Transport: competition in the cross channel market

When the Channel Tunnel opened in May 1994 bosses of many ferry companies were glum. But it was the backers of the channel tunnel who lost a fortune: according to The Economist (the source of the graph above), the train through the tunnel was meant to carry 28m passengers a year by 2010. Ferries were expected to lose foot passengers, cars and lorries. Like many predictions in business, this soon came to seem wrong; now it seems wrong only in the timing. Now it looks like competition in the market may be about to collapse, with ferries coming under increasing pressure.

The article explains that for a few years ferries held off the competition from the tunnel. Ships introduced weeklong shifts. Tickets were made cheaper and more intelligently priced, spreading demand throughout the day. Investment in bigger ships allowed more room for freight. Luck played a part: a fire in the tunnel in 2008 helped keep the ferry market buoyant for two years. But competition, both from the tunnel and from low-cost airlines, gradually chipped away at passenger numbers.

Although duty on alcohol remains low in France, sales to UK day trippers are smaller than they used to be. According to the Office for National Statistics the proportion of people drinking frequently dropped from 22% to 14% among men and from 13% to 9% among women between 2005 and 2013. And Britons who want cheap booze go to supermarkets. All of these things have dragged the ferries down. Between 2002 and 2013 the number of international short-sea passengers leaving Britain plummeted by 29%. Although the tunnel carries fewer people than it was supposed to, numbers are gradually growing. In 2012 more people travelled through the tunnel than on ferries for the first time.

From January next year ships will have to run on fuel with a lower sulphur content and will either have to burn more costly diesel fuel or install “scrubbers” to clean the exhaust gas, which can cost as much as £1.5m to £2m per ship. Ticket prices might go up. And if MyFerryLink, a ferry service run by Eurotunnel, the owner of the Channel Tunnel, is scrapped by the Competition and Markets Authority the market may shrink even more.

Ferries have come to rely on the freight market. Between 2001 and 2013 the number of road haulage vehicles going through Dover increased by 25%. But even this could be threatened: in April the Channel Tunnel announced reduced track access charges for rail freight, making it more attractive to hauliers. And even freight is not enough to sustain a declining industry, despite being more reliable than the tourist market. One lorry takes up the same space as a coach full of 52 people.