The Merton Centre
NFC is the largest road transport, household moving, and contract distribution business in the United Kingdom. It is also a significant contender in these markets in North America, Europe, and Australia, with about a third of its total business overseas. Worldwide NFC has over 20,000 vehicles on the road.
The company has four divisions. The transportation division operates chiefly in the United Kingdom under the names of BRS and Lynx Express Delivery. The logistics division undertakes distribution and warehousing for retailers and manufacturers, mainly under the name Exel, and is particularly strong in North America. The home services division carries out household moving under the names Pickfords and Allied Van Lines. NFC also has a property division.
A very distinctive feature of the company is that it is largely owned by its employees, pensioners, and their families. Current employees hold around 18 percent of the equity and their shares carry two votes each. New employees are helped to buy shares, and management keeps all employees informed about the company's progress. It also invites their views on major issues. Employee ownership, the company says, is 'the essence of NFC's culture.'
The reason for this lies in the circumstances of the company's birth. The letters 'NFC' originally stood for National Freight Corporation, which was a collection of road transport businesses owned by the British government. The Thatcher administration, when it took power in 1979, was determined to return it to the private sector, and in 1982 agreed to a unique 'employee buy out.' At that point employees, their families, and pensioners owned 82.5 percent of the equity. The company became extremely successful in its new form, and it is only because of its rapid expansion that the employees' percentage has dropped.
It is debatable at what point a history of this company should begin. Legally, it began life in November 1981, when the buy out consortium was formed. However, the assets it acquired two months later had been brought together as the National Freight Corporation in 1968, and had been owned by the state under other names since about 1948. Furthermore, many of the businesses that were taken over at that time had existed for generations in private ownership.
It is obviously impractical to trace all these companies back to their beginnings, but one exception must be made. This is Pickfords, a name so well known in England that it is still used by NFC today. It is almost certainly the oldest road haulage business in the United Kingdom, and was the largest at the time the industry was nationalized.
It is said that the firm was founded in the seventeenth century, but the earliest documentary evidence of its existence is an advertisement from 1756 in the name of 'James Pickford, the London and Manchester Waggoner.' He offered a regular wagon service for goods between Manchester and London. To cope with the rough roads of those days his wagons had wheels with rims nine inches wide, and they were pulled by teams of as many as eight horses. They covered the 200 miles or so in eight or nine days, which at the time must have been good going for a heavy load.
James Pickford and his sons developed a flourishing business on this important route, and gradually extended their service to other towns in the midlands. By the end of the eighteenth century, canals formed an alternative means of transportation, and Pickfords were quick to use them too. By 1835 the firm was said to be 'the greatest carrier on the canals,' with over 100 barges and 800 horses in use.
Then came the railways. Pickfords tried to persuade the railway companies to let them run their own goods wagons on the railways. Failing in this, they became agents to the London and North Western Railway, which ran the best service between London and Manchester. In this capacity Pickfords carried goods by horse and cart to the stations and, at the end of the rail journey, on to their ultimate destinations. As railway traffic grew, this became a very profitable business. Pickfords made similar arrangements with other railway companies, operated their own road services where there were no railways and all over London, and by the end of the nineteenth century had a countrywide business and reputation.
The Pickford family lost control of the business around 1850, but another family, the Baxendales, operated it under the old name for another two generations. It then suffered from bad luck in the early 1900s and was bought first by one company, then another, until in 1933 it was bought jointly by the four railway companies that at that time owned Britain's entire rail network. Under their ownership Pickfords again flourished and grew, used by the railway companies as a means of recouping some of the business they lost to road transport services with the coming of gasoline-powered trucks.
During the 1920s and 1930s, Pickfords branched out into household moving and, with its national network of offices and depots, became the leading firm in that business, as it still is today. By the end of World War II Pickfords offered a unique range of road transport services, from heavy loads and bulk liquids to furniture-moving and parcel delivery service.
At this point Britain's post-war Labor government decided to nationalize the road transport industry, along with the railways, the docks, and other major utilities and industries. The rationale was that with railways and road haulers under common ownership, wasteful competition would be eliminated and a more efficient transport system would emerge.
The fragmented road transport business was a formidable challenge to government bureaucrats. Ultimately, the state took over only those companies whose major business was the carriage of goods for 40 miles and upwards, but even so it took the government agency five years--from 1948 until 1952--to buy the 3,744 firms in this category. Most of them lost their old identities and became part of a new corporation, British Road Services (BRS), but Pickfords and a few other large operators were allowed to keep their old names within BRS.
Even before this process was complete the Conservatives were back in power, intent on reversing nationalization. In the early 1950s much of the BRS fleet was sold back to private operators. However, BRS was retained, still in the public sector, to provide a single nationally coordinated road haulage service on trunk routes.
Over the years, and through various reorganizations, BRS expanded to take in a whole range of road transport services. Certain specialized services, including household moving, were carried on under the name of Pickfords, and a parcel delivery service operated under the name Roadline. At the same time, British Railways developed its own rail and road parcel delivery service. The advent of the container in the 1960s increased the railways' involvement in road transport still further.
Because of these overlaps in the public sector, the government decided in 1968 to bring BRS/Pickfords' and British Railways' parcel delivery business (renamed National Carriers and container operation (Freightliner) under the control of one organization, the National Freight Corporation (NFC). In the same piece of legislation, the licensing system which had restricted the number of new entrants into the road haulage business was relaxed.
These measures committed NFC to running several services in competition with each other, while exposing it to still more competition from the private sector. The NFC's services had to be comprehensive and therefore had higher overhead costs than the small private operators, and were inevitably undercut in price.
Despite these inherent weaknesses, NFC got off to a good start. Its workforce, which numbered 66,000 at its inception, was gradually reduced, and profitability improved so that the initial government subsidy granted to NFC became unnecessary. Encouraged by this, the corporation decided to expand into continental Europe, and bought businesses in France, Germany, and elsewhere.
The oil crisis of 1974 hit all NFC markets simultaneously and its modest profits gave way to serious losses. In 1976 NFC's top management underwent change, curbs on spending were set, and the Freightliner business was returned to British Railways.
NFC's new chief executive was Peter Thompson, who later led the buy out. His career had been mainly in the private sector of the transport business until he became managing director of BRS in 1972. Once at the head of NFC he began to apply private sector criteria to all its operations. Its European ventures, which had proved to be liabilities, were sold and other loss-makers severely pruned. The workforce was reduced still further, to 34,000 by 1979. The organization was decentralized, many senior managers were retired, and younger employees who had proved their worth were promoted. Not least important, the government was persuaded to write off much of the corporation's accumulated debt. By 1979 NFC was beginning to look more like a shareholder-owned company.
In that year the Thatcher government came into office and NFC was at the top of its list of state-owned businesses to be privatized. In 1980 a merchant bank was appointed by the government to advise on how this should be done. It soon found that there were snags. NFC's pension arrangements had not been properly funded, business was again suffering from a recession, and NFC had just lost a lucrative contract with British Railways as a result of pressure on the latter to cut its losses. The bank advised that NFC should not be brought to market for two or three years, and even then set a relatively low value on it.
Thompson and his team believed that NFC was worth more, or soon would be under their management, and began to think about a buy out. Realizing that they could not raise sufficient capital themselves, even with loans, they decided to propose the idea to employees. The response was favorable, and this solution also appealed to the government because it would speed up the privatization process. After much negotiation, a deal emerged whereby a consortium of banks would lend the money to make good the pension deficit in return for 17.5 percent of the equity, while employees and pensioners of NFC and their families would put up the rest (about £7 million).
In this way NFC became a public company, owned by its employees, in February 1982. Thompson remained chief executive and the board had full authority to run the business, but employees were encouraged to contribute to a new definition of the company's aims. The first of these was of course to increase profits for its existing shareholders. More unusually, it was also agreed that the company should allocate a portion of each year's profits to making more employees shareholders and that it should aim to increase employment opportunities.
The company was therefore committed to expansion, as well as improving profits, almost from the start. To achieve this, the management set itself some very specific growth objectives and some equally specific cost reduction requirements. One obvious way of cutting costs was to make better use of the company's properties. Because BRS, Pickfords, Roadline, National Carriers, and other subsidiaries had all developed their own branch networks, there were many towns where NFC had four or more depots. Once these subsidiaries saw that they had a common interest in cutting costs, it was not difficult to persuade them to share premises, and large savings were made in this way. The surplus properties were then sold or redeveloped, boosting profits.
More controversially, the management decided that its two parcel delivery services, Roadline and National Carriers, must either merge or be reduced by one. The two companies were merged as National Carriers Roadline and then relaunched under the name of Lynx Express Delivery.
The most important growth objectives the new company set itself was to expand overseas until at least a quarter of its profits were coming from abroad. This time, acquisitions would be more selective than in the 1970s. NFC resolved to concentrate first on building an international household moving service, to meet the needs of executives being moved around the world, and second on acquiring businesses in the growing field of contract distribution.
In the moving market, Pickfords provided a strong base for expansion. It first bought an Australian company, then set up branches in Hong Kong, New Zealand, and elsewhere. Then, in 1988, it acquired the roughly 500 independent firms comprising Allied Van Lines, one of the leading moving companies in the United States. This link-up established the Allied Pickfords group in more countries than any other moving company. Another United States acquisition was that of Merchants Home Delivery Service of California, which specializes in deliveries to private homes from furniture and appliance retailers.
On the contract distribution side, NFC was again building from a position of strength in its home market. It undertook distribution for Marks & Spencer and other big retailers in the 1970s, and in the recession of 1981-83 found many more companies receptive to the idea of sub-contracting delivery and warehousing to a specialist in this area. NFC took over an increasing number of transport fleets and storage facilities, especially from food manufacturers and retailers. Later in the 1980s, newspaper groups became customers too.
In the United States NFC was able to acquire two important businesses in the same field: Dauphin Distribution Services of Pennsylvania in 1986 and Distribution Centers Incorporated of Ohio three years later. These and other companies in North America and Europe were then grouped together by NFC to form the Exel Logistics division.
In the United Kingdom NFC improved profitability chiefly by continuing to move away from general haulage and into more specialized services. BRS became the market leader in contract hire and developed truck rental, tank freight, and waste management subsidiaries. The travel side of Pickfords was also expanded, becoming a leading British travel agency.
NFC has seen some failures, notably an attempt to sell its computer software to a wider market, but they have been few. The company's turnover has grown every year since 1982, and its pre-tax profit increased almost tenfold from £11.8 million in 1983 to £114.4 million in 1989. It has since declined slightly in the face of a long recession, but was still a very respectable £102 million in 1991. In keeping with its employment objective, the company's workforce has risen from 23,000 in 1982 to 33,000 in 1992.
Growth aside, the most important change in the company since 1982 has been in the wider spread of its ownership. To provide a more efficient market in its shares, NFC applied for a Stock Exchange quotation in February 1989. Institutions now own a significant proportion of its shares, although control still rests with the company's employees families, pensioners, and former employees. Peter Thompson was honored with a knighthood for his part in creating NFC, and was succeeded as chief executive by James Watson in 1991.
Principal Subsidiaries: BRS Ltd.; Tankfreight Ltd.; National Carriers Ltd. (trading as Lynx Express Delivery); Waste Management Ltd.; Exel Logistics Ltd.; Exel Logistics Inc. (USA); Fashionflow Ltd.; Pickfords Ltd.; Allied Van Lines Inc. (USA); Allied Pickfords Pty. Ltd. (Australia); Merchants Home Delivery Service Inc. (USA); Trammell Crow Distribution Corporation; Hyperion Properties PLC.