Overview
Prior to the introduction of the Road Equivalent Fares (RET) in October 2008, fares for commercial vehicles (CVs) were set on a route-specific basis. In October 2008 the RET pilot was introduced on routes serving the Western Isles Coll and Tiree where the fare was set around the equivalent cost of driving the same distance. This resulted in significant reductions in CV ferry fares.
In April 2012 RET fares for CVs were removed resulting in large annual increases in single fares, both in percentage terms (up to 50%) and absolute terms (up to £100).
The intention of the removal of CV RET fares was to return fares to their pre-RET level. Given, however, the scale and potential impacts of the increases, transitional arrangements were put in place to limit the increases and allow the full increase to be phased in over three years.
The purpose of this study is to consider the impact of the removal of RET fares in April 2012 on the economies of the Western Isles, Coll and Tiree.
Funding
Results
The introduction of RET for CVs made an important contribution to the initial equity objective of supporting, sustaining and developing the economies of the Western Isles, Coll and Tiree.
The introduction of RET had positive impacts for local businesses, including improved competitiveness, improved business performance and supporting local economic activity.
The removal of RET for CVs in April 2012 has had a significant negative impact on different types of hauliers. It has:
- had a negative effect on the volumes and margins of small hauliers, who play an important role in offering choice in the market;
- squeezed the margin of trader-hauliers who are key to the economies of small islands like Coll, Tiree and Barra;
- necessitated an increase in prices for network hauliers who require high volumes to ensure the sustainability of their businesses. In turn this will expose these firms to volume risk; and
- reduced the volume and economies of scale of full-service hauliers, thus increasing the long-run market rate for haulage.
The short six month period since the removal of RET has meant that it has not been possible to quantify all the potential impacts. Furthermore, other factors, such as the changing market structure and the general slowdown in economic activity, has meant that it has not been straightforward to isolate these effects from the removal of RET.