According to the Norton Rose "The Way Ahead" Transport survey - Where are you now?
A global survey of 1,000 plus respondents across aviation, rail and shipping
- London leads as the financial centre considered best able to meet the financing needs of the transport industry, followed by New York and Singapore.
- Increased financial constraint is highlighted as one of the most significant changes to respondents' businesses between 2010 and 2012.
- 60% have sought to change their market position or geographical focus since 2010.
- Demand for infrastructure investment is growing - 80% deem government support for the provision of infrastructure "essential".
- However, just 35% believe that government support will be sufficient over the next five years.
- 22% intend to draw on structured finance and 18% on private equity for the first time.
- Fuel cost remains the industry's biggest concern with more efficient fuel consumption deemed the most important development focus for the industry.
In an increasingly constrained financial market, London is the financial centre best able to meet the funding needs of the transport industry, according to international legal practice Norton Rose's "The Way Ahead" Transport survey - Where are you now? Almost two-fifths (37 per cent) of respondents from the global aviation, rail and shipping sectors ranked London as the key financial centre for transport, followed by New York (14 per cent) and Singapore (7 per cent).
The extent of price, cost and funding pressures on the transport industry are clear, with 40 per cent of respondents citing increased financial constraint as one of the most significant changes to their business between 2010 and 2012.
The majority of respondents also report making changes to their strategy in response to the more challenging business environment. Two-thirds of respondents report that they have sought to change their market position during this period, in terms of the market segment in which they operate, the range of products and services they offer or their geographical focus, with the aviation sector most likely to have sought to change their market position.
While the survey indicates that the sectors surveyed are adopting new strategies in the wake of the global financial crisis, demand for government investment in infrastructure is growing. Eighty per cent believe government support for the provision of infrastructure such as increased airport and rail capacity and better road and rail links to ports is "essential" and 70 per cent believe that infrastructure investment is the most helpful form of government support for their industry, up from 39 per cent last year.
Despite this, just 35 per cent believe that government support will be sufficient over the next five years, with respondents based in the Middle East most optimistic that their infrastructure needs will be met and respondents based in Africa most pessimistic.
The transport industry is continuing to explore alternative sources of funding, particularly the shipping sector, where respondents are most likely to report increased financial constraint. Almost a quarter (22 per cent) of all respondents are using or considering using structured finance for the first time, especially in the shipping sector (26 per cent) and the aviation sector (25 per cent). Almost a fifth (18 per cent) are using or considering private equity funding for the first time, with 23 per cent of shipping sector respondents considering using this form of finance. Indeed, 26 per cent of shipping respondents anticipate that private equity will be their primary source of funding over the next two years.
Harry Theochari, Global Head of Transport, Norton Rose, comments:
"London and New York remain key financial centres for the transport industry but are looking over their shoulders at Asia which is growing in importance and continues to power forward. The industry, particularly shipping which has suffered the most from a lack of debt funding, continues to look at alternative forms of finance such as structured finance and private equity and there is evidence that respondents are increasingly able to meet their financing needs in their home markets, with a number of financial centres including Canada, Australia, Scandinavia, Switzerland and South Africa attracting the transport sector."
"Overall, strong demand for increased infrastructure capacity, coupled with demand for new orders, suggests a greater sense of optimism across the transport industry this year, particularly within the aviation sector."
Gordon Hall, partner, Norton Rose, said:
"While a sense of uncertainty continues to pervade the transport industry, positive strategies, such as entry into new markets and the development of new products and services, are being pursued, indicating renewed confidence across the industry."
"The employment of more assets and demand for infrastructure also demonstrate that the aviation, rail and shipping sectors are looking to the future. Despite this, the cost of fuel remains a major concern, as does a perceived lack of support from government in the form of increased infrastructure investment."
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