11th February 2022
The rising cost of road haulage
In this article, we look at the causes of these increasing costs and try to understand how road freight rates have reached such levels – their highest in three years.
The pandemic’s waves have caused many issues for the industry across the past two years – from staff health and lockdowns to being unable to test and train recruits due to social distancing restrictions.
The emergence of the Omicron strain in late 2021 added even more uncertainty and delays over recruitment and the supply chain. While restrictions have eased in the UK, the potential for further variants to emerge could cause the industry’s recovery to falter again and at short notice. Despite this, the haulage industry has done a remarkable job to keep the UK moving and continues to play a significant role in the pandemic recovery.
December’s increase reflects a typical rise in demand that comes annually in preparation for the holiday period. However, adding this additional demand on top of the ongoing challenges magnified the level of pressure the industry was operating under.
Demand has been rapidly increasing in recent years, both through lockdowns and as technology gradually shifts people towards home delivery. Demand in April 2021 was 120% higher than the same month in 2019.
With fewer drivers and more red tape, meeting demand on this scale continues to be a challenge. The cost and inconvenience of driver CPC training
is a barrier to entry for new drivers and an unwelcome inconvenience for many existing drivers.
The government’s response to the demand has been to reduce qualification requirements so that more new drivers can get on the road. Another more controversial approach has been to repeatedly relax driver’s hours
, meaning they are allowed to spend more time on the road per week. But, this does not factor in the needs of the people behind the numbers – the drivers themselves. Instead, it puts road safety at risk as tired drivers have to work longer hours.
With many already frustrated by their work conditions, this policy could have the unintended effect of making more look for employment elsewhere.
Whatever the reasons for this shift, HGV drivers becoming couriers or leaving the industry entirely, the drop in HGV drivers during this period demonstrates that more needs to be done to improve pay and conditions, as a focus on promoting retention is key to slowing the driver shortage.
The significant wage increases to tempt people into the industry have seen the average salary increase from £30,000 in January 2021 to £36,000 in September.
This is an essential step in helping to improve driver conditions, but the additional expense will become a factor in the increasing cost of road haulage.
The impact Brexit is having on the haulage industry cannot be understated. The three main areas of concern are:
- Reduced driver numbers
- Increased red tape
- Border crossing delays.
What’s making this problem even worse is the degree of impact that was underestimated by those in the industry. A study by Haulage Exchange in mid-2021
found that 94% of haulage industry leaders were seeing greater aftereffects from Brexit than expected and that 69% of UK haulage firms were losing business because of regulation changes since Brexit. That same percentage also saw increased costs in the first six months after Brexit
With additional Brexit regulation changes expected in 2022, the industry will be required to adapt even further, leading to even higher costs in the short to medium term.
Kent improvement delays
Not all the measures designed to ease the Brexit transition have been effective. The Operation Brock system, which was installed to manage traffic in Kent post-Brexit, is facing early teething troubles. A barrier needs to be relocated to improve drainage
, meaning that this improvement will cause its own disruption to the M20 (serving Folkestone and Dover) for approximately one year.
Increased operating costs
The broader financial reaction to global and domestic challenges means that most industries are also facing similar issues around increasing rates. The cost of materials is making repairs more expensive, and increasing interest rates are being driven in part by petrol costs. According to figures from the ONS
, Petrol was at an all-time high of 145.8 pence per litre in November 2021 – almost 30% more than 12 months earlier.
Other additional costs include:
- Longer journey times due to alternative routes
- New and higher tariffs
- Changes to licensing and registration requirements
- Increased energy costs
- Port delays.
While one or two additional costs could be manageable, increases across so many areas at once make rising costs inevitable.
A challenging future
The surge in December 2021 was an expected seasonal shift, but weeks later the industry is still grappling with the impact of Covid-19, Brexit changes causing delays, red tape and reduced driver numbers. Managing each of these inevitably results in increased costs, which are now being reflected in the price per mile rates.
“It is important to note that the impact of these combined challenges is not restricted to haulage and is being felt by companies and individuals across the UK through the increased costs of fuels and materials. The industry must remain poised to adapt yet again and maintain itself until these changes become normalised.” Said Mark Garner, Managing Director at SNAP.
Ways of working have been impacted, but the solutions are not yet in place. While many are calling for improved driver conditions, the government has not yet done enough. Examples of this include relaxing driver hours, cabotage
and suggesting that the cost of increased Dover parking could see a tax on the haulage industry to fund new parking facilities
Looking at automation and AI to improve efficiency and alternative fuels like biomethane
to save costs and reduce emissions are long-term goals that have the potential to improve every aspect of the industry. However, we do not have to wait for technological advances – the work towards a better future can begin now.
Increased wages for new drivers have attracted recruits to come from a range of backgrounds
and by offering more support to existing drivers through improved conditions, including safe overnight parking services and better facilities, they will be more likely to stay in the industry and help the driver shortage to resolve.
Learning to live with some changes will mean that costs will remain high for some time to come but working to reduce the extent of the driver shortage and learning new ways of working to deal with revised regulations are steps towards a positive future where efficiencies can be identified to balance the affordability of haulage with driver needs.