Thoughts on the DFDS freight charge

The fact that DFDS has been forced by the Government to charge a flat rate, without exception, to any freight company wishing to book space on its new ferry service next month should be a good thing for Jersey, shouldn’t it?

Before looking at some unintended consequences of the move, lets focus firstly on the positives. 

For too long, consumers in Jersey have been paying a price for imported products – from supermarket groceries to high street purchase – which have been influenced by a special relationship between Condor Ferries and freight firms, particularly the main player Ferryspeed.

The more space Ferryspeed booked on the vessels, the higher the discount it received, which in turn, boosted the profits of Ferryspeed. What’s wrong with that, you may rightly ask.

Well, for starters, consumers, industry executives and government officials were kept in the dark as to what price Ferryspeed were able to get from Condor for each metre of space it needed on the ship. All that was known was what the end price each importer was being charged. It also meant that any rival importer wishing to offer some competition to Ferryspeed could not get enough volume to obtain the same deal from Condor. This meant that two pallets of bananas could be sitting next to one another on the same Condor vessel, one bound for one supermarket with Ferryspeed and another bound for elsewhere with a different freight business and each pallet could cost a different amount to be on the boat. 

For years Islanders have had to swallow the fact that the majority of things in our Island cost more than the same like-for-like product in the UK. When challenged, a retailer or business would often say that rents and wages are higher, and they had to factor in the cost of importing the product. But we were never able to drill down into exactly what that importation cost was – ad whether it was fair - as we never knew the exact figures. 

Last week DFDS announced that the new importation fee it was charging would be £56 per metre for freight. No loyalty or volume discounts will be applied under any circumstances, we have been told, as that is the arrangement DFDS has come to with the Government in the awarding of their contract. 

While some supermarket bosses have privately expressed a fear that this could see some prices rise (as presumably they may have been riding on the special deal Ferryspeed had with Condor), the Government have said they expect there to be a 0.4% initial knock-on effect to prices. Only time will tell what the end figure will be, but we can at least be certain prices will rise. 
However, after that initial bump in the road, prices should stabilise and Islanders will no longer be able to be fobbed off by some retailers that the cost of importation is the reason their store is more expensive than their competitors. There will be, at long last, some transparency for all. 

That said, it isn’t all good news. With every freight provider soon to be paying exactly the same to bring a pallet or container of goods to Jersey, the margins for profit have been drastically reduced. This means that a freight company can now only rely on the efficiency of its business to return a profit. While some may be expecting the competition to come flooding in, there is a real risk that we could see some freight companies go altogether as there simply isn’t enough money in the game anymore, leading to a situation where we may see the Government of Jersey having to set up and run its own freight importation company. That may not be as bad as it sounds, but any service that doesn’t have competition is not a good think, especially for us consumers.