The Channel Tunnel and regional economic development

Journal of Transport Geography I994 2(3) 17X- I89

The Channel Tunnel and regional economic development

David M Dundon-Smith

Department of Geography, University of Salford, Manchester MS 4WT, UK

Richard A Gibb Department of Geographical Sciences, University of Plymouth, Drake Circus, Plymouth PI24 #AA, UK

It is widely argued that the regional economic benefits of the Channel Tunnel will be confined to south-east England. The current paper challenges this proposition, arguing instead that the opportunities created could be spread more equitably than previously predicted. Economic potential analysis, a policy evaluation and a questionnaire of business attitudes are used to examine the potential regional economic impacts of the Channel Tunnel. It is concluded that the quality of the rail network and, in particular, the beyond London international rail services are crucial to the regionalization of Channel Tunnel benefits.

Keywords: Channel Tunnel, international rail link, economic potential, regional impact. market solutions

The principal aim of the present paper is to investigate the potential regional economic impact of the Channel Tunnel. In sharp contrast with the conclusions reached by previous academic investiga- tions, it will be argued that the Channel Tunnel represents a significant opportunity to narrow regional economic divisions within the United King- dom. With a few notable exceptions (Chisholm, 1993; Smith and Gibb, 1993), it has been widely accepted that the Channel Tunnel will further advantage the South East as a result of its geographic proximity to the Continent, to the detriment of the more peripheral UK regions (Wise, 1965; Clark et al, 1969; Keeble et al, 1982a; Centre for Local Economic Strategies [CLES], 1989; Pieda, 1989a, 1989b). However, it is the authors’ opinion that these existing studies tend to underestimate the potential which the Channel Tunnel offers the UK as a whole.

Scope of analysis

Economic potential analysis (EPA) is employed to quantify the impact of the Channel Tunnel on UK regional accessibility to the Continent. The potential rnodel employed is essentially an update of an earlier version used by Keeble et nl(1982a). The findings of this earlier study, based on ‘shortest road distance’, support the general consensus that the South East will be the main beneficiary of a fixed link. However, Keeble and colleagues’ use of road distance between major cities in order to calibrate the distance/ transport component in the potential analysis may

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underestimate the potential impact of the Channel Tunnel on the more peripheral regions (Gibb et ul, 1992). The EPA presented in the present paper incorporates a distance component based on inter- regional rail freight journey times. A comparative analysis of the results derived from these two EPAs, and consequent implications for regional devclop- ment, will be presented.

At the beginning of the fixed link debate, the House of Lords (1987) recognized the influential role to be played by supporting railway infrastructure in determining the scale and scope of the Channel Tunnel’s long-term impact. British Government policy towards the Channel Tunnel has been strongly criticized for failing to provide an adequate supporting transport network and, more particularly, to ensure the provision of sufficient international rail services to and from the regions (North of England Regional Consortium [NOERC], 1988; Pieda, 1989a, 1989b; Town and Country Planning Associa- tion [TCPA], 1990; Smith and Gibb, 1993). Govern- ment policy could restrict severely the rcgionaliza- tion of benefits created by the Channel Tunnel. This paper will therefore examine the impact of the Government’s ‘market solutions’ strategy (Comfort. 1987) towards the Channel Tunnel and related transport infrastructure, and its conscyuences for regional economic development.

Finally, it is important to analyse the likely reactions of Britain’s business community. The long- term impact of the Channel Tunnel will be determined ultimately by how British companies react to

The Channel Tunnel and regional economic development: D M Dun&m-Smith and R A Gibb

the challenges created. Surprisingly, very little research has been published with regard to inter- regional studies of company perceptions of the Channel Tunnel - the exceptions being Eurotunnel and BR (1988) and Henley et al (1989). Thus, a brief review of the results from a questionnaire survey of 1500 large and/or exporting companies will highlight the main hopes and fears of British companies.

The current paper therefore examines the potential regional economic impact of the Channel Tunnel using three methods of analysis: first, a regional economic potential analysis of accessibility; second, a policy analysis of the British Government’s actions and decisions relating to the Channel Tunnel and supporting transport infrastructure; and third, a review of a questionnaire survey carried out to evaluate the attitudes of British business.

The principal aim of this paper is to provide a wide-ranging analysis of the potential regional economic impact of the Channel Tunnel. The fixed link has in the past been the focus of much attention, but few have attempted to draw together the above three methods of analysis. This broadly based critique of the regional economic implications of the Channel Tunnel could be criticized for being too wide-ranging. If, however, the result is more discus- sion on the opportunities and problems created by the Channel Tunnel, then this paper will have been successful. As more information becomes available concerning Channel Tunnel services, research can test more sharply the conclusions presented here and in earlier work.

Economic potential analysis

The potential model used here re-examines the regional implications of the Channel Tunnel and challenges the generally accepted perception of the South East gaining at the expense of the regions. Therefore, contrary to the study by Keeble et al (1982a), it is hypothesized that the Channel Tunnel has the potential to improve regional accessibility throughout the UK. However, before reasons can be advanced to support this rather optimistic hypothesis, it is first useful to review briefly the economic significance of the Channel Tunnel.

It has been argued that, as a result of reduced journey times, enhanced reliability and the through movement of rail wagons, the Channel Tunnel will improve significantly the competitiveness of al1 British companies. The Secretary of State for Trans- port announced during the franchise award to Eurotunnel that:

The link in operation will bring direct benefits these bcncfits can be cxpectcd to increase the level of UK’s trade with continental Europe and contribute to economic growth and employment throughout the UK. (Kay et ul. 1989. p. 75)

Kay ef al point out correctly that Channel crossings account for a small fraction of total company costs.

Hence, the impact of the Channel Tunnel on the level of UK trade to the Continent is not expected to be significant. Chisholm (1993) supports the conten- tion that the impact of the Channel Tunnel on the British economy will be small. Chisholm predicts that virtually all Channel Tunnel traffic will be captured from other modes of cross-Channel trans-

port, with minimal levels of new traffic being generated. By comparing the possibility of a net reduction in transfer costs with other impediments to trade, such as tariff barriers, Chisholm concludes that the Channel Tunnel is unlikely to have a dramatic or even measurable impact on regional development within Britain and mainland Europe (Chisholm, 1993). Put simply, a fixed link that is likely to have a marginal impact on overall transport costs, which in turn represent a marginal cost to industry, is in all likelihood going to have a limited impact on the economic well-being of the more peripheral regions (Gibb et al, 1992).

However, Vickerman (1989) and Holliday et al (1991) consider the possibility that transport costs are influential in helping to determine company profit margins. Although transport costs often represent less than 3-5s of company costs, and cross-Channel costs much less, cost savings could nevertheless be important, particularly if the Channel Tunnel offers improved service, quality and reliability. The former Chairman of the Confedera- tion of British Industry, John Banham, also points to the potential benefits which might accrue from the diversion of traffic away from existing ‘congested’ modes of transport, which is estimated to cost British industry &15 billion annually.

Most commentators agree that the long-term impact of the Channel Tunnel will be determined primarily by British companies realizing the anticip- ated savings on journey time and cost over existing modes of cross-Channel transport. As observed by Pieda (1989a, 1989b), this is dependent on companies sending freight via the rail network. European legislation or permitted daily driving hours will reduce considerably any time savings enjoyed by road hauliers using the Channel Tunnel. Thus, any benefits derived from Eurotunnel’s Shuttle service are likely to be extremely localized on both sides of the Channel. The economic impact of the Channel Tunnel is therefore more likely to be influenced by the degree to which companies use BR’s international rail freight services. Consequently, the EPA advanced in the present paper will focus on rail

journey times between UK and continental cities. More than 7.5% of UK-continental freight origin-

ates from, or is destined for, regions outside the South East, with up to 20% within a 64 km radius of Manchester (Gossop, 1987; BR, 1989; Pieda, 1989a, 1989b). In addition, rail freight, as compared with road haulage, is more competitive over distances in excess of 250/300 km (Pieda, 1989a, 1989b). Hence, it is assumed that the Channel Tunnel, in joining the

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The Channel Tunnel and regional economic development: D M Dundon-Smith and R A Gihh

UK and continental rail networks, will reduce the peripheral nature of some of Britain’s regions more distant from the European market.

It is only possible here to outline briefly the main methodological issues associated with the potential model. Emphasis will be placed on the results generated and their implications for British Govern- ment policy.

Economic potential: methodology

Economic potential is a measure of the nearness or accessibility of a given volume of economic activity to a particular point/region and can be interpreted as the volume of economic activity to which a region has access, after the cost/time of covering the distance to that activity has been accounted for (Clark et al, 1969; Rich, 1980; Keeble et al, 1982b). EPA will be used to calculate the relative accessibility of UK regions to the Continent both before and after the cpening of the Channel Tunnel.

The standard formula for regional economic potential analysis, as given by Rich (1980), is:

Pi = 5 MjlDij” j=l

Where Pi is the economic potential for region i; Mj is the measure of the volume of economic activity in region j; Dij is the measure of the journey distance/ time or transport cost between region i and region j; and a is the distance exponent. The potential value for region i is calculated by summing for all IZ regions and is expressed in units of economic activity per unit of distance/time or transport cost.

The potential model used here incorporated 90 Eurostat level II regions within seven European Community (EC) countries; namely, the UK, Eire, France, (West) Germany’ and the Benelux states. The intention was to focus on those countries most likely to be affected by the Channel Tunnel. Although it is recognized that economic considerations could justify extending the area of study to all 12 EC member states, as well as European Free Trade Association states and certain East European countries, those countries selected for study account for approximately 80% of the UK’s trade with the EC and a large proportion of foreign direct investment. Furthermore, the results show that the more peripheral continental regions were only affected marginally.

The mass Mj term was measured by Eurostat 198g2 gross domestic product (GDP) values (Statist- ical Office of the European Communities [SOEC], 1990). The distance Dij term represents inter- regional rail freight journey times. A distance matrix was compiled based on Thomas Cook’s European Rail Timetable (1989a) and Rail Map of Europe (1989b), and converted into journey times. Following

’ No consistent data sets wcrc available at the time of study for the former East Germany.

2 The data were the most up to date at the time of analysis.

discussions with BR, three simulations were set up based on average running speeds of 30, 40 and 7.5 mph. The first two represent the average running speed of existing continental and UK rail freight services, respectively, while simulation 3 (75 mph) incorporates the proposed running speed of post- tunnel international freight trains (BR, 1989).

Without any theoretical justification for one particular distance exponent value, and following sensitivity testing, unity value was incorporated into the model. The distance exponent is an expression of the importance of distance to the volume of economic activity. Empirical research has shown that distance exponents have tended to fall as transportation systems improve (Rich, 1980; Keeble et al 1982a). However, it is important to stress that there is no universally accepted exponent, although values between 1 .O and 2.5 are commonly used. Therefore, the selection of a suitable distance exponent does encounter particular problems. Keeble et al (1982a) decided that without any clear justification for one particular distance exponent value, the most logical basis for potential analysis is unity. Since no previous research could be drawn on and after sensitivity testing between values of 0.5 and 1.7, the present EPA employed a distance component of 1 .O, which had the added advantage of allowing direct compari- son with Keeble’s 1982 study. Finally, the ‘self- potential’ of a region was measured by Keeble and colleagues’ (I 982a) amended formula:

D,, = ‘/‘q-\/ area of region

3.142

Two scenarios then had to be established: the ‘Before’ (ferry) and ‘After’ (post-tunnel). The ‘Before’ scenario, based on discussions with BR (Jenkins, 1990), incorporated ferry crossing times as well as the time required for transshipment (6 hrs) and organizational purposes (l/2 hr). The .After’ scenario simulated the post-tunnel European railway network, with all freight diverted through the tunnel. The Channel Tunnel will reduce considerably the non-transit times of present rail freight opera- tions, with only two hours required for freight handling at the Channel Tunnel Freight Interchange (BR, 1989) and half an hour for locomotive changes at either end of the tunnel (Jenkins, 1990). It would have been impracticable to attempt to incorporate the frequency of proposed international freight services to and from all 90 regions and within all seven EC countries. BR (1989) is confident that its planned level of service will meet the needs of all regional manufacturers. If BR is to be believed. service frequency should not seriously influence the ‘accessibility’ of a region, at least relative to others. The possibility of missed rail freight services from regional terminals was not incorporated into the potential model because, while this could affect significantly the relative accessibility of individual companies, the impact on a region would be neglig-

Journal of Transport Geography 1904 Volwne 2 Ntrrnher 3 180

The Channel Tunnel and regional economic development: D M Dundon-Smith and R A Gibb

Table 1. The Channel Tunnel and regional accessibility

Level II regions most affected

Increase in own calculated potential

(mio WAS per km)

Improvement relative to EUR 9 maximum (%)

South East West Midlands South West Nerd-Pas de Calais Wales East Midlands Hainaut West Vlaanderen Picardic Ireland Oost Vlaanderen East Anglia Namur Champagne-Ardennes North West Brabant

10.05 6.67 6.56 6.47 6.02 5.93 5.02 4.12 3.75 3.61 3.34 2.80 2.57 2.34 2.07 2.04

497.8 241.8 203.2 343.3 166.1 200.2 294.8 193.1 156.2 60.8

180.6 80.7

110.9 93.1 82.6

129.2

4.98 2.39 2.00 3.38 1.63 1.96 2.86 1.85 1.48 0.57 1.70 0.74 1.00 0.83 0.72 1.13

Source: Keeble rt al (lY82a)

ible. In both the ‘Before’ and ‘After’ scenarios, the quickest route between each of the 90 regional nodes was chosen. A ‘delay factor’ was incorporated into the ‘Before’ scenario to account for the likelihood of delays associated with ferry services. However, neither a six or 18-hour delay affected the relative accessibility of UK regions to the Continent. The next section therefore compares and contrasts the results for an efficient ferry service in the ‘Before’ situation with a post-tunnel international rail freight ‘After’ service.

Analysis of results

According to the study by Keeble et al (1982a) based on road distance, the results of which are summarized in Table I, the increased accessibility benefits associated with the Channel Tunnel will produce a modest increase in regional economic potential levels for most regions of the EC. However, in terms of percentge increase, the South East records the highest gross benefit with a 10% increase in economic potential. Outside the South East there are fairly widespread and modest increases in potential with the highest gains going to those areas in the immediate vicinity of the link. Thus, according to Keeble et al’s analysis, the fixed link will dispro- portionately benefit London and the South East. Since the bulk of freight traffic likely to be carried through the tunnel will be road traffic using Euro- tunnel’s shuttle trains, Keeble et al’s analysis adds weight to the argument that Channel Tunnel benefits will be confined to south-east England.

Analysis of the EPA results generated by the present study will focus on simulations 1 (30 mph) and 3 (75 mph) since the non-parametric Mann-

Whitney statistical test showed that the results for simulation 2 (40 mph) were not significantly different from the findings of simulation 1. Before examining the results, it is worthwhile re-emphasizing that the simulation speeds were not selected at random but are based on discussions with BR (Jenkins, 1990).

The potential effect of the Channel Tunnel on the relative accessibility of UK regions to the Continent is shown in Figure 1. The existing rail-ferry service for freight exports to the Continent is simulated in the ‘Before’ scenario (ie simulation 1: 30 mph and no delays), while the ‘After’ scenario represents post- tunnel international rail freight services (ie simulation 3: 75 mph). As can be seen from Figure I, the relative accessibility of most UK regions is significantly improved. However, the importance of the Channel Tunnel is exaggerated. Although the in- corporation of two different simulation speeds in the ‘Before’ and ‘After’ scenarios represents existing and proposed post-tunnel rail freight services, one would expect regional accessibility to increase as the average running speed of freight trains increased. Therefore to determine the ‘real’ impact of the Channel Tunnel, it is necessary to examine percent- age changes in relative accessibility for simulations 1 and 3.

The results for simulation 1 are set out in Table 2. It can be seen that the increase in relative potential for regions outside the South East is quite uniform. The South East, however, records more than twice the increase in relative potential of that experienced by other British regions. Northern Ireland and Eire are the only two regions that record higher percent- age increases than the South East, which is repeated in simulations 2 and 3. The ‘Barrier Effect’ of a sea

Journal of Transport Geography I994 Volume 2 Number 3 181

The Chunnel Tunnel und regionul economic development: D M Dundon-Smith and K A Gihh

Figure 1 UK regional accessibility: (a) before and (b)

after the opening of the Channel Tunnel

Note: Potential vducs dative to the maximum (Ilc dc France).

crossing created by the English Channel is further compounded for these two regions by the additional barrier of the Irish Sea. The Channel Tunnel, by removing the barrier of the English Channel, has a considerable effect on the relative accessibility of Northern Ireland and Eire, and tends to support the concept of an ‘Irish Landbridge’ as advanced by Pieda (1989a).

The results for simulation 1 show the South East recording significantly higher increases in relative potential than other British regions. It is therefore not possible to accept the hypothesis developed in

the current paper that the more peripheral regions of the UK will experience gains in relative accessibility similar to those in the South East. Simulation 3 incorporates the proposed running speed of post- tunnel international freight trains (75 mph).

It is apparent from Table 3 that the South East no longer experiences considerably higher incrcascs in relative potential compared with the rest of Britain. Scotland. the North and East Anglia record increases in relative potential to within S”/o of the South East, with Scotland only 0.2% below the respective value for the South East.

The results for simulation 3 therefore support the present paper’s hypothesis and contradict the earlier findings of Keeble et al (1982a). Furthermore, it is likely that if a ‘narrower’ data set, such as regional unitized freight exports (by value), were used to measure the mass term, the results would have been even more positive for the peripheral UK regions. Eurostat level II GDP data (SOEC, 1990) ovcr- emphasize the dominance of the South East in the UK economy, particularly in terms of regional freight exports to the Continent.

The results generated by the potential model. particularly with regard to simulation 3, have pro- duced empirical evidence which counters the accepted wisdom that the South East has to be the main beneficiary of Channel Tunnel services. The EPA incorporating a distance component based on rail journey times, reflecting the through-rail potential of the Channel Tunnel, provides evidence to support the argument that Channel Tunnel benefits can be spread more equitably than previously predicted. This argument is supported by BR (1989), who estimate that international through rail freight traffic will triple to over six million tonnes per annum within a year of the tunnel opening, with over 70% of traffic originating in or destined for areas beyond London. These forecasts are based on an analysis of industrial structure in the regions and estimates of export traffic diversion potential. The EPAs undertaken for the present paper and the Keeble et al study serve to illustrate both the difficulty of predict- ing the impact of a development as large and as innovative as the Channel Tunnel on a phenomenon as fluid and diverse as regional development, and the potential of the Channel Tunnel to support and reject the widely held belief that regional economic benefits will be confined to south-east England. The central hypothesis of the current paper, that the Channel Tunnel has the potential to benefit the more peripheral regions of the UK, is supported by the EPA based on rail freight journey times. However. whether or not increases in relative accessibility for

the more peripheral regions are to be realized will depend on the quality of the rail network. The British Government has favoured a non-interven- tionist approach towards the Channel Tunnel and related transport infrastructure. The next section will therefore examine the effectiveness of the

The Channel Tunnel and regional economic development: D M Dundon-Smith and R A Gibb

Table 2 Absolute and relative potential values for the UK and Eire: simulation I

Level II regions: UK and Eire

mil ECUs/hour

Increase in own potential’

(%)

Percent increase relative to Ile de Franceb

Scotland 37 850 10.6 10.0 North 27 850 22.2 12.5 Yorks and Humb‘ 57 861 20.6 IO.‘) North West X7 251 22.0 12.2 East Midlands 52 474 20.3 10.6 West Midlands 74 226 22.4 12.6 Wales 30 840 21.7 11.9 South West 67 322 23.6 13.7 East Anglia 20 395 18.5 9.0 South East 480 983 34.8 24.0 N. Ireland I7 118 37.0 26.0 Eire 53 418 52.8 40.5

Notes: “The wide disparity in own potential vlues represents an cxaggcratcd ‘North-South divide’. The distance term acts to pcriphcralize further regions to the north and west of London since the vast majority of domestic British/Irish trade is transported by road. “Ile de France is the maximum. ‘Yorkshire and Humberside is the Standard Economic Region, not BR’s planning region which includes Lincolnshire.

Table 3 Absolute and relative potential values for the UK and Eire: simulation 3

Level II regions: UK and Eire

mil ECUs/hour

Increase in own potential

(%)

Percent increase relative to Ile de France

Scotland North Yorks and Humb” North West East Midlands West Midlands Wales South West East Anglia South East N. Ireland Eire

I65 2h4 104 Oh5 213 74s 283 814 164 806 221 I99

96 571 191 614 78 I21

I 165 1x9 61 3x1

176 555

48.6 30.7 46.6 29.0 30.8 23.Y 36.X 20.3 33.1 17.1 34.7 18.4 36.2 19.x 35.6 19.2 42.6 25.4 48.8 30.0 x0.5 58.8

Ill.7 86.2

“Yorkshire and Humberside is the Standard Economic Region, not BR’s planning region which includes Lincolnshire

Government’s policy and its likely impact on the regions to the north and west of London.

Free market philosophy

The aim of this section is to outline briefly the consequences for the regions of the British Govern- ment’s commitment to promote private sector funding for tunnel-related transport infrastructure. It does not attempt to provide a definitive study of the vacillations of Government policy. Focus is concentrated upon the regional consequences of the British Government’s philosophical and political commitment to market-led solutions. Although the Government actively promoted the regional dis- persion of construction contracts throughout the

UK, no national strategy has been implemented to enhance the long-term benefits of the Channel Tunnel. A political philosophy and planning environment centred on the enterprise culture has meant that the provision of supporting transport infrastructure and services has been left to the private sector. The series of delays associated with the International Rail Link (IRL) between London and the Channel Tunnel portal, as the private sector failed to support fully any one of the proposed alternatives, underlines the Government’s commitment to market-led solutions (Gibb and Smith, 1991; also Kilvington and Cross, 1986; Knowles, 1989; White and Turner, 1991). In the belief that competition would lead to better services at reduced cost to both taxpayer and user, free-market principles were

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The Chunnel Tunnel und regional economic development: D M Dundon-Smith and R A Gibb

applied to public transport with the deregulation of express coach services in 1980 and local bus services in 1985 (Gibb and Essex, 1994). Free-market ideology is now being applied to the future ownership and organization of the rail network, with a gradual programme of privatization and ‘commercialization’. The uncertainty now surrounding the railways, particularly with regard to international passenger and freight services, could act to undermine any potential offered by the Channel Tunnel. The core idea of rail privatization is to attract private operators to take out franchises, either with a subsidy on unprofitable lines or by paying a fee on the more profitable ones (Gibb and Essex, 1994). Inter- national services will operate through a franchise system. However, Section 42 of the 1987 Channel Tunnel Act prohibits potential operators from gaining access to subsidies for international services. Rail privatization will therefore further reinforce the free market as the organizing principle determining the appropriate level of service provision. The uncertainty surrounding rail privatization has been compounded by the lack of consultation on the regional economic impacts of the Channel Tunnel.

Limited consultation

Three main policy forums can be associated with the regional economic implications of the Channel Tunnel: the ‘Hybrid’ Channel Tunnel Bill, the Section 40 process of regional consultations and the Kent Impact Study. It is only possible here to provide a brief insight into the limited scope of these policy forums. None the less, it will become apparent that regional considerations were never accorded a high priority by the British Government.

The Government indicated in the official ‘Invita- tion to Promoters’ (Department of Transport, 1985) that it would promote the Channel Tunnel by way of a Hybrid Bill. The usual platform for consultation for most major transport infrastructure projects, a public inquiry, was avoided. Furthermore, it was made clear that the parliamentary process was not expected to take longer than 18 months (Department of Transport, 1986). A Hybrid Bill is a special measure used when a matter of public policy directly affects private interests. As far as the Channel Tunnel was concerned, petitions could only be heard concerning specific details of the scheme. The principle of whether or not the Channel Tunnel should be built was regarded as a matter for the Government and Parliament to decide. However, the House of Lords Select Committee on Transport widened its remit to hear petitions lodged by local authorities and associations from Greater Manchester, Bradford, Yorkshire and Humberside and Glasgow, concerning the regional economic implications of the Channel Tunnel. The Select Committee concluded that:

The key to spreading the benefits which could flow from the project mostly lit in the hands of British

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Rail, at present totally dependent on Government for its resources. (House of Lords, 1987. p. 4)

The government agreed to an amendment of the Channel Tunnel Bill (Section 40), with the stated aim of ensuring that BR would serve adequately regions to the north and west of London.

The Section 40 consultation process was the principal mechanism used by BR to address the needs of all UK regions (BR, 1989; Knowles et al, 1989). However, Section 42 of the Channel Tunnel Act - ‘No Government grants to Railway Board in respect of international railway services’ - combined with the Government’s policy of reducing the public subsidy element in BR’s external financing limit, effectively prevented regional demands for improved services being satisfied.

Although Section 40 is regarded as a success in terms of identifying regional aspirations (Farrington et al, 1990), no strategic forward planning emerged from the regional consultations. The mismatch between regional aspirations for improved services and the tight commercial practices within which BR has to operate were never likely to be resolved by Section 40. Thus, the outcome of the regional consultations has not been to allay fears that the potential benefits created by the Channel Tunnel will be confined to the South East.

The one exception to the absence of strategic planning in the UK was the Kent Joint Consultative Committee (KJCC), set up in March 1986, under the chairmanship of the Minister of State at the Depart- ment of Transport. The Government could not ignore the unique circumstances faced by Kent. in terms of the economic, social, environmental and political impact of the Channel Tunnel and related transport infrastructure. In order to examine in detail the economic and development implications of the Channel Tunnel and supporting infrastructure in Kent, the KJCC established the Kent Impact Study (KIS) in April 1986. The KIS concluded that specific implementational measures would be necessary in order to realize the potential benefits for Kent of the Channel Tunnel. Strategic planning policies were therefore proposed for planning, transport and labour markets. The KJCC was, however, consultative in nature with no executive powers to enforce recommendations. The KJCC set up a monitoring group in 1988 to report regularly on the achievements of the strategy. In 1991, the Joint Committee commissioned a review of the strategy which concluded that it had got off to a good start in the first two years of its existence (1987-89) but quickly thereafter lost momentum. The KIS was the sole attempt by government, being part of the KJCC, to examine the relationship between the Channel Tunnel and supporting infrastructure and development policy. The Government was a reluctant partner in the study, with its support being attributed to political expediency.

Journal o,f Transport Geography 1994 Volume 2 Number 3

The Channel Tunnel and regional economic development: D M Dundon-Smith and R A Gihh

A missed opportunity?

The success of the present Channel Tunnel project owes much to the Government’s early support and, in particular, to the influential role played by the then Prime Minister, Margaret Thatcher. The Government was confident that the Channel Tunnel would be ‘good’ for the UK as a whole (Comfort, 1987). However, this belief was not based on conclusions drawn from national and/or regional impact studies. Regional interest groups fear that government inaction will prevent any opportunities created by the Channel Tunnel being spread evenly across the UK (Campaign for the North, 1981; NOERC, 1988; CLES, 1989; South East Economic Development Strategy, 1989). As recognized by the House of Lords (1987), the quality of the rail network will be critical to the regionalization of benefits from the Channel Tunnel. The results of the potential model also show that speed (journey time) will be a crucial factor in determining the regional distribution of tunnel-related benefits.

As became evident in the Section 40 consultation process, the IRL is regarded by all regions throughout the UK as an important component of an efficient post-tunnel rail network. Although Union Railways has published the final route for the high- speed rail link, terminating at London St Pancras, it is still subject to parliamentary approval. It is therefore unlikely that a high-speed rail link between London and the Channel Tunnel portal will come into operation before 2002. The postponement of the IRL was primarily a consequence of the Govern- ment’s initial refusal to commit public sector funds to the project.

BR’s revised pattern of international passenger and freight services also fails to satisfy the regions (see Figures 2 and 3). As can be seen from Figure 2, the West Country and Wales, as well as the Manchester to Glasgow stretch of the West Coast Main Line, will be served by a night-time train only. In contrast with a typical summer service of 1.5 passenger trains per day between London-Paris and London-Brussels, beyond London services will consist of two daily return services to the same two continental cities, operating on both the East Coast Main Line to Edinburgh and the West Coast Main Line to Manchester. BR has also revised its original proposal for a system of 12 regional freight terminals to serve the main industrial and population centres of the UK (Figure 3). Only nine are now envisaged, with the East Midlands, South Midlands and Avon terminals no longer regarded as viable (Gibb et al, 1992). However, BR’s (1989) freight forecasts have been criticized as being too conservative, and thus its proposed service levels as inadequate (Kent County Council, 1989; Pieda, 1989a, 1989b). Railfreight Distribution (1993) have revised these freight forecasts downward, as a result of the 1990s economic recession and lack of investment in regional freight

==Q== Day Serwce

-01 N,ght Service

- Eurotunnel

Figure 2 Proposed international rail passenger services

(1993)

terminals, anticipating 6.5 million tonnes of traffic per year shortly after the tunnel’s opening.

More fundamental is the Government’s failure to develop a coherent and coordinated national strategy for the Channel Tunnel and related infrastructure (Harman, 1989; Simmons, 1989; TCPA, 1990). The Association of Metropolitan Authorities’ (1989) policy statement - Getting the Best from the Channel Tunnel: A Local Government Initiative - outlines the conflicting policy objectives of central and local government. The Government’s obvious lack of a strategy to maximize the opportunities created by the Channel Tunnel and minimize the ensuing adverse effects is likely to be further compounded by their planned commercialization of the railways. The gradual franchising of rail services will create much uncertainty and could further undermine BR’s ability to attract freight onto the rail network.

In Britain, the Channel Tunnel was, in policy terms, perceived to be a discrete project linking the United Kingdom to continental Europe via the existing rail network (Gibb and Knowles, 1994). The British Government’s commitment to a neo-liberal political philosophy which advocates minimum state interference and market-led solutions has reduced the influence of strategic planning to a minimum.

The Chunnel Tunnel und regional economic development: D M Dundon-Smith and R A Gihh

\

0 b”z ,

0 miles 100

Figure 3 Proposed international rail freight services (1993)

Those institutions and bodies charged with the responsibility for planning and the environment were largely removed from the decision-making process. As Simmons (1991, p. 107) notes, in the United Kingdom:

there is little understanding of the way this transport infrastructure controls location of future development and the cxtcnt to which it can redefine the comparative geography of economic activity on either side of the Channel.

As already outlined, the aim of this section is to examine the consequences for the regions of the British Government’s commitment to market-led solutions. The EPA analysis based on a distance component calibrated according to freight journey times indicates that the Channel Tunnel has the potential to benefit regions to the north and west of London. However, the British Government’s policy of promoting private-sector funding has failed to generate investment in supporting infrastructure from either the public or private sectors. The absence of strategic planning and meaningful regional consultation has resulted in the regional benefits of the Channel Tunnel being threatened as a result of policies based on market-led solutions.

186

Company perceptions: no regional bias?

This section will outline the principal results of a questionnaire survey on company attitudes towards the Channel Tunnel. If, as shown in the EPA. potential gains in regional accessibility are to be realized, companies have to react positively to the opportunities created by the Channel Tunnel. Analysis of the questionnaire results will highlight company perceptions of the Channel Tunnel, as well as their plans to use it. However, before proceeding to analyse the results of the present questionnaire survey, it is useful first to discuss briefly the comparative findings of two earlier surveys carried out by Eurotunnel and BR (1988), and Henley et ul ( 1989).

Eurotunnel and BR commissioned a survey during 1987 which targeted companies outside the South East. The main findings support the views held by the British Government and Eurotunnel that the Channel Tunnel will augment the perceived growth prospects for UK exports to the Continent, as well as improve industrial efficiency and commercial performance. The Channel Tunnel is considered unlikely to attract investment away from peripheral UK regions. Although the quality of transport infrastructure is recognized as an important component in any locational decision, other factors such as ‘opportunities for expansion, land and property costs and availability of skills’ are believed to favour regions to the north and west of London. This conclusion is supported by the findings of the survey carried out by Henley et ul (1989).

Henley et al (1989) argue that peripheral UK regions have ‘no need to fear a great exodus’ of firms to the South East. Based on data from the 1987 KIS, Henley et al show that labour market considerations are of prime importance in locational decisions. Only 13.2% of manufacturing companies located outside Kent state that ‘proximity to ports’ is important. The above result is not altogether surprising considering that less than 1% of the companies surveyed (none in Kent) had more than 50% of their sales in Europe. In fact only 19% of Kent establishments have any sales at all on the Continent. Caution must therefore be used when interpreting these findings since the strong domestic orientation of the companies surveyed may underestimate the potential significance of the Channel Tunnel. None the less, their main finding that the Channel Tunnel will not encourage a mass reloca- tion of industry to the South East is reflected in the present study.

The current survey was undertaken during May and June 1991, with questionnaires distributed to over 1500 companies - 1002 from the South East and 517 from the South West. A response rate of approximately 2.5% was achieved for both regions, with more than 370 questionnaires completed and returned. Large exporting companies or companies

with an annual turnover in excess of f20 million’ within the manufacturing and distribution sectors were targeted. The aim was to survey companies most likely to be affected by the Channel Tunnel. This short section of the present paper outlines briefly some of the principal results of this questionnaire of relevance to the current study.

The results revealed a surprisingly high degree of similarity in company perceptions and plans between firms in the South East and South West. The widely expected South East bias of the Channel Tunnel is not reflected in the results. Companies in the South West tend to be as optimistic as their counterparts in the South East, with 25% and 30% respectively anticipating increased accessibility to the Continent for their exports. A similar proportion of companies in the two regions expect increased competition from continental producers in the UK market as a result of the Channel Tunnel, 24% and 22% in the South East and South West respectively. The Euro- tunnel and BR (1988) study failed to evaluate the ‘double-edged’ nature of competition arising from the Channel Tunnel.

The South West, and in particular the far South West (Devon and Cornwall), is in terms of distance and transport networks one of the UK’s regions most isolated from the tunnel. Hence, company perceptions within the South West may be similar and of relevance to other peripheral UK regions. Furthermore. fears that the Channel Tunnel will encourage a regional drift of industry to the South East are not substantiated by the results. No companies in the South West stated an intention to relocate as a resuft of the Channel Tunnel. These results add further weight to the findings of the potential model, since it shows that companies outside the South East expect to benefit from a cross-Channel fixed link to the same degree as those companies in close proximity to the Channel Tunnel portal.

In terms of company plans to use the Channel Tunnel, only 19% of companies in both regions anticipate using international through trains or the Eurotunnel Shuttle service for more than 20% of their exports. However, a further 22% and 15% of companies in the South East and South West, respectively, are uncertain. Eurotunnel and BR (1988) show that a reduction in delivery times is regarded by 67% of exporting companies to be an important potential attribute of the Channel Tunnel. In addition, 57% state that they would consider transferring at feast some road haulage to international rail freight services. Nevertheless, if company plans do remain static, the long-term impact of the Channel Tunnel is likely to be marginal. The vast majority of companies in both

.’ This was later revised to an annual turnover of fS million for the South West to allow a sufficient number of companies to be surveyed.

Journal of Transport Geography I994 Volume 2 Number 3

regions have no plans, at present, to use Channel Tunnel services. Therefore, potential gains in regional accessibility to the Continent, as shown by EPA, may not be realized. However, company plans to use the Channel Tunnel are unlikely to remain constant, particularly as more information becomes available. Strategies employed by the Government and BR could therefore play a critical role. The questionnaire survey undertaken for the present study revealed important similarities in company ~effct~un~s towards the Channel Tunnel in the South East and South West. Company perceptions of the overall regional economic impact of the Channel Tunnel, however, differ significantly between these two regions. While nearly two-thirds of companies in the South East anticipate a beneficial impact, companies in the South West are more likely to expect a neutral (34%) or negative (20%) effect. The short-term construction impact of the Channel Tunnel partly explains this difference, but the widely held perception of the South East as the main beneficiary is also likely to account for the contrast- ing levels of optimism.

Conclusion

This paper provides evidence to support the hypothesis that opportunities created by the Channel Tunnel do not necessarily have to be confined to south-east England. The results generated by the potential model show certain peripheral UK regions experiencing gains in relative accessibility similar to the South East. The Channel Tunnel has the potential to improve signifi~antfy the accessibility of Britain’s more peripheral regions to European economic activity. However, the quality of the rail network, and, in particular, the beyond London international rail services, are crucial to the successful regionalization of Channel Tunnel benefits. British government policy has thus far failed to ensure that the more peripheral UK regions are served adequately by international passenger and freight trains. The limitations imposed by the 1987 Channel Tunnel Act and the strict financial condi- tions under which BR has to operate have restricted the levels and quality of service being offered to the regions. Paradoxically, then, the Government’s policy on Channel Tunnel related transport infrastructure, as opposed to the Channel Tunnel itself, could be the determining factor leading to an even greater concentration of economic activity in the South East.

However, the questionnaire survey revealed that the vast majority of companies do not plan to use the Channel Tunnel. This raises a number of important questions: has the economic significance of the Channel Tunnel been overstated? Alternatively, is the apparent lack of ‘interest’ by companies a reflection of failed government policy? If, for any reason, British companies do not realize the advant-

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Thr Channel Tunnel und regional economic development: D M Dundon-Smith and R A Gihh

ages offered by the Channel Tunnel. the ‘double- edged sword’ of improved accessibility could become focused on domestic markets within the UK. While British companies may be prevented from exploiting the opportunities created by the Channel Tunnel, the same cannot be said of their continental counterparts. The Nord-Pas de Calais Regional Council is actively promoting the region as a ‘gateway’ to Europe, including the UK (Conseil RCgional Nord- Pas de Calais, 1991). A substantial investment programme has been implemented to persuade companies to locate within the region, with increased accessibility to the UK and other European markets believed to be the largest incentive. The dynamic impact of the Channel Tunnel should not therefore be underestimated.

As a result of the British Government’s commitment to free enterprise, with priority being attached to deregulation, competition, privatization and commercialization, British Rail appears unable to provide the regions with an international service capable of maximizing the opportunities offered by the Channel Tunnel. The British Government’s commitment to market-led solutions is likely therefore to result in a missed opportunity to help revitalize the economic well-being of the regions and may peripheralize further British manufacturers from the continental market-place.

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