LONDON, U.K.–The transport sector is looking to Asia Pacific as the key market for investment over the next five years, according to the seventh The way ahead Transport survey from global law firm Norton Rose Fulbright. China and India are the most popular jurisdictions for investment, followed by the U.S., with growth through consolidation viewed as the best investment opportunity currently. While confidence among respondents from the aviation and rail industries is high, owing to lower oil prices, the availability of funding and the impact of infrastructure improvements, the shipping industry remains the least optimistic as a result of overcapacity in many subsectors of the market.
Over half (52%) of all respondents to the Norton Rose Fulbright survey agree that a global recession poses the greatest threat to their industry. However, despite political uncertainty, most agree that the transport sector can expect to enjoy further growth over the next five years. Rising passenger numbers and freight volumes are anticipated (by 73%) and an increase in the number of routes and services is expected (52%).
Investment in technology is expected to rise, according to 67%, with low carbon technology and predictive analytics expected to represent the most significant driver of change in the transport sector over the next five years.
Infrastructure remains a key theme for the sector. After consolidation, infrastructure improvements are viewed as the best investment opportunity currently (by 19%), and infrastructure investment is seen as the most helpful form of government support (by 25%). For the aviation, rail and road industries, inadequate infrastructure is seen as the greatest challenge to the operational efficiency of their industries.
Bank debt, capital markets and private equity will represent transport businesses’ main sources of funding over the next two years, and 74% of respondents expect the availability of funds to stay the same, or even increase, over the next five years.
“The transport sector is continuing to look to Asia Pacific for investment opportunities, encouraged by rising demand and China’s ambitious Belt and Road initiative, a modern day silk road which will improve China’s infrastructure links with the rest of the world. Sentiment is high in the aviation and rail industries, buoyed by the expectation of increased passenger numbers. However, shipping continues to feel the effects of overcapacity in many markets, and an increase in enforcement actions is widely predicted, although in the longer term respondents believe conditions will improve,” said Harry Theochari, global head of transport at Norton Rose Fulbright.
“Investment in infrastructure and technology, and consolidation through both M&A and joint ventures, will be key drivers for transforming the transport sector and assisting growth. The adoption of new technology in particular will help to address numerous issues the sector has been grappling with in recent years, such as low carbon technology to meet increasingly stringent environmental legislation, and predictive analytics to anticipate repairs and maintenance and better understand and forecast consumer behavior.
“While respondents are most fearful of the impact of a worldwide recession, they will be watching closely the implications of the UK’s referendum result. The transport sector is international and highly regulated and any UK exit from the EU would need to take into account a number of complex issues,” he said.