaviour (price cutting and reduction in labour costs) by operators through the pre-existing facilities. Similarly it is evident that traffic generation may also include the new establishment or inward re-location of productive activities or households responding to the changes in generalised costs. This discussion introduces the temporal and spatial dimensions of impacts. In the temporal dimension some effects become evident at an early stage in the project (for example the employment arising from initial construction and early phases of operation) but others may be delayed for some years or even decades. In addition there is a distinction between impacts which are short lived (construction employment) and those which are quasi-permanent (employment in operation). In the spatial dimension a similar distinction must be made between those effects which are localised (usually close to the new facility or associated developments) and those which are felt at a regional or national scale The last feature of the model which needs to be identified is that many of the statistical series which might be expected to show evidence of impacts reflect more than one of the processes identified and may indeed reflect changes in macro-economic conditions which would have occurred without the project. So, for example, any changes in the aggregate flows of road freight vehicles on the Tunnel shuttles will include traffic diverted from a variety of alternative routes and modes, traffic generated by short run responses to changes in costs, longer term traffic generation and changes in volumes due to the increased volumes of international trade between the UK and Eire on one hand and the rest of Europe. Similarly changes in employment in the immediate locality of the Tunnel terminals will include changes due to direct effects, indirect effects, traffic diversion and traffic generation as well as changes due to the performance of the national economy. It is also evident that statistics collected for quite different reasons will seldom permit the researcher to separate out the individual elements which go to make up aggregate changes. The impacts of the Tunnel are shown in the following diagrams which establish the broad structure within which our analysis has been conducted and, in greater detail, a series of sub-models which examine specific aspects of this.

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Flow Chart: Overview

Sub-model A: Construction Sector

OTHER SOURCES OF CHANGE

TRANSPORT OPERATIONS

SECTOR

(Sub-model B)

ENTERPRISE SECTORS

(Sub-model C)

CONSTRUCTION SECTOR

(Sub-model A)

OUTCOMES

(Sub-model D)

Channel Tunnel

Associated

Developments

DIRECT

INDIRECT

Employment Impact

Land Use and Environmental

Impacts

ASSOCIATED

CONSTRUCTION

TUNNEL

CONSTRUCTION Construction

Traffic (To B)

4

Sub-model B: Transport Operations Sector

Sub-model C: Enterprise Sectors

REAL & PERCEIVED RELATIVE COSTS OF MODES/ROUTES

GENERATED

TRAFFICS

DIVERTED TRAFFICS

TUNNEL

TRAFFICS

TRAFFICS (OTHER MODES)

Employment

Impact

OPERATIONAL

CHANGES

Employment

Impact

Road Traffic

Impacts

Land Use and Environmental

Impacts

Construction Traffic (From A)

Induced Traffic (From C)

Employment

Impact

Land Use and Environmental

Impacts

REAL & PERCEIVED CHANGES IN COMPARATIVE ADVANTAGE OF LOCATION IN

KENT

ATTRACTION OF NEW OR

RELOCATING ENTERPRISES

EXPANSION OR

CONTRACTION OF EXISTING ENTERPRISES

Induced Traffic

(To B)

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Sub-model D: Outcomes

The flow diagram attempts to model the impacts of the Channel Tunnel in the form of four sub-models. The first is focused on the construction sector work associated with first the Tunnel but later with complementary facilities which (especially CTRL) are seen as having temporary economic impacts and longer term environmental impacts. The second is focused on the transport operations sector where traffic generated by or diverted by the Channel Tunnel and associated operators is seen as expanding directly economic activity (reflected in employment) but also as leading to a reduction in economic activity and employment in the modes of transport (ferry, sea cats and hovercraft), and locations (including Dover, Folkestone, Ramsgate and Sheerness) which have suffered as a result of this diversion. The third model looks at enterprise sectors which are seen as expanding (or maybe contracting) as an effect of the changed cost structures resulting from the new facilities, or which see that new investment and new enterprises are established or relocated from outside the region. The fourth sub-model ‘receives’ outcomes for all the first four and identifies both the additive effects of changes (for example by employment sector) and also the knock-on effects of such economic changes on household incomes and GVA and the consequences of such changes in terms of in-migration, housing construction, and the provision of services to meet the demands of an employed population.

Impact on Base Employment

Income Levels

Commuting, Migration and

Population Change

Housing

Developments

Induced Service

Sector Employment

GDP/GVA

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1.3 Background: Change in Kent 1980 to 2003 The object of this section is two fold. Its primary purpose is to present overall economic and demographic change in Kent as a backcloth against which to view the changes which may be more specifically related to the Channel Tunnel and its associated projects. The second purpose is more speculative. It is sometimes argued that major infrastructure projects (and indeed other projects with a high profile) may trigger economic and demographic growth by changing the perceptions by entrepreneurs and households of the attractiveness and future prospects of a region in addition to any more tangible changes in relative costs and opportunities. In this section therefore the descriptive accounts of change from 1980 to the present day are used to see if there is any evidence that there were changes in the time series for the Channel Corridor (re-defined for our purpose as the KCC Planning Channel Corridor: Ashford, Maidstone and Shepway with the addition of Dover, unless stated otherwise) that might be interpreted in such a way. There is also a brief account of the various planning and regeneration initiatives which have occurred in relevant parts of Kent and which may also be seen to have been influenced by expectations related to the Tunnel. 1.31 Demographic and Economic Change Figure 1 shows the demographic changes experienced in the four Channel Corridor local authorities as revealed by Census data for 1971, 1981, 1991 and 2001 and compared with the same series for Kent as a whole and the South East region. It is evident that Kent has shared in the overall population growth of the South East. Within the Channel Corridor the greatest growth is in Ashford and to a lesser extent Shepway: these changes might be seen as prima facie evidence of a Channel Tunnel effect.

Figure 1: Relative Change in Population (1981 – 2001)

85

90

95

100

105

110

115

1971 1981 1991 2001

Rel

ativ

e C

hang

e in

Pop

ulat

ion

AshfordDoverMaidstoneShepwayKent (without Medway)South East

Source: Calculated using ONS Census data, base year (1991 = 100) The question which then arises is to what extent employment is correlated with these demographic changes in the expansion of job opportunities where there has been rapid demographic growth (e.g. Ashford) or the contraction of job opportunities in areas of population decline. It is difficult to resolve this issue for four reasons. First it is not possible from existing data sets to obtain the geography of employment by reference to the location of the employee, secondly even when such data are collected they are distorted because returns from multi-site firms are often reported as if from a single headquarters location. Thirdly, in the geographic scale of districts there is a lot of commuting across district boundaries so that quite local employment may be registered as out of district: for example there is significant commuting out of Ashford to Maidstone and from Thanet into the Canterbury district. Unfortunately the detailed workplace-residence matrix constructed using the 2001 census has not yet been made available. Finally in the case of Kent it is important to register the extent to which residents in the county commute into the London region (for example from Maidstone).

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The data which are available have been used to construct Figure 2. These record the persons resident in an area, who are in employment (though the place of employment is not necessarily the place of residence). Kent reflects the general pattern for the South East over time but with lower levels of employment: within the Channel-corridor there is a general tendency for Maidstone to have lower unemployment rates than the other Local Authority areas which is probably linked to the greater range of employment opportunities in West Kent, around the M25 and into London.

Figure 2: Rates of Employment - % Working Age in Employment (1994 - 2003)

50

55

60

65

70

75

80

85

90

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Empl

oym

ent R

ate South East

KentAshfordDoverMaidstoneShepway

Source: NOMIS, Labour Force Survey (Not consistent with ONS Census data)

Figure 3 records per capita GVA on the same basis. From the figures it is evident that the Channel Corridor in general reflects the performance of Kent but there are two qualifications to this generalisation: first it is evident that Maidstone has a significantly higher GVA per capita, though among those shown here it is of course the Local Authority least directly affected by the Tunnel project; secondly there is clear evidence of a decline in GVA for Dover from 1991 to 1995. Overall it seems that there is no evidence that the Channel Tunnel and associated projects have generated demographic or economic changes which set the Channel Tunnel corridor apart from the rest of Kent. On the other hand the estimation of GDP and GVA figures for relatively small geographical units is known to be extremely difficult, so the figures given here (from KCC) must be treated with caution.

Figure 3: GVA per Capita: Channel Corridor and Dover (1991 – 2000)

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

GVA

per

Cap

ita AshfordDoverMaidstoneShepwayKent

Source: Kent County Council 1.32 Sectoral Change Underlying these overall employment trends are the performances of individual sectors. These can be tracked using the location quotients reported in Table 1(a – d) which compares

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the districts in the Channel Corridor with the performance of Kent and the South East region using the national (Great Britain) figures as the yardstick for the periods before 1991 and after 2001. Our interpretation is focused on the overall trends.

Table 1: Location Quotients by Sector (1991-2001)

1a. Manufacturing 1991 1993 1995 1997 1998 1999 2000 2001

Ashford 0.97 0.96 0.77 1.04 1.01 1.11 1.18 0.99 Dover 0.59 0.73 0.78 0.89 0.96 1.03 1.04 1.06 Maidstone 0.49 0.57 0.62 0.61 0.68 0.63 0.65 0.69 Shepway 0.61 0.77 0.65 0.58 0.62 0.64 0.67 0.67 Channel Corridor 0.63 0.72 0.69 0.75 0.80 0.82 0.85 0.83 Kent 0.81 0.84 0.84 0.86 0.89 0.90 0.90 0.88 SE 0.80 0.78 0.79 0.78 0.78 0.78 0.79 0.79 1b. Services 1991 1993 1995 1997 1998 1999 2000 2001 Ashford 0.99 0.97 0.97 0.99 1.00 0.95 0.97 1.00 Dover 0.69 0.83 0.87 0.82 0.89 0.87 0.89 0.91 Maidstone 1.14 1.09 1.08 1.06 1.05 1.05 1.07 1.04 Shepway 1.00 1.03 1.08 1.09 1.02 0.98 0.98 0.98 Channel Corridor 0.97 1.00 1.01 1.00 1.00 0.98 0.99 0.99 Kent 1.00 1.01 1.02 1.01 1.00 0.98 1.01 1.01 SE 1.06 1.07 1.06 1.05 1.05 1.04 1.04 1.05 1c. Construction 1991 1993 1995 1997 1998 1999 2000 2001 Ashford 0.67 0.70 0.74 1.07 0.97 1.07 0.85 1.20 Dover 2.47 1.30 0.73 0.94 0.97 1.00 0.85 0.88 Maidstone 1.34 1.58 1.53 1.53 1.31 1.32 1.08 1.27 Shepway 2.14 1.69 0.99 1.12 1.04 1.23 1.15 1.09 Channel Corridor 1.65 1.35 1.09 1.23 1.11 1.18 1.00 1.14 Kent 1.19 1.00 1.03 1.15 1.11 1.27 1.01 1.17 SE 0.90 0.76 0.84 0.96 0.93 0.93 0.95 0.93 1d. Transport and Communications 1991 1993 1995 1997 1998 1999 2000 2001 Ashford 1.44 1.59 2.27 0.90 1.02 1.24 1.07 0.89 Dover 4.52 3.46 3.40 3.50 2.53 2.48 2.34 2.07 Maidstone 0.86 0.84 0.82 1.03 1.04 1.11 0.97 1.03 Shepway 1.36 0.87 1.14 1.07 1.75 1.95 1.96 1.94 Channel Corridor 2.02 1.64 1.74 1.54 1.47 1.57 1.46 1.39 Kent 1.44 1.32 1.29 1.24 1.25 1.29 1.07 1.06 SE 1.06 1.02 1.08 1.07 1.08 1.12 1.09 1.00

Source: Nomis (Annual Business Inquiry and Annual Employment Survey) Table 1a shows that in the Channel Corridor as in Kent and the South East as a whole there is a relative deficit in manufacturing activity (location quotients below 1) though this deficit has become less marked in the period reported mainly because de-industrialisation in other regions of Great Britain has reduced the share of manufacturing in the yardstick figures. Within the Channel Corridor the figures for Dover reflect the decline in overall employment (especially in mining and transport) so that the share of manufacturing in Dover’s employment base has increased. The location quotients for services (Table 1b) indicate that the Channel Corridor and its constituent districts closely parallel the national and regional profiles over the whole time period (1991 – 2001), but Dover has a low location quotient throughout the period.

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Turning to those sectors which might exhibit some more direct Channel Tunnel effect it is evident that the corridor and its constituent districts (except Dover) have exhibited high location quotients for construction (greater than unity – Table 1c) throughout the time period. This reflects the Kent pattern, but not that for the South East region. It is tempting to interpret some of these figures as evidence of effects relating to the construction of the Tunnel itself (up to 1995) and to related works (especially CTRL). Finally, Table 1d gives location quotients for the Transport and Communications sector which show that the corridor as a whole has an above average share of employment in this sector (compared with Great Britain and the South East) but this has declined in Dover and Ashford and increased in Shepway and Maidstone. Some of this may be interpreted in low of decreased employment in the cross-Channel ferries (Dover) but employment increases associated with Eurotunnel (Shepway). 1.33 Planning and land use change The attitude of planning authorities in Kent to the Channel Tunnel project has been very mixed. On the one hand a number of responses were hostile or at best defensive because the authorities were aware of the possible negative impacts especially in terms of employment, traffic and environmental damage. So for example many of the responses within Dover and Shepway were of this type and the County Council too was aware of public concern in relation to the alignments chosen for the Channel Tunnel Rail link. A second response can be described as constructively defensive as authorities accepted the main elements of the Channel Tunnel project and were concerned to ensure that additional measures were put in place to benefit their districts or to safeguard against perceived harmful impacts. So for example Shepway pressed hard for exits and links from the Cheriton terminal into Folkestone and Ashford pressed hard for the location of the International Passenger Station. On the other hand Shepway also pressed hard to ensure environmental protection of the landscapes around the Cheriton terminal. Thirdly there were various organisations which viewed the project positively overall but recognised that significant additional effort and investment would be necessary if the potential benefits of the Tunnel were to be maximised: this was true of the Kent County Council for much of the period, though it added the additional concern of seeking to ensure that areas remote from the Channel Corridor and the new rail links were not unnecessarily disadvantaged. For example the Kent Impact Study identified the duelling of the A299 Thanet Way as a priority to provide better access to Ramsgate. This need for additional effort, co-ordination and investment was also recognised by organisations like Locate in Kent and the Kent Tourism Initiative, and similar approaches have been evident at the district level in Ashford and (though only in recent years) by Shepway. The role of the planning authorities in this context was twofold: on the one hand they had the power to zone land uses through the mechanism of local plans, on the other they were able to respond to applications by landowners and from potential developers for planning permission to develop specific sites. These two processes are not entirely independent because most specific applications are made in the knowledge of the local plan and the planners’ knowledge of developers’ aspirations will influence the local plan. These two aspects are evident from the material presented in Table 2 and in Figure 4. Table 2 shows the floor space (in square meters) of land allocated for ‘employment uses’ in the period 1991 – 2001, and the net completed floor space in the same period. It will be evident from this table that the allocations were modest but also that there was no great pressure for planning permissions in the Channel Corridor (the percentage of the allocated space completed ranged from only 1% in Shepway, through 20% in Maidstone and 25% in Ashford to 63% in Dover). A similar picture is evident from the map in Figure 5 which shows the geographical distribution of planning permissions since 1991. There is little evidence of pressure on land allocations along the Channel Corridor. The last column of Table 1 also shows that allocations 2001-2011 are similarly modest.

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Table 2: Employment Land Uses (m²) - The Channel Corridor (1991 – 2011)

1991 – 2001 Structure Plan allocations

1991 – 2001 net completions

2001 – 2011 allocations

Ashford 430 107 (25%) 310

Dover 300 190 (63%) 228

Maidstone 150 30 (20%) 96

Shepway 150 2 (1%) 110

Total 1030 329 (32%) 744 Kent Total 3330 1003 (30%) 2956

Source: Kent County Council

Figure 4: Geographical Distribution of Planning Permissions for Employment Land Uses in the Channel

Corridor (1991 +)

Source: Data from Kent County Council

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2. Preliminary Expectations There was no shortage of studies conducted into the potential impacts of the Channel Tunnel prior to its completion and even the beginning of construction. This section provides a short review of some of the studies carried out in Kent. It is useful to make a comparison between these predictions and what has happened, and perhaps to shed some light on the accuracies of the forecasts. The studies (which themselves draw on predictions from Eurotunnel and the Kent Ports) we have examined are

1. Kent Impact Study 1987 2. Kent Impact Study Review, 1991 3. Kent Ports Strategy, 1994

In reviewing these we have adopted the same structure consistent with the rest of this report and separated the anticipated effects into 3 sub-sections: the construction sector, the transport operations sector and enterprise sectors. 2.1 The Construction Sector The Kent Impact Study recognised that the Tunnel would provide a substantial level of employment in the construction sector. The peak in construction employment was predicted to be during 1990 at a little less than 4,000 and distributed geographically as shown in Table 3 (A more detailed table of the predictions for 1986 to 1993 can be found in Annex 1).

Table 3: KIS Predictions - Construction Employment (1990)

Location Estimate for 1990

Dover, Shakespeare Cliff (Tunnel Workings) 1,725 Ashford (Inland Clearance Depot) 91 Isle of Grain (Manufacture of Tunnel Linings) 234 Folkestone (Terminal and Local Project Office) 1,395 BR Works (Ashford International Station, route and track improvements, etc) 456 Total 3,901

Source: Kent Impact Study The importance of supporting infrastructure on Kent roads and rail was emphasised in the KIS. Improvements were predicted to generate further construction sector employment throughout the county, over a longer time span. Construction workers spending a proportion of their incomes locally was hoped to generate additional employment in retailing and other service sectors in the short term. The KIS also predicted the laying-off of skilled and unskilled manual workers with the completion of the Tunnel. The study recognised that much of the construction workforce would be concentrated in Dover, though it would also involve residents of Folkestone, Thanet, Ashford and the remainder of Kent. In the long run it was thought there would be a need for re-training programmes, advice and counselling for redeployment of these workers. 2.2 The Transport Operations Sector The Tunnel was expected to have a considerable effect on the cross-Channel market. The KIS predicted that the Tunnel would increase the size of the total market by creating new traffic and offer an alternative rather than replacement to the ferries. Following initial losses, ferry traffic was projected to increase, leading to some recovery of ferry-related employment. The Kent Ports Strategy predicted that the market in which the Channel Tunnel would be principally competing for freight and passengers would be Travel between the UK and: Belgium, Luxembourg, France, Germany, Holland, Italy, Austria, Spain, Switzerland, Portugal and Eastern Europe.

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The KIS included projections (made by Eurotunnel) of future passenger traffic, these are summarised in Table 4. They predicted passenger numbers for the Tunnel at 29.1 million and 39.5 million for 1993 and 2003 respectively, with a total passenger market of 64.3 million and 88.1 million for each year. Through services (Eurostar) were expected to attract 15% of air passengers, 90% of foot passengers travelling by sea and 30% of coach passengers. A further 51% of coach passengers were expected to travel on coaches on shuttles.

Table 4: Estimates of the Passenger Traffic Market - Million Trips per Annum

1985 1993 2003 2013

Projection of existing market

48.1 64.3 88.1 111.9

Traffic created by the Tunnel

- 2.8 5.5 6.8

Total passenger market 48.1 67.1 93.6 118.7

Projected Tunnel traffic - 29.1 39.5 46.6

Sources: KIS and Eurotunnel The Kent Ports Strategy predicted that Eurotunnel’s impact would have been to attract a considerable share of the car passenger market. Assuming no price advantage or disadvantage compared to the closest ferry rivals, and that customers perceived it as a faster and more frequent service, the study predicted that Le Shuttle could attract 35% of the Total UK-Continent market. However, when taking into account that the Tunnel is not a perfect substitute for the Ferry (e.g. No rest break or on board facilities) they predicted this share would more realistically be 25% of the total market. The Ports of Dover, Ramsgate and Folkestone were expected to ‘bear the brunt of the Tunnel. The strategy drew a comparison with Eurotunnel projections that predicted the Channel Tunnel would attract 50% of the car market due to parallel rationalisation of the ferry industry and the potential merging of ferry operations. For the through-rail passenger market, the Kent Ports Strategy attempted to estimate the volumes of passengers transferring from short haul air services to the network, via the Eurostar high speed service from London to Paris and Brussels. They predicted that the conversion to through-rail would be 3.3 million passengers per year. In terms of the freight market the Kent Ports Strategy expected that the Shuttle would be competing with the Ferry operators in the movement of accompanied (ro-ro) and unaccompanied (lo-lo) trailers. The market for accompanied trailers was larger than that for unaccompanied at the time of the report and was expected to remain so. The relative importance of Kent in the freight transport market, as of 1994 was outlined in the KPS and is summarised below.

Table 5: Relative Importance of Types of Freight for Kent

Accompanied Lorries: 70% market share Unaccompanied Trailers 13% market share Containers 5% market share

Source: Kent Ports Strategy, 1994 The KPS further estimated that Kent’s share of accompanied traffic could rise to 75% following the opening of the Tunnel, climbing to 77% if Kent routes became relatively cheaper than others (e.g. if Kent routes were £5 cheaper, while others’ prices remained the same). For unaccompanied freight they expected Kent’s share to rise to 22% after the Tunnel and to 25% should the routes be more competitive in terms of price. The study also noted that an important limitation for levels of unaccompanied freight in Kent was the capacity constraint at Dover. The study anticipated that Eurotunnel would gain between 22% and 28% of the market for accompanied freight depending on the importance freight hauliers gave to speed on crossings on the Dover Strait. The impact on unaccompanied freight was expected to be less apparent due to the small market share held by existing services on the Dover Strait. It predicted that

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Eurotunnel would achieve a market share of 3% of the total market. The Kent Ferries were hence predicted by the KPS to retain 34% of the cross-channel car passenger market and 53% of the accompanied freight market. An important outcome of the model used in the KPS was that without price cutting by the Kent cross-Channel operators, there would be little possibility for trade diversion into Kent resulting from the opening of the Tunnel and therefore limited expansion of the Kent-Continent market. The study also predicted that by 2000 the Kent Ferry market would have returned to equilibrium The KIS expected that the impact on ro-ro freight traffic would be much less than on passenger traffic, particularly at Dover. The Eurotunnel estimates of cross -Channel freight traffic taken from the KIS are summarised in Table 6 below. It was thought that Eurotunnel would become an effective competitor for ro-ro traffic and some container traffic. By 1993 Eurotunnel expected to capture 24% of the ro-ro market plus a further 3% which would transfer to rail, and 37% of the container traffic, new vehicle delivery and rail wagon markets. This was expected to give the Tunnel over 17% of the total cross-Channel freight market.

Table 6: Estimates of the Freight Traffic Market - Million Tonnes per Annum

1985 1993 2003 2013 Projection of existing market

60.4 84.4 122.1 169.8

Traffic created by Eurotunnel

- - 0.5 0.6

Total freight market 60.4 84.4 122.6 170.4

Projected Tunnel traffic - 14.8 21.1 27.8

Sources: KIS and Eurotunnel

In terms of the effect the Tunnel was predicted to have on services in operation, it was thought in the KIS that Dover would be the port most affected and the study was uncertain of the future for the fast ferries (hovercraft). The port at Folkestone was thought to be particularly vulnerable though it was predicted that Ramsgate could withstand the competition due to its diverse operations. The KPS expected the impact on freight carriers to affect principally the P&O and Stena Dover-Calais services, with Ramsgate and Sheerness services less affected. The studies predicted increases in road traffic volumes in Kent (resulting from the expansion of the cross-Channel market), particularly on the M20, but also on parts of the M25 and the A2/M2. The expected increase on the M20 was put down to proposed improvements to the route as it was to serve both the Tunnel and Port of Dover. The KIS acknowledged that there would not be sufficient capacity for peak flows in Kent - either for growth of commuter traffic or for the progressive development of international services and that consequently, investment would be required in road and rail infrastructure within Kent. The studies acknowledged that the Channel Tunnel would undoubtedly result in both positive and negative direct employment effects within the Transport Operations sector. The Tunnel itself was expected to generate employment in its operation and maintenance and government departments, both at the Cheriton site and the Ashford International Passenger Station and Freight terminal. However increased competition within the ferry industry was also expected to mean a reduction in Port and ferry employment resulting from the operation of the Tunnel. The estimated loss in ferry related employment was predicted to be in the region of 7,440 and 7,480 jobs (KIS Review 1991). The Review recognised that the job losses would indeed be at the larger end of this scale, if not larger. The study forecast port and ferry job losses at Kent Ports by 1994, as summarised below in Table 7.

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Table 7: Estimated Port and Ferry Employment in Kent Ports (1991 – 1994)

Port 1991 - 1994Dover -5400

Folkestone -800

Ramsgate -780

Sheerness and Chatham -70

Dartford -60

Elsewhere (including Ashford) -330

Total -7440 Source: KIS 1991 Review

The KIS review 1991 estimated a direct employment gain of between 1,500 and 2,000 jobs in Tunnel and rail operations arising from the operation of the Tunnel (less than the 3,200 predicted in the KIS 1987). These estimates included employment in operation and maintenance, Government departments, employment at both Cheriton and Ashford and elsewhere. These figures combined with the predicted loss of ferry employment, led the study to conclude that the Tunnel would result in a negative ‘direct’ employment effect in Kent of between 5980 and 5480 job losses. 2.3 Enterprise Sectors The Kent Impact study identified several sectors that would be affected by the existence of the Channel Tunnel and associated infrastructure within Kent. These were: Tourism, Retailing, Manufacturing and Wholesalers and Road Hauliers. The Tunnel was expected to promote growth in these sectors in Kent for varying reasons and to generate additional indirect and induced employment within the county. The KIS predicted an overall secondary employment effect of 13 -14 thousand jobs by 1995 in Kent. 2.31 Tourism It was thought that the Channel Tunnel could create significant opportunities for tourism in Kent and hence tourism employment. The KIS identified several shortcomings in provision for tourism within Kent including: limited ability to accommodate groups such as conferences; poor standards of accommodation in Thanet; a serious shortage of accommodation in Canterbury; and a general lack of purpose-built, medium priced serviced accommodation, particularly in locations serving transit markets. The Tunnel was expected to increase the size of the potential continental tourism market tapped by Kent, as well as attracting more of the UK market due to the infrastructure improvements. However it was also recognised that the Tunnel and its associated infrastructure would have some adverse impacts: it was thought the shorter cross-Channel journey times would reduce the need for visitors to stop in Kent between other UK destinations and the Continent, as well as redirecting tourist traffic away from the parts of East Kent relying on transit traffic to Dover Port. The KIS identified several issues to be addressed in order for Kent to establish itself as a major tourist destination: transforming the tourism image of Kent; provision for the needs of Tunnel users; development of new tourist attractions; improvement and better distribution of the accommodation base; conservation and improvement of the natural and built environment. On the basis of the completion of these improvements, the KIS estimated that: a total of 3,391 jobs would be created without the Tunnel, 5,521 with the Tunnel and 6,394 from projects made feasible by the existence of the Tunnel. The study highlights that for the employment to be generated the tourist industry in Kent needs to be improved and expanded –the Tunnel alone would not generate the employment due to limited tourist attraction and capacity in the county. The 1991 KIS review stated that the 1987 Kent Strategy stressed the potential for 2,000 to 3,000 tourism jobs to be created in Kent as a result of the Tunnel and its related

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infrastructure. The review regarded these estimates as overly optimistic and re-estimated this at around 500 new jobs (a net additional figure after taking account of displacements and relocations of accommodation as well as visitors diverted away from Kent to France for short breaks). 2.32 Retailing The KIS recognised that the impact on retailing would be difficult to ascertain due to the complex changes in catchment areas resulting from structural changes taking place in the retail sector, as population and income changes as well as the effect of the Tunnel and associated infrastructure. The KIS expected 1,000 – 1,200 net additional jobs in retailing by 1996 resulting from the influence of the Tunnel and associated infrastructure. A survey of existing Kent retailers and national/regional retail headquarters by the KIS revealed that while the Tunnel would influence the location decision of about three quarters of respondents, the possible destinations for new shops were spread around the county. West Kent was most popular and particularly Tonbridge, Sevenoaks and Maidstone. Four fifths of respondents thought the Tunnel was likely to increase the market, especially for comparison goods. 2.33 Manufacturing The KIS highlighted Ashford as a potential manufacturing and commercial hub for East Kent. However, much of the benefits were expected to be felt in North Kent, due to its proximity to London as well as the Continent. In terms of attracting firms from outside Kent the KIS identified 4 priorities for manufacturers in choosing a location: availability of skilled labour; low rent and rates; access to UK markets; and proximity to motorways. The study, however, also identified limitations to new firms locating in Kent: A lack of appropriately skilled workers, the cost of moving to Kent (for firms outside the SE) and the fact that the firms’ main markets were close to their present location. The KIS commissioned a survey of firms into their expected gains from the operation of Channel Tunnel. They surveyed UK firms in Kent, the South East and elsewhere in the UK. The study predicted that the subsequent growth in existing Kent firms and the inflow of firms from outside would result in some gains in employment. The estimated employment gains predicted in this survey are summarised below in Table 8. In total they predicted a total increase of 7,975 manufacturing jobs in Kent by 1996 with 2,637 – 2,845 of these being due to infrastructure improvements.

Table 8: Estimated Kent Employment Gains from Manufacturing Firms (1986-96)

Estimated

Employment Gain Kent firms Total increase 5,718 (21%)

Contribution of infrastructure 2,533 (9%)

Firms relocating from outside Kent Total increase 2,257

Contribution of infrastructure 104 - 312 Source: Kent Impact Study

The KIS Review modified these expected employment gains and estimated that 2750 jobs could be created in manufacturing resulting from the existence of the Tunnel and associated infrastructure developments (they quoted the KIS prediction as 5200 jobs). The impact of the Single European Market was however, expected to boost this number.

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2.34 Distribution, Road Freight and Wholesaling The Kent Impact Study identified distribution as a prospective Channel Tunnel related growth sector due to its great dependence on transport and communications. Expected benefits revealed as the result of a survey of road-hauliers and wholesalers included direct benefits from improved access to Europe and the rest of the UK and modest growth, though road hauliers saw more benefit in being closer to UK customers rather than European ones. The estimated employment gains taken from the KIS are detailed in Annex 2 and total 2,510 – 2,910 between 1986 and 1996. The 1991 review re-estimated the impact to be of around 1 thousand jobs (rising to 2.7 thousand when the effects of the Single European Market were included) by 1996. Surveys revealed that firms had great difficulty in separating out the Tunnel impact from that of the SEM. The 1991 review also pointed out the failure of the KIS to take account of the decline in employment in specialised customs clearance companies and of Customs and Excise and immigration staff around Dover, resulting from the SEM. These were expected to amount to over 1.8 thousand job losses. To summarise, from the studies examined it can be seen that the main expectations for Kent were:

• A substantial temporary increase in construction sector employment • An expansion of the cross-Channel passenger market • Significant numbers of cross-Channel passengers using the Tunnel • Expansion of the cross-Channel freight market: ro-ro & lo-lo but mainly the former • Direct employment gains from operation of the Tunnel • Substantial employment losses in the ferry industry • Growth and employment gains in the Tourism, retail, manufacturing and the

distribution, road freight and wholesale sectors

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3. The Construction Sector The approach we have taken in this chapter separates the Channel Tunnel and associated developments in relation to the construction sector due to the different geographical and time scales involved. It can be said that the construction of the Channel Tunnel was short term and very much localised, while the associated developments as we have defined them, are less localised and spread over a time period extending to now and into the future. In terms of the effects of construction, employment and economic activity were and are transient as are some of the land use impacts. In this particular context, the geographical location of these effects is shifting. It started around Dover and Folkestone with the Tunnel Construction, then moved to the Cheriton Terminal and Ashford international Passenger Station, on to the sites of road improvements and then most recently to the Channel Tunnel Rail Link line and its stations (in Kent and further a field). Finally, many firms involved in the Channel Tunnel and associated works will have been national or international contractors and sub-contractors, who will have recruited at least some of their labour force from outside the region (transient employment effect). It is therefore feasible to say that there are very few, if any, long term induced effects of the construction associated with the Tunnel. 3.1 Tunnel Construction The Channel Tunnel is the longest tunnel ever built under sea. The undersea section is 24 miles long and the fixed cross-Channel link is made up of three 31 miles long tunnels. The Tunnel links two terminals; one at Folkestone and the other at Coquelles near Calais and lies at an average depth of 40m below the seabed. Between 1987 and 1991 93 miles of tunnel were bored. There are 2 one-way tunnels dedicated to rail traffic and 1 central service tunnel linked every 375m by cross-passages to the rail tunnels. However, in order to support the Tunnel further construction of infrastructure was required. 3.11 The Channel Tunnel Act The Channel Tunnel Act of 1987 was put together with the purpose of providing “for the construction and operation of a railway tunnel system under the English Channel, together with associated works; to provide for connected improvements in the road network near Ashford, in Kent, and in the rail network in South Eastern England; to incorporate part of the railway tunnel system into the United Kingdom and to provide for the application and enforcement of law in relation to, and otherwise for the regulation of, that system and matters connected with it; to provide for the construction of certain highways and associated works in the vicinity of Folkestone; and for connected purposes.”1 The act proposed schedules for the construction of the works to be completed by the Concessionaires, the County Council and the Railway Board, covering: the Tunnel under the English Channel between Cheriton and Fréthun, improvements to roads and railways, the terminals at Cheriton and Fréthun controlling access, an inland clearance depot in Ashford and the fixed and moveable equipment needed for operation of the Tunnel. The Channel Tunnel Act permitted the building of an international station at Ashford and an international terminal at Waterloo. The act did not require that the Ashford international station be built but granted the powers required and provided the location. 3.2 Associated Road Construction Road infrastructure improvements were an important part of the Channel Tunnel construction project and were included in the Channel Tunnel Act. This was reinforced by the KIS which had a key aim to improve road access into Kent and its new development sites resulting from the Tunnel. If there was to be an increase in traffic on Kent roads then improvements were

1 Channel Tunnel Act, Chapter 53, HMSO Publications, 23rd July 1987

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required to support this on certain routes. In addition to the direct Tunnel requirements road improvements were justified on two other counts: the need to stimulate activity associated with the wider potential of the Tunnel and for the enhancement of greater travel to work mobility2. Major improvements to the trunk road and motorway network were announced in connection with the Tunnel. The associated road improvements are summarised below:

Table 9: Kent Road Improvements Associated with the Tunnel

Announced in Connection with the Tunnel (KIS 1987)

M20 Completion between Maidstone and Ashford Complete

M20 Widening of the Maidstone Bypass Complete

A259/A261 Major improvements to the South Coast route, New Romney Bypass and Dymchurch & St Mary's Bypass Incomplete

A 261 Major improvements to the South Coast route, Hythe to M20 Incomplete

A20 Major improvements between Folkestone and Dover Complete

Access roads to the Cheriton Terminal (M20) and Ashford ICD, to be financed by Eurotunnel Complete

Transport Supplementary Grant System Schemes from 1988 - 1991

A253* Ramsgate Harbour Approach Road, junction improvement scheme Complete

A299* Dualling of the Thanet Way Complete

A2070 Ashford Southern Orbital Road Complete

A2070 Beaver Road Diversion Complete

A2070 Ham Street Bypass Complete

A260 Hawkinge Bypass Incomplete

A260 Denton Bypass Incomplete

A260 Densole Bypass Incomplete

A260 Improved route Folkestone-Canterbury Incomplete

A256 Improvements, Dover - Ramsgate and bypasses at Whitfield and Eastry Complete

A226* Thames side Industrial Route Complete

Proposed as of 1990 but not able to proceed without TSG

A228 Improvements and junction with M20 providing access to the Kings Hill Business Park Incomplete

Remainder of Thameside Industrial Route Incomplete

A249* Dualling including a new Swale Crossing Incomplete

A2 Dualling between Lydden Dover and junction near Honeywood Industrial Park Incomplete

A20 Folkestone Harbour Approach Road Incomplete

M20 Improved access northwards to Paddockwood Incomplete

M25/M26/A21 Interchange and slip road near Sevenoaks Incomplete

A2/M25 Interchange Incomplete Sources: Channel Tunnel Act, Kent Impact Study, Channel Tunnel Progress and Impacts, Local Transport Plan for Kent 2001/02 to 2005/06

The first section of the table shows the improvements announced before the 1987 Kent Impact Study. In the second section are the schemes considered for Government Transport Supplementary Grants (TSG) up to those announced for 1990/91. The third section contains schemes proposed but unable to happen until they are deemed eligible for TSG, as of 1990 when the “Channel Tunnel- Progress and Impacts” report was written. Not all of the proposed improvements were included in the Channel Tunnel Act and some have not been completed to date as indicated in the third column of the table. It is important to note that without the 2 Kent Impact Study, 1987

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building of the Channel Tunnel many of these improvements to roads would either not have happened or would have taken considerably longer to be implemented. 3.3 Associated Rail Construction Various additional rail constructions were required in the districts of Shepway, Dover and Ashford to support the international trains running from London. As well as this, rail terminals had to be built on both sides of the Channel to accommodate the Shuttle trains. In addition, another important aspect within Kent was the construction of the International Passenger Station at Ashford required for international Eurostar trains, the realisation of which was a key aim of the Kent Impact Study. The Channel Tunnel Rail Link Act (1996) provided for the building of a fast rail link between the Tunnel and London. Work is currently taking place on The Channel Tunnel Rail Link, which is to be a high speed line running for 109 Km (68 miles) between St Pancras station in London and the Channel Tunnel. New international stations are being built at Stratford in East London and Ebbsfleet in North Kent. The CTRL is considered in this chapter as even though the final decision took a long time to be taken; its construction can be deemed a direct result of the existence of the Channel Tunnel. The construction of the Channel Tunnel Rail Link is divided into two sections; section 1 is shown below in Figure 5a. The construction of section 1 between the Channel Tunnel and Fawkham Junction in North Kent began in October 1998 and was finished in 2003, as highlighted it included: The Medway Valley and Waterloo Connection route (contract 330); the Medway Crossing (350); the North Downs Tunnel (410); Extension of mid-Kent section from Tonbridge and Malling through Maidstone to Ashford (420); Lenham Heath to Ashford (430); and Ashford to the Cheriton Terminal (440). Additional contracts included also covered railway infrastructure modifications, signalling, train control and communications, Resignalling at Ashford and work on Tracks, catenary, mechanical and electrical systems.

Figure 5a: The Channel Tunnel Rail Link, Section 1

Source: CTRL

Figure 5b: The Channel Tunnel Rail Link, Section 2

Source: CTRL

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The construction of section 2 which runs between Southfleet and St Pancras (Figure 5b above) commenced in 2001 and is due to be completed by the end of 2006. This section will include the construction of the international Terminals at Ebbsfleet, Stratford and St Pancras. The contracts for construction in Kent cover: the Thames Tunnel (contract 320); Ebbsfleet station (340); Highways works connecting A2 to Ebbsfleet Station (342). 3.4 Employment Impacts of the Construction Sector The various preliminary studies conducted before the building of the Tunnel anticipated that one of the principle direct employment impacts of the Tunnel would have been an increase in employment in the construction sector from 1986 to 1994 as a result of the construction of the Tunnel. Primarily this effect would have been felt in the Dover, Shepway and Ashford districts where a majority of construction took place for the Tunnel. Since then it would have been expected that construction employment in the districts associated with the CTRL would have been positively affected. Following the Kent Impact Study predictions (1987), the KIS 1991 Review acknowledged that construction employment did indeed peak in 1990, though with a much larger labour force than originally anticipated (8,300). In addition there were 1,827 people recorded as employed in sub-contractors working on the Tunnel Terminals. However this study acknowledged that both direct employees and subcontract employees were recruited mostly from outside Kent (of the direct employees only 35% from were from within Kent in 1990). Figures on construction sector employment (SIC 45) for Kent from 1991 show that at the county level there was a fall in construction employment of 23% from 1991 to 1995. This is however followed by subsequent growth of 29% and 12% between 1995 – 1998 and 1998 – 2001 respectively. In 2001 there were 32,368 employees in construction, 12% higher than in 1991. Figure 6 shows employment numbers in the Construction Sector within the Channel Corridor districts and Dover.

Figure 6: SIC 45 - Construction Employment (1991 – 2001)

0

1,000

2,000

3,000

4,000

5,000

6,000

1991 1995 1998 2001

Empl

oyed

Per

sons

AshfordDoverMaidstoneShepway

Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry Construction employment in 1991 was highest in Dover, where most of the construction work for the Channel Tunnel took place. Numbers fell dramatically after the completion of the tunnel by 1995 (80%). Dover also had the highest location quotient of the districts in 1991: 2.20 to the Kent base (falling to 0.75 by 1995), indicating a relative concentration of construction employment in the district. In Shepway numbers also fell from 1991 to 1995, as did the LQ (1.71 to 0.93), indicating a reduction in the concentration of construction employment as the construction of the tunnel reached an end. In Maidstone numbers remained high and fairly constant over the whole period. Numbers in all 4 districts grew from

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1995 to 2001. In Ashford construction employment grew throughout the period by a total of 138%. Construction employment numbers in Dartford have been growing steadily since 1991 (67% 1991 – 2001). Similarly, so have numbers in Medway (62%) which saw much activity during the construction of section 1 of the CTRL. The numbers employed in SIC 45 (Construction) throughout Kent (by district) are included in Annex 3. 3.5 Land Use and Environmental Impacts of the Construction Sector The construction of the Tunnel and CTRL involved significant temporary land use changes. Among the temporary changes were sites for construction operations near Cheriton, at Ashford (Waterbrook for Eurotunnel, and Beechbrook for CTRL) and smaller sites associated with CTRL works. But these temporary sites were only given planning permission for strictly limited periods. The local planning authorities (at district and county level) and those responsible for construction have been very concerned to safeguard the environment during the construction phases. In some localities the local community groups were active in expressing their concerns. As a consequence of these pressures three key outcomes should be noted:

• Alignments and design specifications were chosen to minimise permanent damage to landscape quality, hydrological systems and plant and animal communities

• Where the construction activities caused inescapable temporary disturbance of the environment, specific arrangements were made to return the land to it’s previous condition (this is a key element in CTRL work)

• Where opportunities occurred new habitats were created to compensate for losses (notably Biggins Wood and Samphire Hoe)

Nevertheless it is clear that the major construction works associated with the terminal and later by the CTRL construction have resulted in quasi-permanent impacts on the landscape, hydrology and ecosystems.

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4. The Transport Operations Sector The sector most directly impacted by the existence of the Channel Tunnel is undoubtedly the transport operations sector. For the purpose of our analysis this is distinct from the more general transport sector as we have excluded some transport-related industries and included only those associated with the operation of the various modes of transport (land, sea and air). 4.1 The Overall Market for Cross-Channel Movements 4.11 Historical Perspective One of the problems with an historical perspective of this sort is that there are no consistent reliable data sets that run over the whole time period. Such data sets that there are refer to passenger numbers but not freight tonnages or volumes. Data for cross-Channel passenger numbers through the Port of Dover is shown below, back to 1985. This allows us to examine the trend in cross-Channel travel before the completion of the Channel Tunnel. Following a slight fall in numbers from 1986 to 1988 there was a steady increase in passenger numbers throughout the period leading up to 1994: A total increase of 55% between 1988 and 1994. Although we believe the trend is reliable the absolute figures are not entirely consistent with more recent aggregates which appear in Tables and Figures in later sections.

Figure 7: Historical Perspective - Cross-Channel Passenger Numbers through Dover (1985 -1994)

5,000

10,000

15,000

20,000

25,000

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

Pass

enge

r Num

bers

(000

's)

Dover

Source: Dover Harbour Board 4.12 The Cross-Channel Passenger Markets This section looks at the passenger market within which the Channel Tunnel (specifically the Shuttles and Eurostar) operate. This is best defined in terms of destination countries and the size of the market throughout the period of operation. Using International Passenger Survey data on visits by UK port of origin we have looked at two destination markets:

1) Travel to and from the EU3 2) Travel to and from ‘Near Europe’ defined as Belgium, France, Germany and the

Netherlands. UK residents make up approximately 80%4 of cross-Channel travel and constitute the focus of this analysis. Figure 8 shows the number of trips made by UK residents to the EU and to Near Europe between 1993 and 2002. Both markets exhibit considerable growth throughout the period. The market for passenger travel to Mainland Europe from the UK increased by over

3 As it stood before the May 2004 enlargement (15 countries), and excluding Ireland 4 Transmanche Tourism Research Programme, Cross Channel Tourism Study, KCC, November 2000

23

61% and the total market to Near Europe by over 43%. In 2002 there were almost 40 million trips made to Europe (excluding Ireland) by UK residents and over 18 million to Near Europe.

Figure 8: Trips Made by UK Residents (1993 – 2002)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

No.

of t

rips

(000

's)

All EU*Near Europe

Source: IPS, Travel Trends The opening of the Channel Tunnel and the establishment and success of low-cost airlines in the UK has led to increased competition for cross-Channel travel. It might be expected that this would result in a change in the relative market shares of operators of the various modes of transport including air, sea and tunnel. To estimate the share of the cross-Channel market held by Eurotunnel we have used data from the International Passenger Survey, which provides passenger numbers by UK Port of origin and country of destination. The data can be used to examine how the passenger numbers as a share of the total market have changed over time. It might be expected that the relative market shares of the various modes of travel would exhibit the following characteristics:

• A gradual increase in the market share of the Channel Tunnel since opening in 1994

• A decrease in the market share of the Kent and South Eastern ferry ports from 1994

• The Tunnel and ferries would have a larger share of the Near EU market than that of the total EU

• A substantial increase in the market share of flights from Stansted Airport due to the success of the low-cost airlines

• A decrease in the market share of Heathrow and perhaps Gatwick as a port of origin

In chapter 2 we outlined the predicted Market share of the Tunnel taken from the Kent Ports Strategy. This was estimated at 25 – 35% of the market for passenger travel to the Continent. Figure 9 shows the percentage shares (taken from IPS data) of the main Passenger Ports (Ferries, Tunnel and Airports) located in the South East for travel to and from the EU, 1993 to 2002. Travel from these ports accounted over 60% total travel from UK to mainland Europe in 2002 (by UK residents). The trends show clearly that the Channel Tunnel (includes both Shuttles and Eurostar) gained a substantial share of the market for passenger travel5 between 1994 and 1998 when it peaked at 18%, however, from 1998 the market share of the Tunnel decreased by over 3%. The market share held by Dover and Folkestone ports fell continuously from 1994 onwards. There was growth in the share held by Stansted airport from 1995 onwards: a result of the increasing popularity of low-cost airlines flying directly and

5 Includes all types of passenger: foot passengers, car accompanied passengers, business-travel passengers, leisure-travel passengers, package holiday & day-trip passengers etc.

24

cheaply to EU destinations. The market shares of Heathrow and Gatwick have been declining since 1993 though Gatwick experienced a slight increase from 1999 onwards.

Figure 9: Travel to the EU6- Market Share of Main SE Ports and Airports (1993 – 2002)

0102030405060708090

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

% o

f Tot

al T

rips Dover & Folkestone

Channel TunnelStanstedGatwickHeathrow

Source: IPS, Travel Trends In 2002 over 60% of travel between the South East Ports and the EU was to countries in ‘Near Europe’. Similar trends are exhibited in the relative market shares for travel to Near Europe as shown in Figure 10. The South East Ports hold a larger overall share of the total market for UK residents and as could be expected for travel to Belgium, France, Germany and the Netherlands, the Channel Tunnel manages a far larger share of the market, peaking at 33% of the total market by 1998 (15% more than its share of the total EU market). The market share of the Dover and Folkestone ports fell from 42% in 1994 to 22% in 2002. However from 1998 to 2002 the market share of the Channel Tunnel also fell: to 28% by 2002. Heathrow’s share of the Near Europe market has generally declined since 1993 as did the share of Gatwick, though this has increased in recent years. Stansted has been increasing its share since 1999 but remains only a small fraction of the total.

Figure 10: Travel to Near EU - Market Share of Main SE Ports and Airports (1993 – 2002)

0102030405060708090

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

% o

f Tot

al T

rips Dover & Folkestone

Channel TunnelStanstedGatwickHeathrow

Source: IPS, Travel Trends However, it is possible to get a clearer picture by looking at each of these countries separately. France and Belgium are the countries currently served directly by the Channel Tunnel and so the Tunnel would be expected to have captured the largest market shares for travel to both via the Shuttles and Eurostar. Dover and Folkestone ports and the Channel

6 Excluding Ireland as Channel Tunnel is unlikely have been used as a method of transport

25

Tunnel have the largest shares of the UK – France and Belgium Market, the Tunnel leading since 1998 for both destinations. For travel to Belgium, 640 thousand trips were made using the Tunnel in 2002: a 36% share of the market. The market share held by Dover and Folkestone has declined since 1993 when it stood at over 48% of the total market. The share of travel to Belgium from Heathrow and Gatwick also fell between 1993 and 2002, and increased for Stansted from 1998 onwards, though numbers remain relatively small (66 thousand in 2002). These shares are shown below in Figure 11. The Channel Tunnel’s share is not unsurprising given the direct services by Eurostar from London to Brussels. Indeed Eurostar recently claimed a 57% share of the whole London to Brussels inter-city market and an even higher figure for the London-Brussels leisure market (75%).

Figure 11: Travel to Belgium - Market Share of Main SE Ports and Airports (1993 – 2002)

0102030405060708090

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

% o

f Tot

al T

rips Dover & Folkestone

Channel TunnelStanstedGatwickHeathrow

Source: IPS, Travel Trends Since 1998 the Tunnel has held the largest share of the market for travel to France (34%, 2002) as shown in Figure 12, though this has fallen from its peak of nearly 40% in 1998. Eurostar remains a significant alternative to the airlines on the London-Paris route (holding a significant share of the market), and this appears to be captured in these data. Eurostar estimate that they hold 65% of the whole London to Paris traffic and an even higher proportion of the leisure sector (85%). This is reflected in the decline in the share of Heathrow, although there has been some growth in the share of Stansted to almost 6% by 2002.

Figure 12: Travel to France - Market Share of Main SE Ports and Airports (1993 – 2002)

0102030405060708090

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

% o

f Tot

al T

rips Dover & Folkestone

Channel TunnelStanstedGatwickHeathrow

Source: IPS, Travel Trends

26

Germany and the Netherlands are existing markets for passenger travel with close proximity to Kent, but are not however, served directly by trains using the Channel Tunnel as a means of crossing the Channel. Thus we would expect the Tunnel to hold a smaller share of these markets than those of France and Belgium. Heathrow Airport has continuously held the largest share of the market for travel to Germany as shown in Figure 13. Nevertheless, this share has been steadily declining since 1993, loosing almost 10% of the market between 1993 and 2002. The Channel Tunnel increased its share of travel to Germany up to 1998 when it peaked at over 14% of the total market. It has since been declining and in 2002 stood at 9%. Dover and Folkestone continue to hold a higher percentage of this market than the Tunnel, though this share has also been declining throughout the period. Stansted has continuously increased its share of this market, though there has been a slight decline since 2000.

Figure 13: Travel to Germany - Market Share of Main SE Ports and Airports (1993 – 2002)

0102030405060708090

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

% o

f Tot

al T

rips Dover & Folkestone

Channel TunnelStanstedGatwickHeathrow

Source: IPS, Travel Trends South-Eastern ports have a less dominant share of travel to the Netherlands (constantly below 50% of the total). This is largely due to substantial numbers travelling from East-Coast ports and direct from other UK airports. The ferry ports and Tunnel dominate the trips made by UK residents to the Netherlands from the South East. Dover and Folkestone’s market share has been declining steadily since 1993 when it stood at almost 21%. The Tunnel’s share increased until 1998 when it reached just under 15% but has since declined.

Figure 14: Travel to the Netherlands - Market Share of Main SE Ports and Airports (1993 – 2002)

0102030405060708090

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

% o

f Tot

al T

rips Dover & Folkestone

Channel TunnelStanstedGatwickHeathrow

Source: IPS, Travel Trends

27

In terms of the length of stay, the cross-Channel passenger market for UK/Eire residents appears to be divided fairly evenly between day trips and trips of one or more nights to the Continent. The Transmanche Cross-Channel Tourism Study (2000) revealed that 48% of UK residents were crossing the Channel for the day and 52% for one or more nights. Eurotunnel data reveals a similar pattern and travel is divided fairly evenly between daytrips (38%), short stay (32%) and long stay (30%). Both sets of data also highlight seasonal variations with long stay trips dominating the Tunnel crossings from June to September. They peak during August accounting for over 50% of Tunnel Crossings. Day trips dominated from September to January. Eurostar figures for 2003 reveal a different pattern with a smaller proportion of passengers making day trips (14%), most stay for between 1 and 3 nights (56%), followed by stays of 4 nights or more (29%). 4.13 The Cross-Channel Freight Markets The general movement of goods in the UK is dominated by road transport and the market for carrying international freight abroad is dominated largely by the ports and ferries, though freight traffic through the Channel Tunnel has expanded rapidly since 1994. The dominance of goods movement by road means that there is less competition from airlines and a greater scope for a larger share of the market for the Channel Tunnel. The Channel Tunnel competes in the freight market through two distinctly different services: Truck Shuttles which carry accompanied trailers (Ro-Ro freight); and through rail services which carry container traffic. For the purpose of our analysis and to try to outline the freight market in which the Tunnel competes, we have used Department for Transport published data on domestic and international freight in the UK and through UK ports. UK Ports cater for a wide range of freight transportation and cargoes. The main cargoes handled at UK Ports are: Liquid bulk cargo, dry bulk cargo, container traffic, roll on-roll off freight traffic, semi-bulk cargo, conventional cargo and non-oil traffic with off-shore installations.7 The share of port–traffic by cargo type is summarized below in Table 10, which gives the percentage of total annual tonnage from 1991 – 1999.

Table 10: Port Traffic by Cargo-Type as Percentage of Total (1991 – 1999)

% Share 1991 1992 1993 1994 1995 1996 1997 1998 1999 Liquid Bulk 52.7 52.9 53.5 53.9 52.9 53.5 51.1 50.5 51.0 Dry Bulk 23.7 22.4 21.1 20.3 21.2 20.4 20.6 20.8 19.9 Ro-Ro Traffic 10.5 11.2 11.6 12.0 12.0 11.8 13.5 13.5 13.9 Container Traffic 7.4 7.7 8.0 8.1 8.7 9.1 9.5 9.8 10.3 All-Semi Bulk 4.3 4.2 4.1 4.2 4.0 3.9 3.9 3.9 3.7

Non-oil Traffic with Offshore installations 1.0 1.0 1.0 0.8 0.8 0.8 0.8 0.9 0.7 Conventional Cargo 0.5 0.6 0.7 0.6 0.5 0.5 0.6 0.5 0.5 All Traffic (Tonnes) 494.6 495.7 506.2 538.1 548.2 551.2 558.5 568.5 565.6

Source: DfT, Focus on Ports, 2000 From 1991 to 1999 liquid bulk and dry bulk continued to maintain a 70% share of total Port traffic. However, the most notable growth was in container traffic and Ro-Ro traffic (60% and 51% respectively between 1991 and 1999). Ro-Ro traffic grew from 51.8million tonnes in 1991 to 78.4 million tonnes in 1999. Their respective shares of the total port traffic grew from 11% to 14% for Ro-Ro traffic and from 7% to 10% for container traffic. These figures appear to reflect a fairly major shift to unitised methods of transporting cargo in the UK Port and shipping industry. While container traffic has expanded most rapidly, of the Kent Ports only Medway holds a significant share of this market (8% in 1999, from 4% in 1993 and 0% in 1988). Containers

7 DfT: Focus on Ports, 2000

28

are taken through the Tunnel via the through rail services, details of the levels of tonnage are included in section 4.2 on cross-Channel flows. Containers are shipped to near and short-sea destinations in Continental Europe, however, much of the cargo through the Medway Ports is in deep sea containers and therefore not in direct competition with the Channel Tunnel. In 2002 Ro-Ro accounted for 16% of UK port freight, it’s share of the total growing by 5% in 10 years (from 11% in 1992)8. The principle ports serving the English Channel route for Ro-Ro traffic include: Dover, Port of London, Portsmouth, Ramsgate and the Channel Tunnel.

Table 11: Share of Ro-Ro traffic - Ports Serving the English Channel Routes

% Share 1982 1990 1993 1999 Dover 92.0 72.4 60.5 50.6 London 0.2 13.7 14.3 12.9 Portsmouth 6.5 12.7 13.3 8.9 Ramsgate 1.3 1.2 11.9 1.8 Total 100.0 100.0 100.0 74.2 Channel Tunnel - - - 25.8 Total with Channel Tunnel 100.0 100.0 100.0 100.0

Source: DfT Maritime Statistics The data in Table 11 (above) show that by 1999 the Channel Tunnel had the second largest share (to Dover) of the Ro-Ro market for crossings on the English Channel. Vehicle numbers through Ramsgate had declined and while numbers for Dover, London and Portsmouth had continued to increase, their percentage shares of this market have declined since 1993. The Tunnel is thought to have had a significant effect not only on freight traffic from Kent Ports but also knock on effects else where in the UK. At some ports this has resulted in rationalisation of operations and services, in others, a termination of ferry services all together (see section 4.3 on services). The percentage share of the market for road goods vehicles (both powered vehicles and unaccompanied trailers) to Continental Europe are shown below. The data up to 1999 are taken from the DfT publication; Focus on Ports.

Table 12: Share of Road Goods Vehicles between UK and Continental Europe by Port Group

% Share 1993 1994 1995 1996 1997 1998 1999 Channel Tunnel - 2 12 15 7 17 19 Dover Strait ferries 47 46 39 37 46 39 40 North Sea ferry routes 41 40 37 36 37 35 34 English Channel ferry routes 12 12 12 12 10 9 7 Total 100 100 100 100 100 100 100

Source: DfT - Focus on Ports, 2000 Over the period there was a 55% increase in the number of vehicles from 2.83 million to 4.38 million vehicles. The data show that the Tunnel gained a significant share of the market for Road Goods Vehicles destined for Europe between 1993 and 1999. This gain was accompanied by a general decline in the shares of the other port routes as well as a drop in the absolute numbers carried through each route. Closer examination of the data on freight by port group reveals differences in the preferred routes for carrying either accompanied or unaccompanied freight across the Channel. They indicate that the Tunnel plays a stronger role in the market for carrying accompanied freight to Europe, due to its importance on the Dover Strait. The data separate routes originating from the UK in three regions: The Dover Strait (Dover, Folkestone and Ramsgate-including the Channel Tunnel), the North Sea (all ports on the East Coast, north of and including the

8 Department for Transport, Maritime Statistics

29

Thames Estuary), the English Channel (all ports on the South Coast west of Folkestone). For powered goods vehicles the prevalence of the Dover Strait routes is noticeable, with a 67% share of the market 1988, growing to 84% by 2003. The respective shares of the English Channel and North Sea routes both declined over the period.

Figure 15: Powered Vehicles Leaving the UK - Percentage Share by UK Port Group (1988 – 2003)

0%

20%

40%

60%

80%

100%

1988

1990

1992

1994

1996

1998

2000

2002

% p

er Y

ear

English Channel

Dover Strait

North Sea

Source: DfT – Maritime Statistics For unaccompanied trailer freight, however, the North Sea routes carry the largest numbers, with a share of 76% of the unaccompanied freight market in 1988 growing to 94% by 2003. The share held by the Dover strait routes has been declining since its high of 16% in 1996: in 2003 it had just under 3% of the total, less than the 4% of the English Channel routes.

Figure 16: Unaccompanied Trailers - Percentage Share by UK Port Group (1988 – 2003)

0%

20%

40%

60%

80%

100%

1988

1990

1992

1994

1996

1998

2000

2002

% p

er Y

ear

English ChannelDover StraitNorth Sea

Source: DfT – Maritime Statistics Defining the market in terms of the countries of destination/origin of freight is not straightforward as freight is often destined for a number of countries and drops off and collects along the way. We have looked at freight travelling to all of mainland Europe as well as to ‘Near Europe’ (defined in this case as France, Belgium& Luxembourg, Denmark & Germany and the Netherlands). DfT data on the number of Roll on-Roll off vehicles by country of vehicle registration shows that over 1.8 million powered goods vehicles left the UK for mainland Europe by ferry or Channel Tunnel in 2002. This is an increase of 134% from the 1992 level of 769 thousand vehicles leaving the UK Ports. The proportion of these destined for Near Europe rose over

30

the period to 46% in 2002 (from 37% in 1992). France held the largest share of registered vehicles at 20%, followed by the Netherlands (10%), Germany (8%), Belgium/Luxembourg (7%) and Denmark (1%). Significant numbers of vehicles were registered in Spain and Italy at 6% and 7% shares respectively of outbound vehicles in 2002. The relative shares of the Ro-Ro traffic by Near European country are shown below for 1992 – 2002.

Figure 17: Powered Goods Vehicles leaving UK Ports - Percentage Share of Traffic by Country of

Registration (1992 – 2002)

0

5

10

15

20

25

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

%

Belgium/LuxDenmarkFranceGermanyNetherlands

Source: DfT – Transport Statistics These figures exclude numbers for unaccompanied trailers which grew overall by just 15% over the 10 years from 629 thousand (1992) to 726 thousand (2002). These represented 29% of the total Ro-Ro market outbound from the UK in 2002. Data on Bilateral traffic between the UK and EU countries (excluding ‘cross trade’) for 2002 show the total tonnage transported between each EU country and the UK (by vehicles registered in the UK and each corresponding European country). For bilateral traffic between the UK and the EU (excluding Ireland) in 2002 there were nearly 29 millions tonnes in total. Almost 18 million of these were loaded in the UK and just over 11 million unloaded in the UK. The Near EU countries accounted for over 75% of bilateral traffic tonnes in 2002, France alone accounted for over a third, Germany 15%, Belgium and Luxembourg 13%, Netherlands 12% and Denmark 1%.

Figure 18: Powered Goods Vehicles to Mainland Europe by Country of Disembarkation (1988 – 2003)

0200400600800

1,0001,2001,4001,6001,8002,000

1988 1990 1992 1994 1996 1998 2000 2002

Pow

ered

Goo

ds V

ehic

les

(000

's)

Other*Denmark & GermanyNetherlandsBelgiumFrance

Source: DfT – Transport Statistics, *other refers to Finland, Norway, Poland, Spain and Sweden

31

Data on the country of disembarkation of powered goods vehicles shows that France is the major disembarkation destination country for accompanied freight travelling to Europe from the UK, and its share of this market has been growing rapidly. Numbers disembarking in Germany or Denmark were low, averaging just over 2 thousand a year over the period. An average of approximately 4 thousand powered goods vehicles disembarked in ‘other’ EU countries over the period (Finland, Norway, Poland, Spain, and Sweden). These data are summarised above in Figure 18. For unaccompanied trailers the data present a different picture. France is no longer the main point of disembarkation and in fact both its total level and share of all unaccompanied freight has fallen over the period (from 17% in 1988 to 7% in 2003). The Netherlands and Belgium have instead seen their share of unaccompanied freight grow throughout the period, with shares of 44% and 34% respectively in 2003. The number of unaccompanied freight disembarking in Germany or Denmark was above that of France by 2003 (8%: 58 thousand trailers). This is shown in Figure 19 below.

Figure 19: Unaccompanied Trailers to Mainland Europe by Country of Disembarkation (1988 - 2003)

0100200300400500600700800900

1988

1990

1992

1994

1996

1998

2000

2002

Una

ccom

pani

ed T

raile

rs (0

00's

)

Other*Denmark & GermanyNetherlandsBelgiumFrance

Source: DfT – Transport Statistics *other refers to Finland, Norway, Poland, Spain and Sweden The data used show that the market for freight destined for France is large and has grown rapidly over the period examined – particularly for accompanied freight vehicles. This may have been a result of the time savings offered by the Tunnel for transporting freight across the Channel as well as increased efficiency and the ferry services and price cuts due to competition and rationalisation within the industry. However, France as a destination seems to have become less favoured for unaccompanied freight over the period. This could be due to a lack of appropriate facilities at the Ports and Tunnel serving France as a point of disembarkation relative to those at other East Coast ports serving other countries (Belgium and the Netherlands). 4.131 Rail Freight The Tunnel provides the opportunity for rail freight to be transported between the UK and Europe. While currently there is no direct competition for the Tunnel for cross-Channel rail freight it could be said that there is inter-modal competition in the carrying of freight by road with road. The Channel Tunnel was expected to boost through rail-freight between the UK and the Continent but has failed to do so. The size of the domestic markets have at least some relevance for the possible future development/expansion of the cross-Channel rail-freight market. Though rail was once the major mode for the transport of goods with 42% of the total tonnes moved in the UK in 1952, it was fast overtaken by road and subsequently its share has steadily decreased since 1953. DfT data show that by 1996 rail’s share of the UK market had fallen to just 6%, followed by some recovery resulting in rail’s share rising to 8% by 2001. The Figures show an increase in the average length of haul for rail freight since the early 1990’s (to just over 200km by 2001), thought to be partly due to the length of distance coal

32

has to be moved as more is imported. Bulk goods dominate the movement of goods by rail, followed by ‘domestic inter-modal’ commodities: comprising of containers moved by road or rail including some that have arrived by sea. Rail is the predominant mode for the movement of coal and coke in the UK, accounting for 70% in 2001. It accounts for just 2% of petroleum and 7% of ‘other commodities’. However, international comparisons conducted by the Department for Transport between the UK and other European countries reveal that rail freight plays a slightly larger role in the EU more generally (though road freight continues to dominate). This is thought to partially reflect the longer journeys possible in mainland Europe which are more suited to rail. Rail freight in the EU accounted for approximately 14% in 2001. 4.14 Low-Cost Airlines Discussion of recent developments in the cross-Channel travel market would be incomplete without reference to the advent of the low-cost airlines. Indeed this has often been advanced as an important factor in the shortfalls from expected traffic volumes and revenues in both tunnel and ferry operations, and certainly it was a development that was not anticipated in the initial planning and forecasting for the Channel Tunnel. At that stage the main competition from airlines was seen in terms of premium business class operations between London, Paris and Brussels. Eurostar's fares were initially pitched very much at this market. It is however rather too simple just to blame the failure to achieve forecast traffic on the advent of low-cost airlines. Although the low-cost airlines have had a major impact, much of this has been in terms of growing markets and developing new markets and is not just a simple diversion of traffic on key routes. The main characteristics of low-cost airlines are that:

• They offer cheap “no frills” services, booked in advance via the internet or phone rather than via a travel agent with no refunds and no (or extremely limited) scope for changing flights. Nevertheless they have made significant impacts on some business markets

• They operate mainly from cheaper regional airports or secondary airports in metropolitan regions rather than from the main hubs; often they have received significant subsidies from these airport authorities as inducements and to keep landing charges low – in some cases these have been ruled improper by the European Commission

• They have sought to develop new markets in both the city break market (e.g. increasing services to destinations in Central and Eastern Europe) and in the second home markets (e.g. the many services to small airports in SW France)

• They have a clear marketing policy towards groups who would not otherwise fly The impacts of the low-cost airlines have been as follows:

• Firstly, they triggered a wholesale restructuring of the conventional airlines at the same time as they have suffered from a reduction in flying due to security problems, particularly on their more lucrative long-haul routes. This has brought down the level of air fares significantly and increased the flexibility of ticketing for much travel in Europe. For example airlines like British Airways no longer require minimum stays to access cheaper fares and they have adopted low-cost airline practices in ticket sales to enable customers to see a range of alternative prices. This has posed a competitive challenge to both Euro Tunnel and Eurostar to adopt more flexible fares and conditions in order to defend their market share.

• Secondly, it has led to direct services between secondary airports in metropolitan regions, thus reducing pressure on the main hubs and enabling them to continue to develop services which may otherwise have been squeezed out. For example in September 2003 there were 30 daily flights from London Heathrow to Paris Charles de Gaulle provided by the three main airlines (and their partners) BA, Air France and BMI. In addition there were flights from Gatwick, Stansted, Luton and

33

London City and to other Paris region airports by these airlines and by low-cost airlines. Travellers are therefore offered flights from/to airports that may be much closer to their trip origin/destination than are major airports or the Eurostar terminals.

• Thirdly, it has been argued to us that the advent of low fare regimes has lowered general consumer expectations of what is a fair fare, which militates against the premium fare regimes adopted by Eurostar.

• Fourthly it has led to an overall growth in air travel at a time when it would otherwise have been squeezed, mainly to new destinations. Inasmuch as these new destinations are not located in the near Continent they do not compete directly but they may have detracted from the Tunnel's markets by offering a different bundle of destination-and-mode.

• Finally it can be noted that the idea often quoted before the Channel Tunnel opened that the airlines would use the presence of the Tunnel and Eurostar as a way of freeing up slots for long-haul traffic seems not to have occurred. Each operator needs to provide the same level of service as Eurostar which offers some 15 weekday daily services to Paris, on a roughly hourly basis, so they have responded by reducing aircraft size rather than reducing frequency.

There is little doubt that the advent of the low-cost airlines and the consequential effects on the travel market has made it more difficult for Eurotunnel, Eurostar and the ferry operators to identify appropriate marketing strategies for the cross-Channel markets. It is not clear however, that those effects have been decisive in terms of market share and financial outcomes. 4.2 Flows Here we examine the levels of cross-Channel movements since the opening of the Tunnel, given the market for cross-Channel passenger and freight. It might be expected that the operation of the Channel Tunnel would result in:

• A decrease in passenger/car/coach numbers crossing the channel by ferry • A steady increase of people travelling by both the Shuttle and Eurostar. • A decrease in the amount of freight being carried by ferry across the channel • An over-all expansion of the market & higher cross-Channel traffic flows • A reduction in, and elimination of some ferry routes

4.21 Cross-Channel Passengers

The data for 1985 to 1995 show that passenger numbers travelling by ferry increased steadily (with an anomaly in 1988). There were rapid increases in the periods both before and after the opening of the tunnel, but the number of passengers crossing the Channel has declined since 1999. This is evident for both passenger numbers and cars. Figure 20 shows the number of cross-Channel passengers from 1995 to 2002 through the ports and Channel Tunnel (Shuttles and Eurostar), using data provided by Kent County Council. It shows that while numbers travelling via the Channel Tunnel (by both Eurostar and Shuttles) increased quite steadily up to 1998, Port numbers after a peak in 1997 of almost 24 million passengers, decreased by 14% in 1998 and since then, numbers have continued to decline up to 2001. In 2001 to 2002 there was a 3% increase in passenger numbers crossing the channel through the ports. Shuttle passenger numbers grew by over 160% from 1995 to 1998 when they began to decline between 1999 and 2002. Eurostar passenger numbers grew most strongly and only began to decline in 2001 and 2002. However since September 2003 and the opening of the CTRL there has been a steady increase in Eurostar passenger numbers. The reasons for the decline in recent years are generally thought to relate to the abolition of duty free shopping, an increase in cross-Channel fares on all modes (partly to compensate for loss of turnover in duty free shopping), and competition from the low-cost airlines.

In addition it should be noted that in 1996 there was a fire in the tunnel. As a result the shuttle was out of service for 6 months from December 1996 – May 1997, and Eurostar for 6

34

weeks. This would have resulted in a transfer of cross-Channel traffic from the Channel Tunnel to the Ports.

Figure 20: Cross-Channel Passenger Numbers (1995 – 2002)

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

1995 1996 1997 1998 1999 2000 2001 2002

Pass

enge

rs PortsShuttlesEurostarTotals

Sources: KCC Tables from- Dover Harbour Board, Eurotunnel, Cruise and Ferry Info, Hoverspeed, Port of Ramsgate, 1997 figure for ports estimated, due to anomaly in the data.

Passenger vehicle numbers for the period exhibit a similar pattern. The shuttle experienced a rapid increase in the number of cars crossing the Channel each year up to 1998 (a total increase of 166% from 1995) when numbers began to decline. The number of cars travelling through the ports by car ferry declined throughout the period 1995 to 2002 (the anomaly in 1997 was due to the fire in the tunnel).

Figure 21: Cross-Channel Car Numbers (1995 – 2002)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

1995 1996 1997 1998 1999 2000 2001 2002

Car

s PortsShuttlesTotals

Sources: KCC Tables from- Port pf Dover, Eurotunnel, Cruise and Ferry Info, Hoverspeed, Port of Ramsgate, 1997 figure for ports estimated due to an anomaly in the data

Earlier data for both cars and coaches shows a similar pattern to that of passenger numbers; a steady increase from 1985 to 1995. Coach numbers for both modes continued to increase up to 1998 but then declined through to 2001. On the Shuttle, coach numbers grew by over 309 % from 1995 to 1998 and from then on declined each year. For coaches travelling via the ports the data show a decline for most years from 1995 to 2001

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Figure 22: Cross-Channel Coach Numbers (1995 – 2002)

0

50,000

100,000

150,000

200,000

250,000

300,000

1995 1996 1997 1998 1999 2000 2001 2002

Coa

ches Ports

ShuttlesTotals

Sources: KCC Tables from- Dover Harbour Board, Eurotunnel, Cruise and Ferry Info, Hoverspeed, Port of Ramsgate, 1997 figure for ports estimated due to an anomaly in the data

4.22 Cross-Channel Freight For freight traffic crossing the Channel numbers have been increasing steadily for both ports and Channel Tunnel, with the exception of 1997 when there was a sharp temporary decline in the numbers of freight vehicles travelling on the shuttles of over 51%. This was accompanied by a sharp increase in the numbers crossing the Channel by ferry by 52% and is the result of the Tunnel fire in 1996. Previous to 1995 the number of freight vehicles crossing the Channel by ferry had been steadily increasing (with the exception of 1988 which was affected by industrial action).

Figure 23: Cross-Channel Freight Vehicle Numbers (1995 – 2002)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1995 1996 1997 1998 1999 2000 2001 2002

Vehi

cles Ports

Shuttles

Sources: KCC Tables from: Dover Harbour Board, Eurotunnel, Cruise and Ferry Info, Hoverspeed, Port of Ramsgate

Table 13: Percentage Change in Cross-Channel Freight Vehicle Numbers by Mode (1995 – 2002)

Sources: KCC Tables from- Dover Harbour Board, Eurotunnel, Cruise and Ferry Info, Hoverspeed, Port of Ramsgate

Annual Percentage Change 95-96 96-97 97-98 98-99 99-00 00-01 01-02 Ports -2% 52% -16% 7% -1% 8% 5% Shuttles 41% -51% 175% 19% 35% 6% 3% Totals 7% 23% 6% 11% 10% 7% 4%

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Three features are evident from Table 13 and Figure 23. The first is the anomaly in 1996 to 1997, caused by the fire in the tunnel which interrupted freight services, for about 6 months. In 1997 to 1998 there was a compensating bounce back in the volume of shuttle traffic. Secondly, and more importantly, there was a tendency for the shuttle traffic to grow more rapidly over the period 1995 to 2000, thus increasing its share of an increasing total market. Third, it appears that from 2000 the growth rates of the two carriers have been similar, which may suggest a longer term equilibrium share has been established. Cross-Channel Freight carried by rail via the Tunnel (measured in tonnes) is recorded separately from the volume of freight vehicles carried through the tunnel. While the number of freight vehicles crossing the channel by shuttle and ports has increased, the tonnages carried by train have been decreasing since 1998. Figure 24 gives rail freight in tonnes from 1995 to 2002. During 1995 and 1996 there was a substantial increase in the amount of freight being carried across the Channel by rail, of over 1.4 million tonnes, a percentage increase of 106%, but it must be noted that 1995 was the first full year of operation of the Tunnel. The level of rail freight in tonnes peaked in 1998 at over 3.1 million tonnes and continued to fall between then and 2002. In 2002 the amount of rail freight was only just above that of 1995 following a 40% decline in volume carried from 2001. This decline is generally thought to reflect the problems encountered by the train operators with security at the freight terminals in Europe (especially Fréthun) and the penalties they incurred if they inadvertently carried illegal immigrants. The way in which tonnages remained fairly constant from 1996 to 2000 meant that there was no diversion of freight traffic from Kent’s road system, while the decline from 2000 onwards (despite an overall increase in cross-Channel freight movement) has further increased the traffic load on the road system. However, even when the tonnages moving by rail were at their maximum they constituted significantly less than 5% of the total volume. These figures underline the environmental implications (traffic flow, noise, air pollution, accidents) of the very modest role so far played by the rail freight services through the Tunnel. This failure of the through rail service to develop effectively has had an impact on the level of truck traffic and hence on the overall traffic and environmental consequences for Kent roads.

Table 14: Percentage Change in Cross-Channel Rail Freight (1995 – 2002)

Annual Percentage Increase 95-96 96-97 97-98 98-99 99-00 00-01 01-02 Tunnel Rail Freight Tonnage 106% 5% 7% -9% 3% -17% -40%

Sources: KCC Tables from- Dover Harbour Board, Eurotunnel, Cruise and Ferry Info, Hoverspeed, Port of Ramsgate

Figure 24: Cross-Channel Rail Freight Tonnage (1995 – 2002)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

1995 1996 1997 1998 1999 2000 2001 2002

Tonn

es Tunnel Rail FreightTonnage

Sources: KCC Tables from- Dover Harbour Board, Eurotunnel, Cruise and Ferry Info, Hoverspeed, Port of Ramsgate

37

4.3 Services 4.31 Cross-Channel Services This section looks at what cross-Channel scheduled services are being provided and how they have changed over time, given the levels of cross-Channel movements of passengers and freight (how services have changed in response to losses of flows on some routes and gains on others). Looking at the data from the Kent Impact Study dated 1987 it is possible to say that there has been both a reduction in and a termination of certain scheduled cross-Channel ferry routes for both passengers and freight, and a concentration of services to particular ports. For 2004 to date (January to May) Eurotunnel has run an average of 90 passenger shuttles and 201 truck shuttles a day a day from its Cheriton Terminal in Folkestone to Coquelles, Calais. Eurostar have run an average of 48 trains a day through the Tunnel over this period to a range of destinations in France and Belgium, an estimated 16 (estimated from current Eurostar Timetables) of these run from Ashford International Passenger Station. In addition an average of 12 rail freight trains have used the Tunnel a day. 4.32 Passenger Services The Kent Ports running cross-Channel passenger services in 1987 were Dover, Ramsgate, Sheerness and Folkestone. Passengers now travel solely from Dover where there are still 71 services a day currently run by P&O, Sea France, Norfolk Line, Hoverspeed and the most recently addition: Speed Ferries. 56 of these scheduled services go from Dover to Calais, 5 serve Boulogne, and 10 Dunkerque. In 1987 there were 71 passenger services in Total sailing from Dover. Of these 38 were going to Calais, 6 to Zeebrugge, 14 to Boulogne and 13 to Ostend. Passenger services have been withdrawn from Folkestone, Ramsgate and Sheerness where there were in total 14 scheduled crossings a day in 1987. The comparison between 1987 and 2004 for passenger services is summarised in Table 15. Although the number of crossings appears to have remained fairly constant, it should be noted that as the size of vessels has increased considerably since 1987 the overall cross-Channel capacity has expanded over the period.

Table 15: Scheduled Passenger Services by Port (1987 & 2004)

1987* 2004**

Port No. of

Operators No. of

Crossings¹ No. of

Operators No. of

Crossings¹

Chatham - - - -

Dartford (Thames Europort) - - - -

Dover 4 71 4 71

Folkestone 1 6 - -

Ramsgate 1 6 - -

Sheerness 1 2 - -

Cheriton (Folkestone) - - 1 90

Ashford International Terminal - - 1 16

Source: Dartline, Port of Dover, Medway Ports, Trans Europa Ferries, Eurotunnel, Eurostar

* Taken from Kent Impact Study, 1987 ** Verified 21/05/04 ¹ Daily unless specified otherwise Refers to services with capacity for passengers including those travelling with their own cars, or in coaches

4.33 Freight Services Scheduled cross-Channel freight services from the Kent Ports are summarised in Table 16 below. An average of 201 freight shuttles a day have run through the Tunnel since the beginning of 2004 as well as 12 daily freight trains. There has been a reduction in services

38

running from Dover (from 71 to 54) with capacity for freight and a termination of scheduled services from Chatham, Folkestone and Sheerness. Ramsgate has increased its number of sailings each day, while reduced the number of operators offering services from 2 to 1. Again it should be noted that while the number of cross-Channel services may have declined there has been a general increase in the capacity of vessels resulting in an overall increased capacity for cross-Channel freight over the period.

Table 16: Scheduled Cross-Channel Freight Services (1987 & 2004)

1987* 2004**

Port No. of

Operators No. of

Crossings¹ No. of

Operators No. of

Crossings¹

Chatham 1 2 - -

Dartford (Thames Europort) 1 2 + 2 Weekly 1 12 Weekly

Dover 2 71 3 54

Folkestone 1 6 - -

Ramsgate 2 6 + 12 Weekly 1 10

Sheerness 1 3 - -

Cheriton (Folkestone) - - 1 201

EWS - Scheduled Trains - - 1 12

Source: Dartline, Port of Dover, Medway Ports, Trans Europa Ferries, Eurotunnel, Eurostar

* Taken from Kent Impact Study, 1987 ** Verified 21/05/04 ¹ Daily unless specified otherwise Refers to services with capacity for freight vehicles: accompanied and unaccompanied trailers

4.34 Scheduled Coach Services The Channel Tunnel and cross-Channel ferry services provide access for scheduled coach services to run between the UK and Continental Europe. The main European network is Eurolines which currently represents approximately 80% of the scheduled market in and out of the UK. They operate a Europe-wide network of coach service connections allowing destinations throughout the Continent to be accessed by coach from the UK. Interviews with Eurolines management allowed us to gather information on their choice of cross-Channel mode of transport since the Tunnel opened and began competing with the ferries. While exact figures were not available for the whole period, the general trend in the carriers used by the company for coaches heading to mainland Europe was outlined. When the Tunnel initially began to operate, the reduced Channel crossing time of 30 minutes was seen as potentially highly beneficial to Eurolines. However, as customers on the coach services expressed preferences (resulting from provision of facilities and a more general fear of the Tunnel) for the Ferry services much of the services remained with P&O and Sea France. Additionally Eurolines estimated that lengthly boarding procedures for coach passenger travellers meant the time saving is just 10 minutes when compared with the ferries reducing the benefits of the Tunnel to coach travel. Table 17 shows the number of scheduled coach services each year (back to 2000) crossing the Channel to mainland Europe by each carrier. The figures appear to show that the Tunnel carried a large and increasing share of Eurolines’ services to the Continent. However, this was put down to pressure on Eurolines from the ferry operators to use alternative cross-Channel carriers when they incurred large fines for illegal immigrants entering the UK on Eurolines coaches. The coach operator was forced to use the Tunnel which had the advantage of controls in France, stopping people before they enter the UK illegally. Hence by 2003 almost 70% of their scheduled coach service business was transferred to the Tunnel.

More recently immigration controls have changed and carrier liability has diminished meaning the ferry companies no longer incur the fines. As of April 2004 Eurolines expected to transfer up to 75% of its business back to the ferries.

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Table 17: Number of Scheduled Eurolines Coach Services Crossing* the Channel by Carrier

Year Eurotunnel P&O Sea France Total

2000 7,180 10,653 170 18,003

% of Total 40% 59% 0.9% 100%

2001 7,504 7,972 190 15,666

% of Total 48% 51% 1.2% 100%

2002 9,976 7,450 54 17,480

% of Total 57% 43% 0.3% 100%

2003 9,636 4,223 52 13,911

% of Total 69% 30% 0.4% 100% Source: Eurolines *includes crossings both ways: with UK as destination and origin The potential cross-Channel market for Eurotunnel carrying scheduled coach services covers a wider geographical area than that for individual passengers. In feeding the whole of Europe the only option for coaches is to cross the Channel either by ferry or the Tunnel. Nevertheless, the market for scheduled coach services crossing the channel has declined in the past two years, largely due to the competition from low-cost airlines. The UK to Paris route alone declined by 30%, and operations have been downsized considerably. While they hope to regain some of the Paris market, the future for longer-distance pan-European routes looks particularly vulnerable to competition and uncertain for this reason. If as appears likely, Eurolines concentrates on the short to medium distance routes in the future this could result in reduction in the total coach market for the cross-Channel. 4.4 Impacts on Road Traffic It was anticipated that the opening of the Channel Tunnel would result in additional traffic on Kent roads. It was therefore decided at an early stage to undertake certain road improvement schemes to cater for this additional traffic, these were described in chapter 3. In this section the emphasis is on traffic flows on the road system. It might have been expected that the impact of the Channel Tunnel and related services would be to divert both freight and passenger vehicles (cars and coaches) through the Cheriton Terminal. In terms of traffic on trunk roads the following effects might have been expected:

• A diversion from the A2 and M2 to the M20 • A reduction in traffic between Cheriton and Dover

In addition, the reduction of ferry activity at Ramsgate might be expected to have resulted in a transfer of traffic from the A299 (Thanet Way) either to the A2/M2 to Dover or to the M20 (to Cheriton). Table 17 has been constructed using the data that has so far been made available to us from Kent County Council and Babtie Transport Consultants. The data show that traffic on the M20 East-bound has generally increased during the period, the traffic on the slip road, Junction 12, to the Channel Tunnel site increased by 9.37% from 2000 - 2002, while the main carriage-way at junction 12 experienced a 36% increase in traffic during 2000 - 2002. Although there was a decrease on the A2 between the A256 and A258 East-bound from 1998 - 2000, this picked up and increased from 2000 - 2002. The initial decline could have been the result of the diversion of traffic onto the M20 to Cheriton. The data exhibit the same pattern for west bound traffic during this period. Traffic along the M2 increased fairly steadily throughout the time period apart from a small decrease in West bound traffic in 2001 to 2002 implying little displacement effect.

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Table 18: Trunk Road Traffic (1996 – 2002)

Road Location Dir. 1996 1997 1998 1999 2000 2001 2002 M2 Junction 4 - 5 EB 21,827 23,526 24,532 24,520 26,453 - - M2 Junction 5 - 4 WB - - - - - 24,756 24,443 M2 Junction 6 - 7 EB 19,412 19,753 20,311 21,414 21,759 22,235 22,576 M2 Junction 7 - 6 WB 19,885 20,349 20,631 21,803 22,131 22,199 22,389 A2 Bridge Main C'way EB - - - - - 12,032 12,286 A2 Bridge Main C'way WB - - - - - 11,635 11,878 A2 Between A256 - A258 EB - - 9,970 9,612 9,608 9,975 10,238 A2 Between A258 - A256 WB - - 9,652 9,188 8,936 9,296 9,470 A2 Between A20 - A258 NB 8,209 9,111 9,362 9,662 8,929 9,122 9,228 A2 Between A258 - A20 SB 8,481 8,733 9,113 8,982 8,331 8,956 8,862

M20 Junction 8 - 9 EB 21,256 22,785 24,230 26,208 25,084 26,275 25,271 M20 Junction 9 - 8 WB 21,146 22,664 25,323 26,084 25,854 27,142 28,290 M20 Junction 10 - 11 (3830 +3832) EB - - - - - 24,289 25,160 M20 Junction 11 - 10 WB - - 23,223 24,586 - 23,716 26,082 M20 Junction 11 - 11a EB 13,843 21,574 22,101 23,649 23,128 24,009 26,043 M20 Junction 11a - 11 WB - 20,150 22,979 23,530 24,741 24,786 21,596 M20 Slip off at Junction 12 (TRL) WB - - 5,798 - 5,750 6,289 6,284 M20 Junction 12 Main C'way(TRL) WB - - 14,905 - 12,319 13,442 16,752 A20 Between A260 - B2011 EB - - 13,605 12,535 12,117 11,685 11,948 A20 Between B2011 - A260 WB - - 13,131 12,258 12,746 13,186 12,999

A299 Thanet Way, Whitstable* N/A - - - 20,381 22,129 23,820 25,283 A299 Ramsgate Harbour Approach Road* N/A - - - N/A N/A 1,078 1,020

Source: KCC and Babtie (1000 PCU’s) Traffic decreased on the A20 East-bound that runs between Cheriton and Dover from 1998 to 2001 by over 14% followed by a small increase of just over 2% in 2002. West-bound traffic towards Cheriton also decreased overall, throughout the period, but increased from 1999 to 2001. Traffic on the A299 Thanet Way Whitstable where you might expect traffic to decrease on the way to Ramsgate experienced an increase in volume from 2000 to 2002 (probably due to its dualling – a priority of the Kent Impact Study), though numbers on the Ramsgate Harbour Approach on the A299 declined by 5% from 2001 to 2002 and remain very low. In interpreting this table it is important to recognise that not all increases and decreases in traffic can be attributed to the Channel Tunnel and associated services. In particular the flows may have been affected by the following:

• The completion of the Thanet Way in 2001 • The improvement of the A258, leading to diversion from the A257 by traffic accessing

Sandwich • Construction traffic associated with the CTRL on the M20 and M2 • Economic development unconnected with the Channel Tunnel. E.g. Changes in the

Thanet district and parts of the Dover district (e.g. Pfizer) The channelling of cross-Channel road traffic along the M20 has had one other impact on traffic. Any disruption of the Tunnel or the ferry services from Dover (whether caused by weather conditions, technical problems or industrial action) leads to a build up of vehicles which cannot be accommodated in the Tunnel or ferry terminals. This problem is ‘solved’ by operation stack which parks excess vehicles along the M20 with consequential delays for other, usually local, road users.

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4.5 Employment Impacts of the Transport Operations Sector The Channel Tunnel was expected to have 2 principal direct impacts on employment within the Transport Operations sector:

• Employment by Eurotunnel during the period of operation so far from 1994, largely in Shepway and Ashford

• A reduction in employment within the ferry industry primarily in Dover, but also in Thanet and Shepway

Eurotunnel figures for UK employees show that there has been fairly steady employment averaging around over 1.4 thousand people over the period. Analysis of the postcodes of employees for October 2003 reveals that over 95 per cent of these reside in Kent. It has not been possible to delve any deeper into specific details but it appears that there are concentrations of employees in Dover and Shepway.

Table 19: Eurotunnel Employment since the Opening of the Tunnel

Year 1995 1996 1997 1998 1999 2000 2001 2002 UK Employees 1,337 1,324 1,307 1,448 1,432 1,526 1,528 1,458

Source: Eurotunnel Eurotunnel employment figures for October 2003 show that there were a total of 1,368 employees with English contracts (includes full and part-time). Of these 869 were men (64%) and 499 women. Technical and Shuttle services employed the most (954 employees), followed by ‘E-Solutions’(234), Business Services (68), Infrastructure (59), The Chief Financial Office(33) and Corporate employees (20) in England. There are approximately 39% more people employed by Eurotunnel in France, a total of 1560. The remainder of this section examines the extent to which the Channel Tunnel may have stimulated any of the changes in overall employment within the transport operations sector looking at employment in transport via railways (SIC 601) and water transport (SIC 61).

Figure 25: SIC 601 - Transport via Railways Employment (1991 – 2001)

0

500

1000

1500

2000

2500

3000

3500

1991 1995 1998 2001

Empl

oyed

Per

sons

AshfordMaidstoneShepwayDover

Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry Figure 25 shows that in SIC 601, Transport via Railways numbers employed in Shepway grew substantially between 1995 and 2001, in particular 1995 to 1998 after the Channel Tunnel began to operate. Location Quotients for 1998 to the both the Kent (12.58) and South-East (39.73) base indicate a relative concentration of employment in the district at that time. In Ashford numbers grew substantially from 1991 to 1995 and then fell dramatically between 1995 and 1998, the LQ (Kent base) fell from 8.2 in 1995 to 2.47 in 1998 though employment in this sector remained relatively concentrated. It looks like the Ashford figures may reflect more the way the data was collected after privatisation of the railways. In Dover

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numbers fell from 1991 to 1995 and remained low with a low concentration of employment in Railway transport, similarly employment in this sector in Maidstone was low throughout the period. It was widely expected that the Channel Tunnel would result in a loss of employment within the Ferry industry, as job cuts were made due to the port’s reduced market share and profits. In particular this was expected to affect Dover where the major cross-Channel ferry services to Calais are based. Figure 26 shows the numbers employed in Water Transport (SIC 61) for 1991, 1995, 1998 and 2001. There was a considerable decline in the numbers employed in Dover in this sector from 1991 to 2001. Employment for this sector is predominantly concentrated in Dover where Location Quotients in 1991 for Water Transport Employment were very high, in particular to the GB Base (119.17). In percentage terms, Dover employment in Water Transport fell in 10 years from 18.4% of total employment in 1991, to 3.8% in 2001. LQs for the Kent, SE and GB bases all fell over the period, though in 1995 both the SE & Kent Based LQs increased slightly indicating that there may have been substantial employment losses in other districts within the regions. Employment in Water Transport also declined in Shepway and Thanet over the period where Folkestone and Ramsgate ports are located respectively.

Figure 26: SIC 61 - Water Transport Employment (1991 – 2001)

0

1000

2000

3000

4000

5000

6000

7000

8000

1991 1995 1998 2001

Empl

oyed

Per

sons

DoverShepwayThanet

Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry Census data from 1991for SIC 74 Sea Transport (by 1980 SIC) shows that there were 5320 people employed in Dover in Sea Transport in 1991, of these 3580 were resident there. The numbers also indicate that the main inflow of workers in this sector to Dover, from Kent, were from Shepway and Thanet. In these two districts considerably more residents were employed in SIC74 than were employed in this sector within the district. This is due to the shift patterns within the Ferry industry, which have meant that employees’ places of residence are fairly dispersed, and therefore the impact on Dover has been slightly less than expected. However, this must be viewed against the background of job losses from the collapse of the mining industry in Dover district. 4.6 Land Use and Environmental Impacts of the Transport Operations Sector There are several sites directly involved with transport undertakings throughout Kent that are the direct result of the existence of the Channel Tunnel. The main ones are the Cheriton and Dollands Moor sites near Folkestone, the site of the Inland Clearance Deport at Ashford, Ashford International Station, and the land development resulting from the creation of the Channel Tunnel Rail Link. This section identifies the main sites of interest.

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Channel Tunnel Terminal, Cheriton The terminal is approximately 150 hectares, 2.5 Km long and 900m across with 45 Km of roadways and 16,000 m² of built space. It is capable of handling 830 ordinary vehicles an hour and 100 Lorries an hour. The terminal has waiting areas for cars, coaches and lorries, check-in gates, shopping facilities and customs and immigration facilities. This is in addition to the track for through trains, and the track loops and loading platforms for vehicles. Cheriton Park, Folkestone The Cheriton Park site occupies a high profile location overlooking the Channel Tunnel Terminal, adjacent to Junction 12 of the M20. The site area is 4 hectares (11 acres) and is classified as an Office Development of use classes B1. The site is owned by Eurotunnel Developments Limited. Dollands Moor Located near Folkestone in Shepway, this is a freight handling facility where trains receive security clearance before or after transit through the Tunnel and locomotive changes take place. Dollands Moor is of importance due to the cross-Channel rail freight that now passes through the Tunnel. Channel ports operate a customs clearance operation from here for rail wagons and trucks through Ashford and Dover. Eurotunnel’s Truck Stop

The Eurotunnel Truck Stop at Ashford, Kent, provides full customs clearance facilities for goods vehicles. There is secure parking for over 300 trucks as well as services including accommodation, restaurant, petrol station, and an environmentally friendly truck wash facility.

Orbital Park and Waterbrook Park, Ashford

Orbital Park consists of 40 hectares (100 acres), and 100,000sqm of office space, retailing and other commercial developments. The adjacent Waterbrook Park includes freight vehicle facilities and an inland clearance depot as well as other commercial developments. Press reports indicate that Eurotunnel Developments intend to sell a portfolio of land of 173 acres including these sites in the near future. Dover (Eastern & Western Docks) The Port of Dover has eight Ro-Ro berths, two cruise terminals, aggregates and semi-bulk handling facilities. It accommodates a range of related businesses including the Dover Port Zone freight distribution centre, offices, housing, shops and a hotel. The Eastern Docks provide seven Ro-Ro berths including a small cargo/container berth and Seacat berth. It is also where the main passenger and freight terminals, customs and immigration services are located. The Western Docks provide facilities for fast ferry passenger services from the old Hover port, a bulk goods (aggregates) dock and two cruise ship berths. The cruise berths are supported by a newly constructed terminal building and the refurbished Dover Marine Railway Building. In addition, the recently agreed local plan has identified 5 hectares for industrial and commercial redevelopment within the Western Docks. The Marina lies between the Western and Eastern Docks, currently accommodating 12,000 visitor nights per annum. The Port of Dover Project Plan jointly developed by Kent County Council, Dover District Council and Dover Harbour Board sets out a number of initiatives that have been identified to facilitate the future growth of the port.

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Folkestone Docks The withdrawal of most port activities from Folkestone has posed a dilemma for local development planning. Although a number of pressure groups have campaigned for a return of cross-Channel services most of the proposed developments in Folkestone envisage a different function for the town. As part of The Folkestone Seafront Master Plan £200 million is being injected for the development of the Seafront area. Developments will include residential, marina, luxury hotel and leisure uses including a casino. A planning application has been submitted to Shepway District Council. The 7.1 hectare project will incorporate 600 residential apartments, 13,935sq m of leisure facilities (including a cinema, health and fitness centre, bowling, bingo, restaurants) and 80,000sq m of retail space. Ramsgate Dock The Ramsgate dock has 32 acres (152,000 square meters) of port land served by the harbour approach road which was completed in 2000. The port facilities include 3 modern Ro-Ro bridges, passenger and freight vessel facilities, capacity to handle multi-decked vessels, capacity to handle stern and quarter ramps, water and bunker facilities on all berths, and all Ro-Ro pontoons and bridges have double width road ways. The Freight Handling facilities include; full stevedoring services dedicated weighbridge for the line with trained operators, a trailer parking area, full moorings services, tug, and customs clearance on site. There is a full security fence and secure perimeter, shed space available amounts to 2,000m², and cargo handling equipment for Ro-Ro operations. Passenger handling facilities include; facilities to handle foot, coach and car passengers, passenger baggage and security facility, 480 sq. metres of retail outlet space within the departure lounge, 32 car lanes covering an area of 6,500 sq. metres, cafeteria facilities within the departure lounge, full Frontier and Customs control facilities, passenger car parking facilities, direct access by road to M2 Motorway and by rail to London mainline stations, Port access road and majority dual carriageway to M2. It remains to be seen whether these facilities will be sufficient to attract traffic and shipping services to compete effectively with Dover and the Channel Tunnel Services. The environmental impacts of the Channel Tunnel and associated transport developments have probably been less beneficial than had been hoped and in some cases more damaging than expected. The original hopes were that the Tunnel would facilitate a transfer of traffic to rail (passengers to Eurostar and freight to EWS and other operators). It is evident that this has not occurred. Much of the Tunnel traffic goes through the Cheriton terminal and is road based. Environmental gains have therefore been small. The negative environmental consequences relate mostly to the concentration of flows through Cheriton and Dover. This has resulted in high traffic volumes on the M20/A20 and to a lesser extent on the M2/A2 with consequential congestion on some sections of the M25 (especially the Dartford Crossing). More locally this concentration of traffic has created congestion and consequential air pollution along the A20 from the M20 to the Eastern Docks. 4.7 Conclusions It is clear that Transport Operations was, as expected, the sector most directly and most greatly affected by the opening of the Tunnel and its associated services. However, the impact of the Tunnel cannot easily be separated from changes due to other factors. Nevertheless the salient points appear to be as follows:

• Cross-Channel movements have increased in the period since the Tunnel opened but the share of traffic used by Tunnel-related services lies in the range from about one fifth (container and Ro-Ro freight), through about one quarter (passengers) and one third (coaches and freight vehicles) and about half (car movements)

45

• These relatively modest market shares for the Tunnel and associated services have been reflected in continuing financial problems for their operators, in contrast the Ferry Industry (including Speed Ferries) to and from Dover has successfully responded to competition and continues to provide a level of service not dissimilar to that offered in the 1980s, although profitability has been squeezed

• The competitive strength of both the Channel ferries and the Tunnel services has led, as predicted, to a concentration of flows through Cheriton and Dover and a loss of traffic and services from other ports: this concentration has been reflected in road traffic volumes on the M20/A20 and parts of the M25

• The impacts on employment in the Transport Operations Sector which have resulted are a reduction in employment in Port services (at other ports and Dover) and an increase in rail transport related employment in the Tunnel operation itself.

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5. Enterprise Sectors and Growth Locations It is possible that the Tunnel has had a wider influence on the Kent Economy beyond Construction and Transport Operations; this section will look at other sectors which may have changed as a result of the Tunnel and associated developments. The underlying issue is whether the Tunnel has been successful in stimulating expansion of firms and of attracting new firms to locate in Kent. It would not be sensible to examine the impact of the Tunnel on every manufacturing or service industry so we have focused the analysis on four specific sectors that could have experienced such changes. These are: Tourism, Retailing, Manufacturing and Logistics & Distribution (including warehousing). Our choice of sectors fits in with those examined in the Kent Impact Study and so provides some basis for comparison of what was expected and what appears to have happened. 5.1 Investment in Kent - Overview It is possible that if the existence of the Channel Tunnel made Kent a more appealing location to investors that it would have resulted in an increase in investment in Kent and in particular in the Channel Corridor Districts of Shepway and Ashford. The firms registering in Kent can be seen as a sign of both commercial activity in the region and a level of investment. It is important to look both at the French & Foreign firms (have more companies opened branches/located in Kent?) and UK firms (have more UK companies chosen Kent as their location due to the improved access the Channel Tunnel has provided to the larger continental market?). The South East England Development Agency (SEEDA) has provided us with information on the corporate researcher database from Experian, listing all companies registered in Kent and Medway. The data goes back over the full time series incorporating the period of construction and operation of the Channel Tunnel. The data base gives companies by the date of registration and shows that the number of firms registering in Kent has increased steadily since the beginning of the period of construction of the Channel Tunnel. The data are summarised below and goes back to 1984. There were particularly high numbers of firms registering in 2001, when we suspect national inward investment peaked. This peak may also be abnormally high due to a period of significant merger and acquisition activity

Figure 27: Overseas Companies in Kent by Year of Registration (1984 - 2002)

0102030405060708090

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

No. of Overseas FirmsRegistering in Kent

Source: SEEDA, data from Experian Database, October 2003 The inwards-investment agency for Kent: Locate in Kent has provided two sets of data relating to firms in Kent. The first contains all firms that are classified as Locate in Kent Successes, which may be as a guide to levels of investment in Kent from the UK and overseas. The data date back to 1997, 3 years after the Channel Tunnel began to operate. The second database contains all French companies that Locate in Kent has verified as being

47

of French ownership in Kent and Medway as of the October 2003. Business Link maintains a database containing approximately 54,000 companies across Kent. 5.11 French Companies in Kent LIK have identified and verified in their database 60 French companies that are to be found in Kent and Medway. Annex 4 shows the distribution of these by district and the number of corresponding employees. French companies appear to be fairly evenly distributed between the Channel Corridor9, North Kent (including Medway) and West Kent. There are only 2 French firms in the East Kent sub-region, both in Dover totalling 203 employees. The highest percentages of companies (in descending order) are in Tonbridge & Malling, Ashford, Medway, Dartford, Shepway, Sevenoaks and Swale. These 7 districts each accommodate at least 8% of the total French companies in Kent each, and in total account for over 83%. In terms of impact, the employment figures reveal there to be clusters of high employment among the firms in Tunbridge Wells, Shepway, Tonbridge & Malling and Medway Towns. Each of these has in excess of 10% of the Total Kent Employment from the French firms, Tunbridge Wells with 27% of employment from these companies having the highest concentration. In total these 4 districts account for 78% of the employment generated by these companies. Collier and Vickerman10, however, found that this data tended to underestimate actual employment levels. Furthermore we know that a majority of the employment shown in Shepway is generated directly by Eurotunnel, this is estimated at 1400 employees (consistent with the figures for October 2003 stated in Chapter 4). The data allow examination of these companies by their Standard Industrial Classification, thus enabling us to see if particular industries are more prominent among the French owned companies in the county. Using the 2003 SIC code as set out by the Office of National Statistics and provided by Locate in Kent it is possible to classify these French firms under key sectors. The distribution of these sectors in terms of number of firms is shown in Figure 28 below. Among these companies the biggest sector of activity is Wholesale and Retail with 36% of the companies (in total 22 companies), this is followed by Manufacturing (18%, 11companies), Real Estate, Renting and Business Activities (17%, 10 companies) and Transport, Storage & Communications (12%, 7 companies).

Figure 28: Sectors of Activity by French Owned Companies (SIC 2003)

3% 2% 5%2%

18%

5%

17%12%

36%

Construction

Electricity, Gas and Water Supply

Financial Intermediation

Hotels and Resteraunts

Manufacturing

Other Community, Social and PersonalServicesReal Estate, Renting and BusinessActivitiesTransport, Storage & Communication

Wholesale and Retail Trade Source: Locate in Kent

9 The analysis of LIK data uses a different definition of the Channel Corridor as Ashford, Maidstone and Shepway. Dover is considered part of East Kent with Canterbury and Thanet 10 Capital Flows Across an Internal EU Border Crossing: The Location and Recruitment Decisions of French Businesses in the English County of Kent, Collier & Vickerman, 2001

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The distribution by sub-region of the individual sectors by number of firms, and number of employees, are shown in Annex 5. The transport sector is fairly evenly distributed in terms of the number of firms throughout the sub-regions of Kent. However, in terms of employment it is relatively concentrated in the Channel Corridor, largely due to the high number of Employees by Eurotunnel in Shepway. The highest employment by these French owned companies in Kent is in transport and storage (28%) followed by financial intermediaries (27%) and manufacturing (25%). The large numbers tend to be due to very high numbers employed by a single company, as in transport in Shepway and finance in west Kent (1 single company employees 1806 of the 1,845 employees), though the manufacturing employment is spread more evenly between firms. Of the 60 firms verified by Locate in Kent the 10 biggest employers account for over 80% of the total employment generated by these companies, this number includes Eurotunnel. 5.12 Foreign & UK Companies in Kent Locate in Kent maintain a database containing all companies that are recorded as successes on a yearly basis. Successes are defined as “those companies that have received assistance from Locate in Kent during the year and decided to invest in the county”. Table 20 gives a summary of these investments by country of origin for the period April 1997 to March 2002 in terms of the number of successes and jobs created. Other UK firms are by far the largest investors in the region, followed by the USA, France, Germany and Japan. Over the period, 15 French firms located in the county creating 1,337 jobs. Comparing this with the total number of jobs from the 60 French firms found to exist in Kent which provide, 6700 jobs for the county, we could estimate that over 20% of these jobs have been created since 1997.

Table 20: LIK Projects and Jobs Created (1997 - 2003)

Country Projects Jobs Country Projects Jobs UK 97 6,363 Iceland 1 260

USA 31 1,802 Finland 1 50 France 15 1,377 Denmark 1 30

Germany 7 486 Malaysia 1 30 Japan 5 329 South Africa 1 12 Spain 4 269 Argentina 1 10 Italy 3 29 Taiwan 1 10

Belgium 2 151 Canada 1 0 Korea 2 70 Switzerland 0 0 Austria 2 18 Total 176 11,296

Source: LIK The database also provides details of the nature of the investment of these companies in Kent. A Relocation is a wholesale move of a business to Kent and Medway from elsewhere in the UK or the World. An Expansion within Kent is an existing Kent based company expanding within Kent and Medway. An Expansion into Kent is a company operating elsewhere within the UK or the world that is undergoing expansion and has chosen Kent as the location for this expansion project. A Foreign Direct Investment is an investment by a foreign enterprise that sets up a branch or subsidiary in Kent and Medway. A Retention is investment retained in Kent safeguarding employment. This may involve moving to new premises but little or no additional jobs to be created. These details are summarised below in Figure 29. Over the time period the majority of projects were expansions within Kent (37%) followed by Expansions into Kent (29%), Relocations (16%), Retentions (2%) and FDI (0.5%). Of these companies, there is no outstanding number relocating, expanding or starting up in the Channel Corridor or the area we would expect as a direct result of the Channel Tunnel. The most popular district for the location of companies appears to be Tonbridge and Malling in West Kent. Examination of the

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geographical distribution of the number of successful projects and jobs created by these companies has not revealed that the Channel Corridor districts have benefited any more than the rest of Kent in terms of investment. It is therefore difficult to identify any ‘Channel Tunnel effect’ in the data examined. Furthermore the limited time series available for this data makes it impossible to make a comparison with what was happening before the Channel Tunnel was completed. Although little can be concluded so far, it should again be highlighted that data from LIK is reflective of a small sample of the companies in Kent.

Figure 29: LIK Success by Nature of Enquiry (1997 – 2003)

0

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RetentionNew Start-Up Foreign Direct Investment Expansion into KentExpansion Within Kent Relocation

Source: LIK There are some sectors we deem to be important in terms of there relationship with the Channel Tunnel or their importance to the Kent region. In sections 5.2 – 5.5 we have examined these in more detail. In terms of the impacts of the Channel Tunnel, it is also important to look at the indirect and induced employment impacts the Tunnel may have had on related industries and through the spending of employee wages within Kent. We have included the impacts on employment in the separate sectors. 5.2 Tourism In the period covered by this report there have been a number of studies and initiatives to promote the tourism industry in Kent led by Kent County Council and the South East England Tourist Board many of these initiatives have also been strongly supported by Eurotunnel. The expectations were that the tunnel and associated services would play a key role in underpinning the Kent tourism sector in a number of ways: first, it was hoped that the improvement in cross-Channel links would attract increased numbers of visits from the neighbouring European countries as day visitors, short break visitors or as longer stay visitors; secondly it was hoped that near Continent visitors to other parts of the United Kingdom, especially those using the shuttle, might stop off in Kent before moving on to another destination; thirdly it was suggested that a cross-Channel trip (probably a day trip) would be an additional attraction for UK residents proposing to make Kent the main destination for a holiday. Mvula (2004) correctly notes that this is a unique marketing point for Kent when compared with many other domestic tourism destinations for UK residents. On the downside it was recognised that fast and smoothly operating cross-Channel services might reduce the need for those leaving the United Kingdom to stay overnight before making a channel crossing: this was expected to damage the hotel trade especially in Dover. Evidence of these activities was assembled for this study in a separate report (Mvula, 2004) which is the source for material quoted here unless other sources are cited. The Cross Channel Tourism Study (Transmanche Tourism Research Programme, 2000) recorded

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showed that in 1999-2000 there were approximately 230 thousand day-trips from the Continent to Kent and about 405 thousand incoming trips (mostly from the near Continent) staying in Kent for one or more nights. In contrast to other UK destinations there were only about 140 thousand day trips but there were about 1.78 million staying visits. It is not possible to identify the Tunnel’s role in carrying these trips. The same study estimated that those whose main destination was Kent spent about £9.8 million on accommodation while those staying overnight while in transit spent about £6.4 million on accommodation. These relatively low figures reflected the fact that nearly half those staying in Kent were staying with friends or relatives. There is no evidence of how many UK residents choose Kent for their holidays in order to make a day visit across the Channel. The figures for stays in Kent by United Kingdom residents en route to the Continent suggest that about 324 thousand stayed for one or more nights en route but the spending (about £6.6 million on accommodation) was again modest. Attracting visitors to stay in Kent (either as a main destination or in transit) is dependent on the existence of suitable hotel accommodation and activities for tourists. There is a long history of tourism in Kent that has left a considerable stock of hotel accommodation especially in seaside towns (including Dover and Folkestone) but there is a marked lack of modern high quality hotel accommodation. The hope was therefore that the new opportunities provided by the Channel Tunnel would encourage the development of major new hotels and other tourist attractions in association with the Cheriton terminal and the Ashford international passenger station. The various district Councils identified potential sites for such hotels in the Ashford-Cheriton-Dover corridor and three new Hotels were built, but several major sites remained undeveloped. A recent study of the potential for new hotel development in East Kent (Tourism Solutions and ACK Tourism, 2003) suggests that the cross-Channel opportunities alone are insufficient to guarantee a high level of hotel occupancy and that the area is too far from London and the M25 to be seen as an attractive location for other sorts of hotel business. Although it identifies a number of potential sites in Shepway, Ashford and Dover it concludes “site availability is not really an issue in East Kent: indeed there are lots of sites, almost too many, certainly to present to the market…” They also note that in many locations alternative land uses (mainly residential) would yield a higher return to the developer than hotels. The evidence on employment in Kent may however present a different picture. Figure 30 shows that employment in SIC 55 (Hotels and Restaurants) has increased significantly in all four Districts since 1991 with especially vigorous growth since 1998 ( Ashford up 86%, Dover 58%, Maidstone 47%, and Shepway 34%). It must however be placed in the context of regional and national figures for the same time periods which showed much less marked increases in SIC55 employment between 1998 and 2001 (8% and 6% respectively) and in the case of Ashford the population growth occasioned by rapid expansion in housing from 1991-2001 (ONS data show this is the highest in Kent at 12%).

Figure 30: SIC 55 - Hotels & Restaurants Employment (1991 – 2001)

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Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry

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Figure 31 shows that employment numbers in Travel agencies and Tour Operators (SIC 633), which includes the call centres operated by Eurostar and the ferry companies, increased substantially in Shepway over the period. Growth in employment in Kent (57%) was below the national and regional averages (both 79%) for the 10 year period. However, Shepway exhibited the highest Location Quotients of the County in each period and a percentage increase in employee numbers of 96% between 1991 and 2001. There was a substantial increase in employment in Ashford from 1991 to 1995, perhaps due to the anticipation effect of the tunnel though this fell sharply again by 1998, overall there was an increase of 134% throughout the period. Numbers of employees in Dover are above the Kent average and concentration of employment was evident from 1998 to 2001 when LQ’s exceeded 1.0. In Maidstone numbers employed grew (74%) but the location quotients for this sector remained constantly low.

Figure 31: SIC 633 - Activities of Travel Agencies & Tour Operators Employment (1991- 2001)

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Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry 5.3 Retailing It was expected, at least in some quarters, that the opening of the Channel Tunnel and associated services would have an important impact on the retail sector in Kent. The argument for a positive impact was that the increased volumes of tourism traffic to go through Kent would result in retail spending and that some retail activities might attract cross-Channel trips if the quality or price of goods offered in Kent was seen to be attractive. There was however, recognition of a potential negative impact in that Kent retail spending might leak to the near Continent if the quality and prices there were seen to be more attractive. The question of price differentials introduces another set of considerations. Cross-channel price differentials for goods of similar or identical quality reflected three different elements.

• The pricing and sourcing strategies of the retailers • The differences in tax regimes between France and Belgium and the United

Kingdom • Changes in currency exchange rates between the pound and the Franc (to

December 2001) and between the pound and the Euro (from January 2002). See Table 21.

Table 21: Currency Exchange Rates (1994 – 2004)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

1.3398

1.2686

1.1848

1.3655

1.5036

1.4227

1.6172

1.5753

1.6218

1.5218

1.4448 Source: European Central Bank, Euros to the pound (for the 1st of January each year)

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As these conditions changed from year to year (for example by the abolition of duty free in June 1999, and the changes in the Euro-Sterling exchange rate 2001 to 2004) the price differentials shifted quite markedly over time, but for much of the study period Nord Pas de Calais was a cheaper place to buy alcoholic drinks, tobacco, groceries, and motor fuel (especially diesel). It was also for a while a cheaper place in which to buy new motor cars (even those which had been manufactured in the United Kingdom). There continue to be considerable fluctuations in the Euro to Pound exchange rate. Evidence for levels of cross-Channel shopping has been assembled by studies in the Transmanche Tourism Research Programme. These studies show that in 1999 some 4.455 million day trips were made from the UK resulting in an estimated £350 million expenditure on shopping in Nord Pas de Calais. In the same year some 680 thousand staying trips to Nord Pas de Calais resulted in an estimated £54 million of shopping expenditure. These figures are reinforced by evidence that 38% saw shopping as their main purpose of the trip and 96% reported shopping activity during the trip. If the proportion of Kent residents in these activities is applied to the spending it suggests that in that year about £110 million of shopping spending leaked out of Kent into Nord Pas de Calais and adjacent regions. In contrast the incoming flows were much smaller in volume: 430 thousand and only 7% of these saw shopping as a main purpose of visiting, though 63% reported some shopping activity. They were also responsible for much less expenditure with a total spend in Kent of about £49 million (an earlier study with a different methodology suggested a figure of about £54 million in 1998). In addition Kent received about £8 million of shopping expenditure from those passing through the county en route to a channel crossing. Although it cannot be certain that these figures have been repeated in subsequent years (because price differentials are variable) it is evident that the spend in Kent from all cross-Channel trips is very modest and that the balance of spend is not in Kent’s favour. It is not possible from data available to us to identify the Tunnel share (Shuttle and Eurostar) of these exchanges. In the light of these figures it is not surprising that in Kent these has been little investment in shopping facilities directly aimed at the cross-Channel travellers. The only major development well located for such trade is the designer outlet centre adjacent to Ashford Passenger Station. Other developments on a smaller scale (e.g. De Bradelei Wharf in Dover) or on a larger scale (e.g. Bluewater) are clearly designed to serve local or regional markets. Similarly, though some local retail outlets have provided facilities to attract cross-Channel travellers (e.g. Tesco at Cheriton and Dover) they do not see such customers as a major element in that business. This contrasts strongly with the developments around Coquelles which have clearly been designed and managed to maximise their attraction for cross-Channel shoppers. Similarly, it seems that far from stimulating employment in retailing the expansion of cross-Channel activity has probably had a net negative effect on employment and the data give no evidence to the contrary. Employee numbers in retail trade (Figure 32) have increased steadily over the period and Maidstone consistently had the highest number of employees of the 4 districts examined. This would be consistent with the size of the town centre as would the higher numbers in Ashford (a designated growth area). However, retailing appears to be more concentrated in other districts within Kent; Dartford had the highest concentration in 2001 which may follow the opening of Bluewater Shopping Centre in March 1999. Otherwise Canterbury, Thanet, Tunbridge Wells, Medway Towns and Gravesham all exhibit higher Kent based LQ’s. The figures for these districts appear to be following the national trend or a steady increase in retailing (consistent with population growth) rather than exhibiting anything which might be called a Channel Tunnel effect.

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Figure 32: SIC 52 - Retail Trade except for Motor Vehicles Employment (1991 – 2001)

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Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry The planning permission data show that from 1991 to now there were 56 permissions granted for retail use in Ashford, Dover and Shepway. A majority of the activity was in the mid to late 1990’s in Ashford and Shepway, while in Dover there was little or no activity.

Table 22: Number of Applications Granted for Retail Planning Permission (1991 – 2004) Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 TotalsAshford - 2 1 1 0 4 7 2 2 1 1 - - - 21 Dover - - - - - - - 1 1 - - - 1 - 3 Shepway - - 1 - 2 1 3 5 1 5 1 4 1 - 24 Totals 0 2 2 1 2 5 10 8 4 6 2 4 2 0 48 Source: Kent County Council This data covers 5 retail land uses: A1 (Shops, Retail Warehouses, Post Offices, and Retail Services), A2 (Financial & Prof. Services -High Street/Public Access, and Betting Shops) A3 (Restaurants, Snack Bars, Cafes, Take-Aways, and Pubs), S1 (Car Sales - Showroom or Open Storage), and S2 (Petrol Filling Stations). In total there were 23 A1 application, 15 A2s, 13 A3s, 8 S1s, and 1 S2. For each land use there was a surge in applications during the late 1990s. 5.4 The Manufacturing Sector It was generally expected that the existence of the Channel Tunnel would stimulate growth in Kent’s Manufacturing Industry, both encouraging growth in firms indigenous to Kent and attracting in firms from outside the county. However, not all manufacturing industries stood to benefit. Some would continue to be in decline (e.g. Steel) while other growth industries (such as pharmaceuticals and high tech goods) stood to benefit. The Kent Impact Study (1987) identified several manufacturing sub-sectors that might be expected to gain from the operation of the Channel Tunnel and associated developments: Scientific Instruments and Medical and Surgical Equipment; Office Machinery and Electronic data processing; Radio and electronic appliances; Printing and Publishing; Pharmaceuticals; and Plastics. Much of the benefit for manufacturing was expected to derive from the associated improvements to infrastructure, in particular to road and rail. It was hoped that this would lead to improved access to markets and improved availability of business services. The new infrastructure would provide additional opportunities for market expansion by opening up

54

accessibility to European and deep sea markets, affecting business travel and the movement of freight. In the preliminary studies the cost of and time involved in transporting freight were highlighted as important issues for manufacturing firms. A survey conducted for the KIS revealed that 44% of Kent firms said they already used the Dover Calais Route, 84% said they would use it if it were faster, cheaper and more reliable. Similarly 90% of SE firms said they would use the Tunnel, against just 59% of firms located elsewhere in the UK. However, only a small percentage of firms considered the savings in freight costs and time significant enough to consider changing location Kent (21%), SE (8%), UK (2%) and a majority of these were already based in Kent and the SE. Overall firms considered transit times to be more important than the cost of business travel, and the study concluded that much would depend on the ability of the through-rail services using the Tunnel to provide UK-EEC travel faster than the airlines. The evidence in terms of investment from the Locate in Kent data shows that of the French companies in Kent11 in their database, 18% were manufacturing firms, making it the second largest sector (to Wholesale and Retail). As a percentage of all companies classified as successes since 1997, manufacturing accounted for over 43% with 90 out of 260 firms. In employment terms these firms accounted for 36% of the total jobs employing 4,108 workers (out of 11,413). Of these firms approximately 32 (1,888 jobs) were expansions or retention of employment within Kent, 28 (1,212 jobs) were start-ups or relocations or expansions from elsewhere in the UK, and 30 (1,008 jobs) were start-ups, or relocations or expansions from Abroad. The Business Link data shows that manufacturing is the 4th largest sector (in terms of the number of firms) with 4,948 companies within Kent. It follows behind Wholesale and Retail Trade (13,013), Real Estate, Renting and Business Activities (8,600) and Construction (5,929). Data on the number of manufacturing firms by size-band is given below. Of the Channel Corridor districts Ashford has the 4th highest total number of manufacturing firms and the largest number with over 500 employees (3). Shepway and Dover have the lowest and second lowest number of firms respectively and Maidstone the second highest Total number. The majority of firms (on average 59%) have between 0 and 5 employees, and generally firms get fewer as they get larger. The data indicate that manufacturing remains an important sector in the Kent economy; however there is no evidence that the Tunnel triggered an influx or growth in these firms due to the lack of reliable and available time series data.

Table 23: Number of Manufacturing Firms - Size Band by No. of Employees (2003) 0-5 6-10 11-19 20-49 50-99 100-199 200-499 500+ Total Ashford 268 72 30 36 17 2 6 3 434 Canterbury 211 51 19 24 13 5 2 2 327 Dartford 125 56 22 23 11 48 3 1 245 Dover 147 32 27 17 12 2 3 1 241 Gravesham 145 46 15 20 10 1 6 1 244 Maidstone 298 78 34 43 17 5 6 1 482 Medway 361 118 48 66 28 9 7 2 639 Sevenoaks 268 80 39 52 13 4 5 1 462 Shepway 154 32 20 13 9 0 2 2 232 Swale 248 76 39 48 25 10 5 2 453 Thanet 198 38 25 34 14 10 3 1 323 Tonbridge & Malling 202 66 39 55 26 14 7 3 412 Tunbridge Wells 225 60 41 29 14 3 2 1 375 Kent 2906 812 403 468 213 67 58 21 4948 Source: Business Link

11 Updated October 2003

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The evidence of employment presents a mixed picture. The employment numbers for manufacturing in the Channel-Corridor districts and Dover are graphed below. It is fair to say that employment figures for manufacturing in Kent as a broad category aren’t substantially different to the national trend in the manufacturing industry. The figures for Great Britain show a general decline in manufacturing employment from 1991 to 2001 with a rise between 1995 and 1998. However the figures for some of the Channel Corridor districts (graphed below) show that employment appears to be more resilient. Numbers in Dover have actually increased since 1995 by 22%, and in Shepway manufacturing employment has remained fairly constant. In Maidstone there was an increase of over 19% % between 1991 and 1995 followed by a small decline up to 2001of just 4%. In all Channel Corridor districts manufacturing employment was higher in 2001 that it was in 1991. Great Britain and Kent however exhibit lower numbers in 2001 than 1991.

Figure 33: Manufacturing Employment in the Channel Corridor (1991 – 2001)

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1991 1995 1998 2001

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Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry A clearer picture is shown by the relative change in manufacturing employment for the Channel Corridor districts against that for Kent and great Britain; This is graphed below with 1991 set as the base year (=100). It shows that in particular Dover and Maidstone gained more manufacturing employment than GB and Kent. Ashford has exhibited the same, though more pronounced trend as GB and Kent, and Shepway has behaved in almost the opposite way. This shows clearly how Kent as a whole has mirrored the national GB trend.

Figure 34: Relative Change in Manufacturing Employment (1991 – 2001)

70

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1991 1995 1998 2001

Rel

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AshfordDoverMaidstoneShepwayKentGreat Britain

Source: Calculated using data from NOMIS (AES & ABI), Base year: 1991=100

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As manufacturing covers a wide range of sub-sector industries these trends may be disguising changes in employment in some manufacturing sub-sectors both positive and negative. Due to this and the fact that the data may be dominated by the national trend, we have looked at the employment levels in some individual sub-sectors of manufacturing where employment in Kent has grown since 1991 to try and ascertain if the existence of the Tunnel has ‘boosted’ growth in employment in any particular manufacturing industries. The argument for employment in manufacturing industries is slightly different to that of other sectors as the effects are less likely to be concentrated in the Channel Corridor districts, but spread around Kent, as firms balance access to the Continent with access to London and the rest of the UK. It might be expected that North Kent and the Medway Towns would have experienced more considerable employment growth. There has been a substantial increase in the manufacture of pharmaceuticals employment (Figure 35) in Dover since 1991, with 2,638 jobs created by 2001. This, however, is due to the existence and expansion of Pfizer in Sandwich. The location of which is largely unrelated to the existence of the Channel Tunnel. The other Channel Corridor districts exhibit low employment in this sector. There was an increase of over 400% in Tonbridge and Malling (an increase of 170 jobs). However, it should be noted that manufacture of pharmaceuticals in Dartford declined by 35% between 1991 and 2001, a loss of 1195 jobs). However, numbers in Kent increased overall by 28%, while there was a decline in Great Britain of just over 1%. Location quotients to the GB Base reveal strong concentrations of Pharmaceuticals employment in both Dartford and Dover of 20.3 and 27.8 respectively for 2001.

Figure 35: SIC 244 - Manufacture of Pharmaceuticals Employment (1991 – 2001)

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DartfordDoverMaidstoneShepwayTonbridge and Malling

Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry Employment in the manufacture of transport equipment (Figure 36) rose substantially in Ashford between 1995 and 2001, despite an overall fall in Kent between 1991 and 2001. This was accompanied by a fall in other parts of Kent, including Tonbridge and Malling, Sevenoaks and the Medway Towns, leading to a fall of 39% in the number employed in Kent as a whole: from 1548 in 1991 to 945 in 2001. Location quotients to the GB base show a concentration of this employment in Ashford (the only Kent district with a LQ greater than 1)

57

Figure 36: SIC 35 - Manufacture of Transport Equipment Employment (1991 - 2001)

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Employment in the manufacture of electrical machinery and apparatus has been rising in the districts of Shepway (49 to 317, and increase of 447%) and Ashford (164 to 462: 182%) This has however, been accompanied by a loss of employment in Dover and Maidstone since 1998. Overall numbers in Kent have risen by over 50% over the 10 year period, this is due also to increases in Canterbury (164 to 462: 182%), Dartford (48 to 573: 1093%), the Medway Towns (102 to 354: 247%), Sevenoaks (63 to 233: 69%) and Thanet (an increase of 847%, from 85 to 805). The location quotients show this type of manufacturing to be most concentrated in Thanet. GB LQ’s reveal concentrations in Dartford, Gravesham, Shepway and Thanet (e.g. Location Quotients exceeding 1).

Figure 37: SIC 31 - Manufacture of Electrical Machinery and Apparatus Employment (1991 - 2001)

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Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry Employment in the manufacture of rubber and plastic goods in Kent grew by 66% (4237 to 7055) between 1991 and 1998. Employment in Maidstone contributed largely to this with growth of over 800 percent (from 118 to 1185) between 1995 and 1998. Other notable Kent growth areas included Medway, Sevenoaks, Swale and Thanet. Growth in SIC 25 employment was stronger than both the South East and national average, though positive growth in employment was experienced at these levels.

58

Figure 38: SIC 25 - Manufacture of Rubber and Plastic Goods Employment (1991-2001)

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Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry

Kent experienced strong growth (93%) in employment within SIC33 (manufacture of medical/precision instruments) between 1991 and 1995. This was largely due to growth in Medway of almost 1000% (278 to 3043). The Channel Corridor districts (graphed below) exhibited nothing special. Both Maidstone and Shepway experienced slow steady growth in employment, while there was a general decline in Ashford and Dover. LQ to GB base reveal concentrations of SIC33 employment in Shepway and Medway, where LQ’s are 5.20 and 6.22 respectively.

Figure 39: SIC 33 - Manufacture of Medical/ Precision instruments etc Employment (1991 – 2001)

0100200300400500600700800900

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Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry A rise in manufacturing activity in Kent might also be visible in the level of completed floor space. At a district level we can look at the number of gross and net completions over the period 1991 to 2001 using data provided by KCC. KCC provide the data for B2-B7 employment land which is classified as General Industry and Manufacturing. For Kent as a whole the gross figures show a gain in B2-B7 floor space of 828,064 m². However there appears to have been a major loss of some manufacturing floor space between 1991 and 2001 as the net figures show a total gain of just 48,971 m². Examining the data for the Channel Corridor districts, Shepway exhibited the lowest level of gross completions throughout the period with a peak in 2001-02 of 5,096 m² and a total of 15,316 m² completed manufacturing floor space over the 10 years. The largest level of gross completions was in Dover with a 10 year total of 143,839m². Almost 46% (65,550) of these were completed in 2000-01. Ashford produced a fairly constant stream of completed

59

manufacturing floor space over the period, with the second largest total floor space of 83,876m². In Maidstone 43416m² was completed between 1991 and 2002.

Figure 40: B2-B7 - General Industry and Manufacturing Floor Space, Gross Completions

(1991-2002)

Source: KCC Employment Land Survey The net figures however, reveal that there were substantial losses of manufacturing floor space in all 4 districts over the period. Only Dover (98,599m²) and Ashford (24,227m²) experienced net gains of B2-B& floor space, Shepway and Maidstone exhibited net losses of -29238m², -5285m² and respectively. The 2000-01 figures for Dover remained high at 64,175m² net, indicating a loss of just 1,375m² for that period. The largest net losses were in Shepway 1997-98 (-16,014m²) and Ashford 1998-1999(-16,790m²).

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Figure 41: B2-B7 - General Industry and Manufacturing Floor Space, Net Completions (1991-2002)

Source: KCC Employment Land Survey

The number of planning applications granted for Ashford, Dover and Shepway from 1991 to 2004 for B2 Land (Light Industry and Manufacturing) are summarised below. This data shows a surge of applications in the mid to late 1990’s. Again activity in Ashford and Shepway began earlier than in Dover.

Table 24: Number of Planning Applications Granted for B2 Land (1991 – 2004) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total Ashford - 1 4 - 5 4 6 7 12 7 2 - - - 48 Dover - - - - - - 1 1 2 4 4 16 1 29 Shepway - - - 1 2 - 5 2 3 3 2 8 1 - 27

Total - 1 4 1 7 4 12 9 16 12 8 12 17 1 104 Source: Kent County Council 5.5 Road Freight, Warehousing & Logistics It was widely supposed that the establishment of the Channel Tunnel and associated services would provide some stimulus to the road freight, warehousing and logistics sector in Kent. The argument had two strands: first it was suggested that Kent would become a good location for companies handling import traffic which would be distributed more widely across the British Isles; and secondly, it was thought that Kent might become a favoured location for distributing goods produced in the United Kingdom to European destinations. In both cases

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the locations suggested by these arguments might have been expected to lie in the Ashford-Cheriton-Dover corridor. It must however be noted that neither of the arguments is straightforward. The arguments for locations in Kent could equally well be put forward for the hinterland of Calais-Fréthun. In such a situation the decisions might well have depended on political cultural factors (language, schooling for employees’ children) and the availability of suitable sites which were plentiful around Calais and to a lesser extent Ashford, but scarce in the immediate vicinity of Dover and Cheriton-Folkestone. There is however a further argument which would have militated against transport and warehousing developments in either Kent or Nord Pas de Calais: if through routes to the Channel Tunnel and the Tunnel services themselves are working well there is no need for a facility in Kent (or in Nord Pas de Calais) as producers on both sides of the Channel can serve their customers on the other side directly from their production centres. It was this sort of reasoning which led a study of Ashford (Halcrow, 2002 p. 90) to the conclusion that “freight distribution is unlikely to be a strong driver of economic growth in Ashford”. The evidence assembled for this study supports this view. We have the employment figures for SIC 6024 (freight transport by road). There was a 5% increase from 1991 to 2001 in Kent, though this was well below the national increase of 26%. There was growth in employment in the Channel Corridor districts from 1995 onwards; the most marked increase was in Maidstone between 1995 and 1998 of 180% (almost 1,000 jobs). From 1995 to 2001 percentage changes in Ashford, Dover and Shepway were 108%, 61%, 97% respectively, though the actual numbers were relatively low.

Figure 42: SIC 6024 - Freight Transport by Road Employment (1991 – 2001)

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We have aggregated the number of employees in Cargo Handling & Storage, Other Supporting Transport Activities, and Activities of Other Transport Agencies in Figure 43. Employment in these sectors falls dramatically in Dover from 1991 to 1995 after the Opening of the Channel Tunnel though the numbers remained higher than the Channel Corridor districts. This fall may be related to the fall in border control activities after the Single European Market was established in 1992 resulting in employment losses, as well as some relocation of activity following the opening of the tunnel. In the other 3 districts employment increased during this period. In Ashford employment in these SICs grew over the time series. Employment fell in Shepway after 1995 and in Maidstone between 1998 & 2001.

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Figure 43: Employment in Cargo Handling and Storage, Other Supporting Transport Activities, Activities of Other Transport Agencies (1991 – 2003)

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Source: NOMIS – The Annual Employment Survey and Annual Business Inquiry The second set of evidence is taken from Kent County Council’s records of planning permissions for land use category B8. Figure 44 shows the total hectares of land for which planning permissions relating to transport warehousing and distribution were given in the period 1991 to 2004 (Data for Ashford run only to 2001). The Figure shows there was little activity until 1998, a brief flurry of activity from 1999 until 2001 and then a falling away of activity.

Figure 44: Hectares of B8 (Warehousing and Distribution) Land Granted Planning Permission (1991 – 2003)

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Those summary figures are confirmed by inspection of the detailed records for planning applications from 1991 to 2003 which are summarised in Table 25. It is evident from this table that there was no strong pressure for new activities in the B8 category in the mid 1990s and the greatest activity was experienced in Shepway and Ashford in 2001 and 2002. This overall picture is reinforced by examining the details of the application some of which were for activities clearly unrelated to the Tunnel and many of which were very small sites: indeed of the 100 applications represented in the table only 27 were for sites in excess of half a hectare.

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Table 25: Number of Planning Applications for B8 Land (1991 -2003)

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Totals Ashford 1 1 1 1 - 3 4 6 7 10 8 - - 42 Dover - - - - - - 1 2 2 2 3 7 5 22 Shepway - - - - 3 - 2 9 5 9 6 5 1 40

Total 1 1 1 1 3 3 7 17 14 21 17 12 6 104 Source: Kent County Council The third relevant data set concerns completion of developments for which planning permission had been granted at an earlier date. Figures 45 and 46 show the gross and net completion rates for land use B8 from 1991 to 2002. It is clear from these figures that there was little activity until 1995/96 after which there was modest activity in three of the corridor authorities, but rather higher activity in Dover. Looking at all three data sets there is some evidence of increased activity in the period following the opening of the Tunnel, but this has not been sustained beyond 2001.

Figure 45: B8 - Warehousing & Distribution Floor Space, Gross Completions (1991-2002)

Source: KCC Employment Land Survey

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Figure 46: B8 - Warehousing & Distribution Floor Space, Net Completions (1991-2002)

Source: KCC Employment Land Survey 5.6 Growth locations Two areas in Kent stand out as particular growth locations linked to the Tunnel: Ashford and Ebbsfleet. Ashford has been seen as a significant growth pole for many years. The reasons for this are partly linked to the Channel Tunnel in that the Kent Impact Study (1987) expected significant economic growth related both to the International Passenger Terminal and the Cheriton Tunnel-Terminal. In line with these expectations, large areas of land were designated for commercial and industrial development (430 thousand square meters in the period 1991 – 2001)12. Some of this land was old industrial land, some was land used in the Tunnel construction, and some was greenfield. The land was accessed by development of roads from Junction 10 on the M20 to serve areas lying to the South and East of the town. Similarly, the 1996 structure plan made provision for 6.8 thousand new dwellings in the period 1991 – 2001. These plans resulted in Ashford being seen as a location for future growth even when the Tunnel related developments failed to materialise on the scale expected. As a consequence, from 1991 to 2001 Ashford saw a growth of 14% in dwelling units (a total of 5,200)13. The problem has been that although housing developments have occurred (and significant development of services and retailing) there has been a much slower development of other

12 Kent and Medway Structure Plan 2003, Working Paper 2 13 Kent and Medway Structure Plan, estimated using census dwelling counts, 2003

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activities and net completions at 107 thousand square meters (1991 – 2001) were only 51% of the plan target14. As a consequence, Ashford has developed its function as a dormitory town for those working in Greater London, Maidstone and other parts of East Kent. However when in 2003, central government published plans for the expansion of housing in the South East Region it identified Ashford as the site for a further 31, 00015 new homes and 28,000 new jobs by 2031, and targets consistent with these figures have been adopted by the Kent and Medway Structure Plan 2003. The second important growth location linked to the Tunnel is Ebbsfleet. If, as appears likely, the main activity of Eurostar will be on CTRL into St Pancras, Ebbsfleet will be the most attractive place in which to have an intermediate stop in terms of people coming by road to pick up Eurostar (there are 9 thousand new parking spaces planned for the Ebbsfleet station). Ebbsfleet International Station opens in 2007 and provides a new access point for Eurostar services to the Continent and fast domestic services to St Pancras via the CTRL. Development at Ebbsfleet has been triggered as a direct result of the building of the CTRL. The scale of this growth can be judged from the fact that within the Ebbsfleet Valley, outline planning permission was granted in November 2002 for 790 thousand sq m (8.5 million sq ft) of mixed-use development for employment, residence (there are plans for 3.2 thousand new homes in the area), hotel and leisure facilities, supporting retail and community facilities together with transport infrastructure and open space.16 It is hoped that these developments will generate up to 20 thousand jobs17. Linked to Ebbsfleet is the development of the Eastern quarry, a site of approximately 300 hectares with the capacity for over 7 thousand new homes and 3 million square feet of office, leisure, shops and amenity facilities. The eastern quarry development is expected to take the form of an urban village and is hoped to generate 10 thousand new jobs. The quarry is located adjacent to Ebbsfleet and is the largest single Kent Thameside development site. Adjoining the Eastern Quarry to the west is the established and successful Bluewater shopping centre, which already has over 153 thousand square meters of retail space. These three sites together constitute a key part of the Kent Thameside, which is in turn expected to be a powerhouse of the Thames Gateway region, identified as a priority region for long term sustainable economic, social and environmental regeneration18.

14 Kent and Medway Structure Plan 2003, Working Paper 2 15 Sustainable Communities in the South East, ODPM, 2003 16 Kent Thameside 17 Dartford Borough Council 18 Kent Thameside

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6. Alternative Futures In this section of the report we take a series of alternative future developments and examine their likely consequences on both the transport sector and on Kent. These developments are not mutually exclusive and different combinations of them will have significantly different implications for Kent and the wider. We do not initially indicate any particular probability of these coming about, some are clearly highly unlikely and others very likely, but it is desirable to demonstrate the range of possible influences and impacts. The fifteen developments outlined are presented in 2 groups: In the first group are developments in the transport system itself and the second group refer to the wider social, economic and political context. In the final section our view of the most probable outcomes are presented in table form which is then used as the basis for expected changes over the next 10 years. 6.1 Future Transport Sector Changes and their Impact 6.11 Technical and Operational Integration We have already identified the problems of defining the logical boundaries of the Tunnel’s operations. Eurotunnel itself has also recognised that some of its traffic and financial difficulties stem from the dependence on decisions taken by others, particularly the national rail operators. This has driven the policy of seeking operating rights in France to be able to provide a more integrated service for freight through the Tunnel and on to key destinations in continental Europe. Secondly, Eurotunnel proposed a continental gauge railhead at Cheriton to enable traffic using larger size containers and piggy-back travel through the tunnel without interruption to access the UK road network and ultimately build traffic demand for future freight use of CTRL to possible transhipment locations closer to London (e.g. Stratford). Finance for this project has not yet been secured. Clearly any development which leads to a shift in traffic from road to rail will have beneficial environmental effects on Kent. We recognise in this that this is unlikely to lead to an actual reduction in road traffic, simply that the future growth will be slightly less strong. In the short-term the creation of a freight facility at Cheriton would have a positive impact on employment but depending on whether it generates new traffic or diverts it from existing rail or road services it might increase flows of HGVs on the access routes. Any move to integrate operational control of the tunnel with the linking high speed lines would also have the potential to increase operational efficiency, reduce conflicts leading to delay and thus enhance through rail services for both passenger and potentially in the future freight traffic. There is also potential to enhance the level of service provided to road traffic using GPS systems to provide approaching traffic with information on services, likely departure times and confirm bookings. This would increase certainty for both customers and operations staff who would have greater knowledge of the likelihood of pre-booked vehicles arriving in time for the scheduled departure. This is a further example of integration of the tunnel with its associated infrastructure. 6.12 Implementation of the EU's 2nd and 3rd Railway Packages The EU has taken a strong lead in trying to open up the rail sector for greater competition, regarding the closed nature of the rail industry in most EU member states as a barrier to greater competitiveness with other modes. These attempts date back to the landmark Directive 91/440 which paved the way for the separation of infrastructure and operations, at least in accounting terms, such that the charges for track access would be more transparent and hence provide the basis for open access. Consistent with the desires expressed in the 2001 White Paper on Transport 2010: A Time to Decide, the EU developed the first railway package of three directives which entered into force in 2001. The first package was designed to open the market for international rail services in two stages: by 2003 on the trans-European rail freight network and by 2008 on the entire network. It confirmed the need for clear

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identification and separation of roles of infrastructure operators, railway operators and regulatory bodies, and their respective finances. The second package, on which agreement was reached in March 2004, contains four principal measures:

• A common approach to rail safety • Amendment of current directives on interoperability • Establishing a European Railway Agency as an effective steering body • Amending 91/440 to extend and speed up opening of the rail freight market

Whilst taken together all of these should work towards improving the competitive position of the rail sector, the last is the most significant since it provides for both international and national freight services. International markets are now to be fully opened by 2006 and complete opening (including cabotage) by 1 January 2007. This is of considerable significance to the international traffic through the Channel Tunnel and also provides for open access by any operator to build networks of domestic services which could complement international services. Given this development in the freight sectors a Third Railway Package is proposed, principally to open up the market for international passenger services by 2010. This broadly provides the same rights in passenger as for international freight services and is timed to coincide with the completion of the high speed network in the EU. Whereas a principal threat to rail freight is seen to come from road, the principal threat to international rail passenger services is from low-cost airlines. However it also envisages that there should be competition for existing service operators, Thalys and Eurostar are specifically mentioned, where operators should have the right to pick up and set down at any station on an international route. This could mean competitive services provided within a single member state (although some safeguards are envisaged for existing public service obligations contracts (i.e. subsidised local services). There are also proposals for minimum rights to information for passengers and the certification of locomotive drivers. Overall the implementation of these packages should have a positive impact on cross-Channel through rail services, although there remain many questions concerning the potential market size for effective competition. Positively, Eurotunnel could potentially become an operator of freight services to take advantage of the access the packages provide or it could use that access to attract more services offered by other operators (for passengers and freight). On the other hand the open access required by the packages will apply to the tunnel operation itself and therefore not only pose some technical problems but also weaken Eurotunnel’s quasi-monopoly of the facility. 6.13 A Shift in Transport Costs and Regulation against Road Transport Despite its dual-mode status, tunnel traffic is dominated by road traffic for both passengers and freight. Any moves to increase the cost of road use in line with the policy statements of both the European Commission and the UK government will have significant impacts on both the growth of total traffic and the share of road. A number of possible scenarios could be considered here. First, there could be a reduction in discretionary traffic; a large share of cross-Channel passenger traffic is discretionary for leisure, shopping etc. Customers would seek closer destinations or reduce total travel if costs were significantly increased. If the increase in costs were imposed mainly on motorway use this may have differential effects on different categories of traffic depending on origin and destination with regional traffic being less affected than traffic from further away from the tunnel. For freight traffic there is likely to be less impact. Freight operators are more able to pass on higher costs to their customers, although this may have a longer term impact on the relative volumes of internationally traded and domestically produced and consumed goods. Perhaps of greater significance is the relative rate of adoption of new charging patterns in different EU

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countries. Road haulage is an extremely competitive sector run on tight margins. Recent complaints by road haulage operators in the UK have centred on the relatively high tax and hence cost of fuel, and the cost of the annual vehicle licence which is more closely related to identifiable road track costs in the UK than in some other countries. These lead to UK based hauliers finding it difficult to compete on equal terms with continental competitors. This needs to be balanced against the higher wage and social costs faced by operators in most near Continent countries. A further source of complaint has been the increasing penetration of hauliers from Central and Eastern Europe, or those using labour from such countries. From 1 May 2004 on the accession of eight of these countries to the EU (along with Malta and Cyprus) it will become necessary for them to comply with the minimum standards provided in a wider range of EU social legislation. 6.14 Restructuring of Ferry Operators from Dover Some studies in the 1980s raised the possibility that the opening of the Tunnel would result in fierce competition and the withdrawal of ferry services from Dover as well as other Ports. Although there has indeed been price competition which is likely to continue it seems unlikely that all ferry operations will cease: there may however be some substantial restructuring of the industry. From Eurotunnel’s perspective any instability in the ferry market poses problems of how to respond. P&O have already been involved in further rounds of job losses as they seek to contain costs. It is relatively easy for ferry operators to enter and leave specific markets and thus there is the possibility of one or more of the major operators pulling out and being replaced by an alternative operator. This could see for example the equivalent of the airline low-cost operator providing more limited services with minimal on-board facilities, an innovation already planned by P&O. The other possibility is that a major operator pulls out and is not replaced, leading to a reduction in the level of services. If there were to be a significant reduction of the level of service through Dover, we would expect some reversal of the traffic trends of the past ten years with less emphasis on the short-crossing routes. This would depend to some extent on capacities at alternative ports and road access to those ports. We regard it as less likely that there would be a simple switch to the alternative near ports such as Folkestone or Ramsgate. Under the assumption that part of the Dover ferry traffic would move to other (longer sea) routes it is unlikely that Eurotunnel would need to absorb all of the current Dover ferry traffic, but even if this occurred it would only present significant capacity problems at major peaks. From the wider economic perspective in Kent, the loss of services through Dover would be a major problem. The district has already suffered from substantial reductions in employment in the port and ferry industry over the past 15 years, added to the losses through the closure of the coalfield. Although the direct incidence of the loss of ferry jobs on the local community is reduced somewhat by the pattern of residence of such workers, further losses would of necessity have a significant negative impact on economic activity. These would be unlikely to be compensated by any employment increase occasioned by the transfer of traffic to Eurotunnel. Reduction of ferry operations from Dover would provide additional capacity for the development of other port services including cruise liner and short-sea shipping services, but it is unlikely that these could replace lost ferry operations in terms of either employment or value added to the local economy. 6.15 Financial Restructuring of Eurotunnel Under this we consider the inverse scenario of Eurotunnel’s creditors finally losing patience and forcing the company into insolvency. Again we consider this an extremely unlikely outcome. The difference with the loss of ferry services is that operations cannot simply be moved elsewhere or easily replaced by an alternative form of service. Much would depend on the nature of the restructuring. A simple bankruptcy of the existing company would in a sense write off the capital cost of the project and allow a new operator to concentrate on providing a low marginal cost operation. Our expectation is that Channel Tunnel services would not be

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allowed to cease, although the governments would face problems of how to organise this, not least in terms of maintaining a level playing field vis a vis ferry operations. From the point of view of the local economy the repercussions may be less serious than the closure of the ferry services from Dover given the likelihood of continued operations, the numbers of people employed. Any disruption to services for a period would have negative consequences for traffic flows since a greater burden would be placed on the ports and the need to accommodate passengers and freight from the through rail services. 6.16 Restructuring of Eurostar This leaves the concern about any of the core services provided by other operators through the tunnel being withdrawn. Given the possibility of alternative operators, including Eurotunnel itself, in the freight market, this section concentrates on Eurostar. Eurostar has itself had a difficult history. Conceived as a joint operation of three national (state-owned) rail operators on the basis of high traffic forecasts it had found it difficult to live up to expectations. Many of the originally planned services (regional Eurostar in the UK and overnight sleeper services) failed to materialise for a mixture of technical and economic reasons. More than the core inter-capitals service, these were the victim of low-cost airline operations. Overnight rail services throughout Europe have seen a substantial reduction in recent years. A service which has been becoming increasingly competitive in time terms with airlines for London-Paris/Brussels now frequently looks uncompetitive in basic fare terms (not least given the significant reduction in business class travel on airlines in Europe). The technical equipment for Eurostar, designed on the basis of ambitious traffic forecasts has proved to be too large and inflexible for the efficient matching of capacity to demand which the yield management techniques used by airlines is able to achieve. Given the complexity of the ownership of Eurostar and its assets and the competing interests of some of these owners we do regard the future of Eurostar in its present form as giving rise to concern. The complete loss of through rail passenger services is unlikely, but a significant reduction in the scale or nature of operations has to be considered. Some of the possible changes would be a reduction in service frequency (particularly to Brussels) to increase load factors with the excess fleet being redeployed as has already been done in both France and the UK; the elimination of intermediate stops in the UK (possibly Ashford after the opening of Ebbsfleet, but also possibly the removal of any intermediate stop) which would reduce the costs of maintaining the terminal facilities and enhance the through service by eliminating the time penalties from stopping (which are now quite severe at Ashford following the opening of CTRL. The consequences of this for Eurotunnel would be serious. It is unlikely that more than a small percentage of the more than 6 million passengers would switch to the shuttle services. Most would either switch to airlines or simply not travel as there is evidence of a significant new discretionary (largely shopping and leisure) market which has been created by Eurostar. The consequences for Kent and the wider UK are more worrying. The potential for absorbing up to 6 million extra passengers through the London airport system is limited; as has been seen in France the successful operation of high speed train services over distances of up to 600km has decimated parallel air services, thus freeing up scarce slots at airports for the growth in longer distance services. The failure of the UK to be plugged in to the European high speed network, which will shortly mean that high speed lines will connect London with such destinations as Bordeaux, Marseille, Frankfurt and Amsterdam, is difficult to evaluate. However, there is evidence that being on a critical network is perceived to have economic value and being on all the critical networks has significant added value. For Kent this latter point is of great significance. The loss of Eurostar services would deprive Kent of any direct high speed (air or rail) international connections (depending on the success of the start-up of scheduled air services through Manston). A critical point in the expansion of Ashford and the development of Ebbsfleet has been the international rail links provided and the absence of these would lead to a marked reduction in the attractiveness of these locations. Although we do not believe a significant proportion of this traffic would switch to road, except for that with a Kent origin or destination, there would be an increase in traffic flow and hence congestion etc on Kent roads.

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6.17 The Impact of CTRL To a large extent the completion of CTRL provides the inverse situation to that of motorway connections. The development of domestic services on CTRL not only provides a faster route to London, but more significantly provides vastly improved access to national rail services to the Midlands and North through St Pancras, Kings Cross and Euston, together with access to a wider South East market via Crossrail. This provides a real possibility that CTRL, which is only possible as a result of the existence of the Channel Tunnel, will provide a positive boost to Kent locations for business development and not just improve commuting access times to London. This is particularly significant for the balanced development of both the expansion at Ashford and the development of Ebbsfleet. CTRL also provides scope for the development of additional cross-Channel services which could be significant in furthering the integration of the Transmanche region whilst allowing Eurostar in its existing form to concentrate on the inter-capitals business. 6.18 The Role of the Low-cost Airlines In an earlier section it was argued that the low-cost airlines may have had a significant and unforeseen effect on the cross-Channel passenger market. Some commentators have argued that the low-cost airlines will prove to be a short term phenomenon and that the other cross-Channel operations will in the future face a very different competitive situation. So, for example, increasing concern in the European Commission about concealed subsidy to low-cost airlines is seen by some as signalling a reduction in low-cost airline activity. Similarly it may be that environmental concerns (with consequent fuel taxation) or security considerations make it more difficult to operate low-cost airlines. This argument needs to be treated with caution for three reasons:

• The changes that the advent of low-cost airlines triggered in the operations of conventional airlines will probably remain even if the low-cost operators become less prominent.

• If the low-cost airlines have created new markets for short breaks and fly-and-drive which detracted from cross-Channel movements these new markets will remain and will not easily be served by surface modes.

• If low-cost airlines have created new bench mark expectations about a “good deal” for continental travel this will persist in the mind of consumers and cannot be ignored in cross-Channel pricing.

The most recent development in low-cost airlines affecting Kent is the proposal by a newly established Irish airline to use Manston as a base for hub operations from the British Isles into continental Europe. Published prospective timetables suggest that these operations will not compete directly with surface modes to near Continent destinations (in terms of destination and frequencies). They may however offer fly-drive alternatives to car crossings and Eurostar connections to longer-distance destinations. 6.19 The Impact of M25, M20, M2 Congestion Congestion on the approaches to the Kent Ports, but most particularly on the M25, is already a source of concern. The unpredictability of the congestion delays are a major cost to truck based freight already (an element is built in for expected delays of about one hour compared with times when free flow ca be expected, but the problem with the M25 is that the delay is not predictable). Some of the revival (or new development) of the long sea routes, such as services through Hull or Rosyth, is attributable to the problems of gaining access to the Kent Ports. The main effect of this is to restrict the geographical market. Whilst motorway congestion is a problem for the tunnel, port and ferry operators, it has a wider and more significant impact on the whole Kent economy which is to some extent isolated from markets in the rest of the UK by the uncertainty of travel. This has precluded Kent from being able to exploit its full potential of lying between continental European markets and suppliers and markets in the rest of the UK.

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We do not see the congestion situation on the major routes improving to any extent in the near future. Some immediate needs have been addressed by the widening of the A2/M2 corridor and the future construction of the new Kings Ferry Bridge to Sheppey will provide much improved access including to the port of Sheerness enabling it to reach its full potential. Some opportunities may be provided by future additional Thames crossings giving Kent better access to a wider range of development and regeneration sites right along the Thames Gateway and alternative access to routes such as the M11. 6.2 Changes in the Broader Context We turn now to looking at a series of wider changes which could have an impact on the long-term impact of the tunnel and its operations. 6.21 The Differences in Retail Prices across the Channel A significant part of cross-Channel traffic (perhaps as much as a third) is generated by the price differentials between the two sides. This has in the past been due to the exchange rate situation (particularly when the pound was particularly low relative to the franc), but is most frequently due to tax and excise duty differentials. This is particularly marked for alcohol and tobacco leading to substantial day trip flows from the UK to France. In addition there are other products for which the segmentation of the markets between the two countries has led to significant price differences. It is not fully clear the extent to which the traffic is generated just by the price differentials, but the expectation is that the elimination of all such differentials would lead to a significant reduction in traffic. Recent reports indicate that this is under active consideration by the Internal Market Commissioner for the EU. For the operators, both Eurotunnel and the ferries, this would need to be replaced by seeking to develop alternative markets, although it could be argued that some harmonization could lead to an increase in France-UK flows in this sector. Although there may be problems for cross-Channel operators, the elimination of price differentials on a number of products could be beneficial to Kent retail businesses, both from increased trade by Kent residents and an increase in trade from French residents. 6.22 The Intensification of Security and Illegal Migrant Precautions We regard the illegal immigrant problem as an essentially transitory one. Illegal immigration, and especially asylum seeking, reflects current world problems. As such it comes and goes. We do not see this as having a significant long-run effect on either the operation of the tunnel or on the local Kent economy, although like any border region Kent will always bear the brunt of any short-run increases. It is important here to distinguish this problem from the possible migration consequences of EU enlargement which we regard, on the basis of earlier research, as being negligible for the UK, and especially for Kent. We regard it as positive that the UK has agreed not to impose transition arrangements on the new EU member states which we believe would have made the situation worse as legitimate migrants may have been forced to illegal entry. We are, however, concerned that the continuing general security situation and threat of terrorism will continue to prevent the tunnel (and indeed all the UK’s links with continental Europe) from operating at full potential to the general detriment of the UK economy relative to the countries which enjoy predominantly land borders. It is clear that one of the factors which has prevented Eurostar from enjoying the degree of success enjoyed by French domestic TGV services or Thalys international services is the penalty imposed by minimum check-in times and the inability to utilise capacity more fully through domestic use of services to and from Ashford (although this is also affected by the franchising situation on domestic services in Kent). Similarly security precautions and check in times have prevented scheduled coach operators from benefiting fully from the Shuttle service. It is unlikely that this situation will improved substantially in the near future and it is clear that in the present situation a high degree of security is essential to reassure travellers of the safety of using Eurostar and Eurotunnel services.

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6.23 Integration of the Cross-Channel Housing and Labour Markets In 2002-03 a number of media sources suggested that the Tunnel and associated cross-Channel services might facilitate an integration of labour markets and housing markets across the Channel. Specifically it has been suggested that housing scarcities and significantly higher housing prices in Kent might result in cross-Channel commuting with people employed in Kent but residing in Nord Pas de Calais. It is evident that the frequency and speed of the cross-Channel services would make this feasible but fare levels probably prevent such a development (and there is little evidence that such cross-Channel commuting currently occurs). However, it is conceivable that if either Eurostar or the Shuttle were to offer commuter season tickets at greatly reduced prices (and Eurostar provided more frequent stops at Fréthun and Ashford) such traffic might develop. The integration of the Transmanche region in this way is currently the subject of a separate study by Mission Opérationnelle Transfrontalière. There is however another aspect of cross-Channel labour market integration which is relevant. Increasing numbers of French citizens now live and work in South East England: similarly significant numbers of British citizens now work in Brussels, Paris and North West France. Such labour migrations may have been facilitated by the presence of Eurotunnel and Eurostar services but even if that is not so these migrant communities represent an important market (visiting friends and relatives) to the cross-Channel transport operators. 6.24 Expansion of Ashford One of the biggest changes to occur in the wider Kent economy over the forthcoming period will be the expansion of Ashford. The creation of over 8 thousand new dwellings between 1996 and 200619 will cause a substantial increase in the town’s population. When taken together with the time savings resulting from the completion of CTRL this implies first and foremost a large potential expansion in commuting from Ashford into London. However, substantial expansion of commuting will not produce the sort of balanced development which is required if there is to be a lasting impact on the economic fortunes of the wider sub-region. It is essential therefore to see the balanced expansion of employment opportunities with emphasis placed on firms which can take advantage of the unique combination of a 45 minute journey to central London, the possibility of Thameslink 2000 and/or Crossrail services to the wider South-east and international services to Paris, Brussels and beyond. The availability of such accessibility will not of itself create jobs and a coherent package of accompanying measures will be needed to ensure that the maximum advantage is obtained. Ashford faces serious risks, however. Potentially, Ebbsfleet will have better communications, not least with its closer proximity to airports such as London City and Stansted. Good links within greater Ashford to provide access to the rail station and to expensed housing and business development areas will be critical. Based on French experience, the creation of business centres and hotel accommodation close to (or better still at) the International Station is likely to have significant pay-offs in terms of creating a location where business can be done easily and with minimum effort on the part of contacts coming from various different directions. 6.25 Development at Ebbsfleet and Thames Gateway The expansion at Ebbsfleet, and elsewhere in Kent Thameside, carries similar opportunities and risks to that at Ashford. The potential greater advantages of Ebbsfleet come with the shorter rail time to Central London of 15 minutes and the better proposed integration with Crossrail as well as proposals for a Thameside metro to provide better internal connections and access to the high speed services.

19 Ashford Borough Council Local Plan, 2000

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The concern we have is that it will be difficult to develop both Ashford and Ebbsfleet as major international development points. Each has its advantages as an attraction for new business development, but competition between the two for business may ultimately damage both. 6.26 A Change in Kent’s Position in the UK Economy Much of our analysis has explored the way in which changes affecting the Channel Tunnel, or Tunnel-linked infrastructure, will impact on the wider Kent economy in the future. There is considerable logic to this approach since transport links have been, and are, to the forefront of the constraints on the economy’s development. To some extent the proposed developments at Ashford and Ebbsfleet could be regarded as induced by the transport changes, although the decisions to develop at these locations have been to a large extent taken independently of these changes by identifying locations where large additional housing developments could be accommodated given the pressure on the South-East generally. Are there any other exogenous changes likely in the Kent economy, positive or negative? The Kent economy has in recent years been largely dominated by industries which do not have a significantly above average rate of growth. With the exception of the pharmaceutical sector, much of Kent industry is in sectors which show below average rates of growth. Education (a significant sector at all levels) has not been able to make an economic contribution comparable with its size in terms of employment; it is perhaps too optimistic to assume that this position might change. Of the remaining sectors, transport and construction have a significant role. Construction will clearly remain an important sector for some time with the major developments at Ashford and Kent Thameside, but although it is a sector which often provides an accurate reflection of trends, and tends to lead the cycle, it is not a sector which stimulates long term change. Similarly, transport is an important sector but one which has been going through substantial change to cut costs and remain competitive. Were Kent to move closer to the average position for the South-East region, this could imply a significant increase in economic activity which could have important knock-on effects for the economy. On the downside, however, if there was a significant economic boost in the short-term this may cause excess demand on much of the infrastructure which could make such growth short-lived. 6.3 Most Probable Future Tables 26 and 27 summarise three possible outcomes for each of the fifteen scenarios considered above. The probability of each outcome is ranked from most likely (1) to least likely (3). In deciding these rankings six key informants were consulted but the rankings presented reflect the considered views of this reports’ authors.

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Table 26: Transport Sector Issues – Future Outcomes and Probabilities

Issues Possible Future Outcomes Probabilities* 6.11 Technical and operational integration A. Integration greatly increased 2

B. Some increased integration 1

C. Integration unchanged 3

6.12 Implementation of the EU's 2nd and 3rd railway packages A: Objectives fully achieved 3 B: Some progress on objectives 1

C: No change 2

6.13 A shift in transport costs and regulation against road transport A: Major shift achieved 3

B: Modest shift achieved 2 C: Little change 1

6.14 Restructuring of Ferry operators from Dover A: Most operators withdraw/reduce services 3

B: Some operator turnover, services stable 1

C: Ferry services stable and expanding 2

6.15 Financial restructuring of Eurotunnel A: New operator after bankruptcy 3

B: No real change 1

C: Successful refinancing of Eurotunnel 2

6.16 Restructuring of Eurostar A: Eurostar Expands services and intermediate stops using two London termini 3

B: Eurostar Focuses on CTRL Route with intermediate stops 1 C: Eurostar Focuses on limited continental destinations with minimum stops 2

6.17 The impact of CTRL A: CTRL triggers integrated through services using Tunnel 2

B: CTRL track used by Eurostar and rail franchise services only 1

C: CTRL track used by Eurostar only 3

6.18 The role of the low-cost airlines A: LCA's continue expansion including near continental destinations 1

B: LCA's continue but with limited cross-Channel services 2

C: LCA's marginalised in all relevant markets 3

6.19 The impact of M25, M20, M2 congestion A: Congestion from rising traffic volumes and no investment 2

B: Some investment relieves congestion 1

C: Major investment in Thames crossing and motorway capacity 3

* Probabilities: High = 1, Moderate = 2, Low = 3

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Table 27: Issues in a Broader Context – Future Outcomes and Probabilities

Issues Possible Future Outcomes Probabilities* 6.21 The differences in retail prices across the Channel A: Major differentials persist 3

B: Some price differentials occur 1

C: Price equalisation 2

6.22 The intensification of security and illegal migrant precautions A: High security sensitivity persists 1

B: Security concerns moderate 2

C: Security concerns cease 3

6.23 Integration of the cross-Channel housing and labour markets A: High levels of cross-Channel commuting 3

B: Modest growth in cross-Channel commuting 2

C: Cross-Channel commuting remains minimal 1

6.24 Expansion of Ashford A: Ashford develops employment based on locational advantage for European links 3

B: Ashford develops on basis of local enterprise and commuting 2

C: Ashford develops mainly as commuting centre for Greater London 1

6.25 Development at Ebbsfleet and Thames Gateway A: Develops significantly as European link into the Thames Gateway 3

B: Develops successfully as a growth pole for the Thames Gateway- limited European activity 1

C: Develops as simply a local centre with commuting out to London 2

6.26 A change in Kent’s position in the UK economy A: Kent develops economic activities using locational advantage in relation to Europe 3 B: Kent and Thames Gateway become economic growth areas within the SE Region 1 C: Kent economy dominated by commuting and local services 2

* Probabilities: High = 1, Moderate = 2, Low = 3

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The picture of the Tunnel and its future impact derived from Tables 26 and 27 is as follows. In the transport context we expect some technical and managerial integration of Channel Tunnel operations with rail operations in the UK and mainland Europe. Such integration will be encouraged by the implementation of the EU’s railway packages. We do not however believe that this will be underpinned by any decisive shift in policy towards rail transport. As regards cross-Channel ferry services, we expect there to be continuing price competition and cost-cutting and some operator changes, but a continuing high level of service. Similarly we do not expect there to be any major change in the position of Eurotunnel – expecting the banks to continue to finance it but on terms which restrict it from any major new initiatives or investments. Eurostar will, we expect, focus on the CTRL route St Pancras- Stratford- Ebbsfleet- Ashford and, at least in the medium term, seek to develop intermediate facilities at Ebbsfleet. In Europe it will focus, as at present, on the three major destinations (Brussels, Paris and Lille). All the surface operators will continue to face competition from vigorous low-cost airline operators, for at least part of the market. We see limited prospects of fully integrated through rail services despite the opportunities offered by St Pancras and CTRL. Finally, we expect the issue of road traffic congestion to pose a continuing problem for both the Channel Tunnel and other surface cross-Channel operators. Looking at the wider context we see a number of tendencies which will limit the role and impact of the Tunnel. We believe that cross-Channel traffic will grow slowly because of the increasing convergence of prices, the perceived need to continue a high level of precautions against illegal migration and terrorist activity. Some key figures anticipate a growth in cross-Channel commuting but there is little evidence for this optimism and it would require a very large increase from currently negligible levels to alter significantly the financial position of Eurostar. Increased traffic volumes will therefore be dependent upon major economic change in areas served by the Tunnel and CTRL: the only likely area of growth seems to us to be Ebbsfleet and the Thames Gateway which will become a major economic growth pole for South-East England but with only a subsidiary role in relation to Europe. We do not believe Ashford, Dover or Shepway will experience major economic growth as a result of the Channel Tunnel, independently of the planned growth area role for Ashford in terms of employment, housing and services.

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Annex 1: KIS Predictions for Construction Employment 1986 to 1993

1986 1987 1988 1989 1990 1991 1992 1993 Total Total TML 77 1,119 2,107 3,068 3,445 2,730 1,562 500 14,608

Total BR - 113 270 334 456 843 516 - 2,532

Total KENT 77 1,232 2,377 3,402 3,901 3,573 2,078 500 17,140 Annex 2: KIS Estimates of Employment Growth in Wholesaling and Road Haulage, 1986-96

Estimated

Employment Gain

Wholesaling

Kent Firms

Total increase 2,400

of which infrastructure related 400 Firms relocating in Kent from elsewhere in the South East Total increase 1,060

of which infrastructure related 660 - 1,060 Firms relocating in Kent from rest of UK

Total increase 450

of which infrastructure related 0

Road Haulage

Kent Firms

Total increase 800

of which infrastructure related 800 Firms relocating in Kent from elsewhere in the South East Total increase 350

of which infrastructure related 350 Firms relocating in Kent from rest of UK

Total increase 300

of which infrastructure related 300

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Annex 3: SIC 45- Construction Employment (1991 – 2001)

1991 1995 1998 2001 Ashford 986 1,101 1,678 2,344 Canterbury 2,415 3,211 2,235 2,363 Dartford 1,386 1,465 2,600 2,308 Dover 4,885 985 1,535 1,511 Gravesham 1,778 851 1,193 1,802 Maidstone 3,774 3,836 3,821 3,836 Medway Towns 2,443 2,083 2,990 3,958 Sevenoaks 1,849 1,788 2,198 3,030 Shepway 2,758 1,177 1,487 1,693 Swale 1,347 1,657 1,960 1,982 Thanet 1,665 935 2,715 1,925 Tonbridge and Malling 1,810 1,782 2,491 3,267 Tunbridge Wells 1,734 1,376 1,888 2,349

Kent 28,830 22,247 28,791 32,368 SE 120,923 101,971 144,375 153,752 Britain 1,003,553 901,104 1,148,508 1,148,507

Annex 4: Location of French Owned Companies and Employment in Kent by District (2003)

District No. of French Companies

% of Total French Companies

No. Kent Employees

% of Total Kent Employment

Ashford 11 18.33 251 3.75 Maidstone 3 5.00 97 1.45 Shepway 5 8.33 1523 22.73 Channel Corridor Total 19 31.67 1871 27.93 Dartford 5 8.33 90 1.34 Gravesham 1 1.67 250 3.73 Medway Towns 7 11.67 701 10.46 Swale 5 8.33 175 2.61 North Kent Total 18 30.00 1216 18.15 Canterbury 0 0.00 0 0.00 Dover 2 3.33 203 3.03 Thanet 0 0.00 0 0.00

East Kent Total 2 3.33 203 3.03 Sevenoaks 5 8.33 55 0.82 Tonbridge & Malling 12 20.00 1225 18.28 Tunbridge Wells 2 3.33 1809 27.00

West Kent Total 19 31.67 3089 46.10 Throughout Kent 2 3.33 321 4.79 Total 60 100.00 6700 100.00

* Source of Data: Locate in Kent

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Annex 5: French Firms in Kent by Sub-Region (2003) a. Number

Con

stru

ctio

n

Elec

tric

ity, G

as

and

Wat

er S

uppl

y

Fina

ncia

l In

term

edia

tion

Hot

els

and

Res

taur

ants

Man

ufac

turin

g

Oth

er C

omm

unity

, So

cial

and

Pe

rson

al S

ervi

ces

Rea

l Est

ate,

R

entin

g an

d B

usin

ess

Act

iviti

es

Tran

spor

t, St

orag

e &

Com

mun

icat

ion

Who

lesa

le a

nd

Ret

ail T

rade

Channel Corridor Total 1 1 2 6 2 6 East Kent Total 2 North Kent Total 2 1 5 2 2 7 West Kent Total 2 3 2 2 1 9 Throughout Kent 1 1 Totals 2 1 3 1 11 3 10 7 22

* Source of Data: Locate in Kent

b. Employment

Con

stru

ctio

n

Elec

tric

ity, G

as

and

Wat

er S

uppl

y

Fina

ncia

l In

term

edia

tion

Hot

els

and

Res

taur

ants

Man

ufac

turin

g

Oth

er C

omm

unity

, So

cial

and

Pe

rson

al S

ervi

ces

Rea

l Est

ate,

R

entin

g an

d B

usin

ess

Act

iviti

es

Tran

spor

t, St

orag

e &

Com

mun

icat

ion

Who

lesa

le a

nd

Ret

ail T

rade

Dis

tric

t Tot

als

Channel Corridor Total 35 84 3 22 242 1401 84 1871East Kent Total 203 203 North Kent Total 6 25 990 9 24 162 1216West Kent Total 1851 613 12 7 250 356 3089Throughout Kent 80 241 321 Totals 41 84 1854 25 1705 253 258 1878 602 6700* Source of Data: Locate in Kent

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Sources

Documents Consulted A Green Perspective: Eurotunnel and the Environment, The Channel Tunnel Group Limited, 1991 Ashford Borough Council Local Plan, Ashford Borough Council, 2000 Ashford’s Capacity: A Handbook for Change, Halcrow Group Limited, December 2001 Capital Flows Across an Internal EU Border Crossing: The Location and Recruitment Decisions of French Businesses in the English Country of Kent, Collier & Vickerman, 2001 Channel Tunnel Act, HMSO Publications, 1987 The Channel Tunnel and High Speed Rail Link: Progress and Impacts, Kent County Council, October 1990 The Channel Tunnel – A Progress Report, The Economist Intelligence Unit (by R W.Vickerman), 1995 Channel Tunnel Rail Link Act, HMSO Publications, 1996 The Channel Tunnel Rail Link Act: Report by the Comptroller and Auditor General, Department of the Environment, Transport and the Regions, March 2001 The Channel Tunnel Rail Link: Annual Environmental Report 2002, Rail Link Engineering and Union Railways The Channel Tunnel: The Economic and Regional Impact, The Economist Intelligence Unit (by Roger W.Vickerman and Anthony D.J.Flowerdew), January 1990 Cross Channel Tourism Study, Market Voice, November 2000 Dartford Housing Strategy Statement 2002 - 2005, Dartford Borough Council, July 2002 Domestic Rail Services on the CTRL in East Ken: The Economic Case, Steer Davies Gleave, August 2002 East Kent Hotel Investment Study: Draft Report, Kent County Council and East Kent Partners, July 2003 Environmental Report, Eurotunnel, 2002 Eurotunnel – A new dimension in European Rail Transport, Eurotunnel plc, 2004 First Report of the Channel Tunnel Impact Monitoring Group, Channel Tunnel Joint Consultative Committee, April 1989 Focus on Ports, Department for Transport, 2000 Edition Focus on Freight, Department for Transport, 2003 Edition Local Transport Plan for Kent 2001/02 to 2005/06, Kent County Council, July 2002 Kent and Medway Structure Plan (Deposit Plan), Kent County Council and Medway Council, September 2003

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Kent and Medway Structure Plan, Working Paper 2: Economy, Workforce and Employment Land, Kent County Council and Medway Council, September 2003 Kent and Medway Structure Plan, Working Paper 1: Trend and Strategy Based Population, Household and Dwellings Projections 2001-2021, Kent County Council and Medway Council, September 2003 Kent Impact Study Review, Kent County Council, 1991 Kent Impact Study, Kent County Council, Kent County Council, 1987 Kent Ports Strategy, MDS Transmodal, March 1994 Kent Tourism, Dr Cheryl Mvula, Tribal Voice Communications, March 2004 Kent Travel Report 2002, Kent County Council and Babtie, December 2003 Port of Dover 30 Year Master Plan, Dover Harbour Board (Prepared by Halcrow Group Limited), November 2003 Review of Regional Eurostar Services: Summary Report, Arthur D. Little Ltd for Department of the Environment, Transport and the Regions, February 2000 Sustainable Communities in the South East, Office of the Deputy Prime Minister, 2003 The Economic Impact of Tourism in Kent, Transmanche Tourism Programme(prepared by the South East England Tourist Board, October 2000 Travel Trends: A Report on the International Passenger Survey, International Passenger Survey, Office for National Statistics, 1997, 1998, 1999, 2000, 2001 and 2002 Editions

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Organisations Consulted Ashford Chamber Babtie Group Canterbury Christ Church University College Canterbury City Council CTRL Dartford Borough Council Department for Transport Dover Chamber of Commerce Dover District Council Eurolines (UK) Ltd Eurostar Group Limited EWS International GRANT Leisure Group Limited Job Centre Plus Kent County Council Kent Thameside Association Locate in Kent Medway Council North Kent Chamber of Commerce Office of National Statistics P&O Ferries Limited Pfizer Port of Dover Shepway District Council South East England Development Agency Strategic Rail Authority Thanet and East Kent Chamber