The closure of Irish Fertiliser Industries brings into sharp focus the inter-woven relationship between the road haulage industry and the economy in general, writes John Loughran.

There will be hundreds of direct job losses in Cobh, Arklow and Belfast as a result of the closure. However, the impact will run much deeper. There will also be job losses locally in the haulage, logistics and shipping industries as the knock-on affect of the closure ripples throughout the country. As every week passes, more and more companies are being forced to close their doors for the last time. Behind these closures, you can bet that another unfortunate haulier has been affected.

The reality is that hauliers need to keep a very close eye on the activities of their customers as well as on their own relative position. At the very least, hauliers need to monitor their level of exposure and put systems in place to minimise that exposure.

As an unsecured creditor, the haulier is at the bottom of the list, when it comes to getting paid, in the event of a customer going into liquidation. By the time the cake is shared between secured creditors, the haulier is looking at picking up the crumbs.

It is therefore vital for hauliers to collect their accounts on time, thus minimising exposure. Hauliers should also err on the side of caution. In some instances it may be prudent to "trade out" or at least "trade down" certain customers. In an ideal world hauliers would have the contents of their debtors ledger spread over numerous companies operating in different sectors of the economy. Reality is all too different though and some hauliers may find that they are tied into too few customers operating within the same sector.

Economic analysts have predicted that Ireland should be back in positive growth territory by the middle of next year. In the mean time hauliers should do all in their power to ensure that they are around to reap the benefits. They can make a positive start by closely examining the composition of their debtor’s ledger and making strides to reduce their overall exposure.

While the closure of Irish Fertiliser Industries (IFI) spells bad news for those hauliers directly affected, it could prove the source of additional income for others. Ireland's farmers will still need fertiliser, which will now have to be imported.

The fertiliser in bulk or bag form will have to be transferred from the entry port to the distributors and ultimately to the customer. This work will come the way of the Irish road haulage industry, but that will be of scant comfort to those hauliers that have built up their businesses around IFI.

The haulage industry will also benefit from Irish Rail's decision to withdraw from its loss making freight activities in the southeast. While the decision smacks in the face of European policy, it will certainly benefit hauliers in the area. Irish Rail's freight division has been competing in the real world - in competition with the road haulage industry - without the aid of subsidies for the past two years. Last year it lost euro 8 million. The closure of IFI, its third biggest customer has compounded the problem.

It now seems likely that Irish Rail will opt out of the transportation of oil and shale, and cut back its activities in the transportation of cement and container traffic. The company will continue its activities in profit making areas such as the transportation of beer kegs, and ore from Tara Mines.

In recent years the company has scaled back its freight activities by as much as 48 per cent, because in a post subsidy era it can longer compete with a very competitive road haulage industry. In most instances Irish Rail's freight division cannot compete with the road haulage industry on price or indeed levels of service.

There is a very strong lobby for expanding rail freight throughout the European Union on the grounds that is environmentally friendly. Advocates also contend it is safer to move freight by rail rather than road and that road fatalities throughout Europe could be reduced if more freight was moved by rail. This lobby has considerable support in Ireland, where Labour's Joan Burton is a leading protagonist. Commenting on Irish Rail's decision to scale back its loss-making freight activities, Ms Burton said: "Cuts like this make no sense. Rail is an efficient and environmentally way to carry freight and ought to be expanded and encouraged to reduce the pressure on the national roads system."

It won't take long for the scare-mongers to start spinning the line that Irish Rail's decision to scale back its freight activities will lead to thousands of extra trucks on the road, adding to congestion and increasing road fatalities. It is a line that has been spun before, to maximum affect.
The truth is quite the reverse. In the past two years there has been an oversupply of trucks in the industry, leading to poor rates and high levels of competition. The economic downturn has worsened the situation with many hauliers now running below capacity and in some instances running at a loss.

Leaving environmental and road safety issues for another day, the news that Irish Rail is opting out of part of its freight activities is welcome news for the road haulage industry, given the difficult times it now operates in.

Irish Rail's decision, taken for purely financial reasons, won't add a single truck to the Irish fleet, but it might help to keep the existing fleet running at a profit.