Horror as freight rates set to rise
by up to 600 per cent
But NorthLink say standardised rates will be fairer

Freight rates out of Orkney could rise by a staggering 600 per cent in extreme cases under ferry company NorthLink, it was claimed this week, leading to fears that the local businesses could be in jeopardy.

The company are due to take over ferry services to the Northern Isles from October next year and their commercial rates have sparked off serious concerns about the impact on the Orkney economy, which relies on transport links to the Scottish mainland.

One shocked local haulier said the rates would force him out of business, with his customers having no option but to move to Streamline or Pentland Ferries.

"Our customers are going to be charged six times more than before, in fact as much as ten times. We are going to lose overnight," he said. "There is no way our customers are going to pay this because they are going to get a better deal with Streamline. As far as I understand, they (NorthLink) have not got a clue what the rates were here when they tendered for this."

But NorthLink say the standardised rate, where everyone pays the same, is fair. They add that some customers have been paying historically low rates with current operators P&O Scottish Ferries, which are unsustainable.

The 600 per cent rise claimed this week is extreme and NorthLink say some people will pay less under the new rates. This is because current rates are complex and not everyone pays the same.

The Orkney services will see one way freight charges on the Pentland Firth route charged at £26 per metre for trailers and £23 per metre for motored units.

From Kirkwall to Aberdeen the rates will be £36 per metre for trailers and £33 per metre for motorised units.

The Shetland services will see trailers charged at £44 per metre and motored units at £42 per metre.

There are also concerns that NorthLink intend to charge for empty trailers that are returning after unloading their cargo.

Managing director of JBT transport, Mr Murray Prentice, said charges for a trailer from Stromness to Scrabster could go up by as much as 600 per cent.

He explained that the current cost of shipping a trailer southbound across the Pentland Firth was around £80.

But NorthLink's charge for a 13.6 metre trailer would come to £353.60 – a 340 per cent rise. After factoring in the extra costs of paying for empty trailers, Mr Prentice said the final percentage hike could be as much as 600 per cent.

"The whole market will be destabilised because there will be traffic that won't use that route," he said. "Fish feed and aggregates will go to Streamline or someone else who comes into the picture and sees there is an opening here."

But NorthLink chief executive Mr John Horton said some customers were paying three times as much as others and £80 for a trailer was not a sensible rate.

"Other people are paying up to the mid £20 per metre and you are comparing that with someone paying £80."

The Orkney-based haulier, who did not wish to be named, said: "They are going to build new ships, put on extra sailings and reduce the subsidy. You know as well as I do there is no such thing as a free dinner. Somebody has to pay.

"These rates could kill the salmon industry in Orkney and a lot of the businesses as well.

"It is going to be severe, not only to us but our customers. Even if they go to Streamline they are going to be paying more but not this much more.

"Over the past year since they have got the contract they say they have been discussing the situation with the hauliers. but they never approached me until I phoned them.

"They do not reflect what the rates are in the market place here. They should have known that before they tendered for the job. I feel that they tendered for this and did not have a clue what the competitive climate is here.

"There is strong competition with Streamline and that is what P&O found out. Streamline came in with a pallet rate to Glasgow which was half what P&O were charging at that time. It has taken us a long time for P&O to get it back by reacting to those rates."

NorthLink say they can run the service with less subsidies than P&O but the haulier countered: "That subsidy is there to subsidise the people of Orkney and Shetland Shetland and they have given it away and I also blame the council because they should have been onto it as well.

"At these rates they are going to lose the freight overnight and we are going to lose the work as well. The customers are going to move to Streamline. There are probably goods that would have to go by road too, but there is Andrew Banks who is going to do a full service next year."

Mr Prentice said he could foresee substantial increases in his charges all round.

"Some businesses will have substantial increases in their transport costs – some of them very substantial especially in Orkney," he said.

A statement from NorthLink said the freight transportation sector of the NorthLink business was not subsidised by the Scottish Executive grant and therefore the rates had to conform to straightforward commercial parameters.

They say they are providing a new electronic customer accessible reservation system which will give regular users an agreed capacity allocation on the vessel.

NorthLink chief executive Mr John Horton said: "We have sought to be open and transparent in our discussions with the hauliers and it is our intention that the commercial vehicle rates will be fair and equitable.

"All commercial vehicles will be charged by length and all customers will pay the same rate for the same transit.

"There has to be some differentiation to take account of the extra handling costs involved in working with trailers, with tractor units and refrigerated trailers. But we have sought to be even-handed in our approach."

He added: "Comparisons with the rates currently being levied on the routes are difficult to make because many of these rates have been negotiated confidentially by P&O Scottish Ferries over a period of many years with individual customers.

"Inevitably, the adjustment to a standard charge basis will see some customers paying more although on most products we don't expect that this will be more than about one penny per kilo delivered.

"It is important to understand too, that the rates which we are announcing today refer to 2003. Direct comparisons with rates currently charged by P&O Scottish Ferries cannot be made. The Competitions Act – fair and equitable treatment for all – has also played a significant part in our deliberations."

Mr Prentice agreed that the current rates were far more complicated.

"What has happened in the past with the history is you end up with a complicated matrix of rates," he said.

"At the end of the day it is the customer that pays it. If we did not pass it on we would be out of business. It is the producer at the end of the day that is going to take the increased costs an that could cause problems if they are on the brink."

The Orkney Brewery ships 20 tonnes of beer out of the county a week and owner Mr Roger White said any increase in charges would have an adverse effect.

"Freight charges are already 12 per cent of our costs which is extraordinarily high.

"It would be great for Streamline, and our friend at the 'Hope ({Pentland Ferries) would be able to do something. There is too much competition to do that. We would do Streamline and readjust. I am hoping that all the food producers get together and develop something with collective rates."

He added: "If this is true, the impact would be very very serious on a lot of us in Orkney. It would turn everything on its head."

Salmon company Aquascot ship large quantities of produce across the Firth. Their operations manager Mr Bruce Mainland said he found it difficult to believe in any 600 per cent rise.

"To me that sounds like scaremongering," he said. "There is something wrong when the Scottish Executive are spending £150 million on new boats and piers and we are going to end up with a 600 per cent rise in freight charges."

Orkney Islands Council vice-convener Councillor Jim Sinclair commented: "It does seem to be a staggering increase. A very very steep rise.

"It is almost an invite for someone to start up the Invergordon run again and certainly will help Andrew Banks when he starts again.

"NorthLink have to remember that there is competition on the routes.

He added: "It is almost a return to the bad old days prior to competition coming in."

myles.hodnett@orcadian.co.uk