Europa Worldwide Group CEO Andrew Baxter talks customs, driver markets and shortcomings of electric trucks
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Transport entrepreneur Andrew Baxter, who has been at the helm of the Europa Worldwide Group for over a decade now, announced earlier this month that his company’s turnover had hit £302m – an increase of 400%. The feat was reached in part due to a major investment in a post-Brexit Delivered Duty Paid (DDP) product that has fostered significant growth.
Around 18-months since we last caught up with Baxter, we took the opportunity to quiz the Europa Worldwide CEO on the company’s development, as well as a number of issues facing international road transport providers today, including driver shortages, UK border friction and freight decarbonisation.
Thanks for taking the time to talk to us Andrew. Europa Worldwide Group recently issued a release detailing a number of the company’s successes since you took over back in 2013. Looking back, what investment are you most proud of and why?
Personally, I think the DDP product has been the most game-changing thing for us. The situation in the run up to Brexit was particularly complex; we were getting ready for such a significant change to our business.
We came up with the DDP product, which we believed would be a much more effective way of moving goods between the UK and Europe. None of our competitors came up with the same product.
Our emphasis was entirely on how to optimise the movement of goods post Brexit. We were more prepared than anyone to support British businesses when Brexit actually happened, and this won us a lot of new customers. Volume of business in the marketplace overall has reduced, but our business has gone up.
Now our competitors are building those sorts of products, but it’s taken them between a minimum of a year up to two and a half years to come up with their version of our product.
Even today, I believe that there is a meaningful difference between our product and our competitors’ product in that regard.
Most of our business is now DDP and not DAP. Although it’s hard to judge exactly, a very substantial proportion of the UK market is now DDP as opposed to DAP. So I believe that we have basically shifted the Incoterms that UK exporters are selling to the EU on through our innovation and market leadership.
So the shift in the market is a thing. We really increased our market share through that approach, and I would say that’s probably the single thing I’m most proud of.
Before the trade agreement was signed, there was plenty of talk in the industry about uncertainty. Why do you think others did not mirror yourselves in getting a DDP product developed as soon as possible?
I think our key competitors in the groupage market, thought Brexit was wrong and would be a disaster. Some of the foreign companies thought that it was a UK problem that would have to be sorted out in the UK and that there was little that could be done about it.
My view was that actually Brexit can be successful, and that the movement of goods can be optimised post Brexit. The last thing I want to see as the chief executive of a substantial European distribution business is for my customers to be damaged by Brexit.
So, I was very determined to find the best way to optimise the movement of goods post-Brexit. I think while a lot of people were complaining about the situation, we were focused on finding the right solution.
We prepared for what we thought was likely to happen and did not get tied up on the bits around the edges. The only difference between there being a deal or no deal was that with no deal, there would have been higher levels of duty. So, all of the operational setups would be precisely the same. There was no major technical difference between a deal or no deal.
I think that a lot of people allowed themselves to get bogged down in minor uncertainties, rather than focusing on what we did know. I would say that that’s why we ended up coming out of the situation positively.
On the subject of post-Brexit trade, there have been different schools of thought within the government regarding how the UK goods border should look. A number of ministers prefer a “light-touch” with as few checks as possible, but the current plan via the Border Operating Model is to introduce some SPS checks. Once they begin, there will be a degree of friction. What kind of solution would you like to see when it comes to the UK goods border post-Brexit?
Ultimately, I’m somebody who really believes in free trade. I think there could be significant simplification within the requirements to import and export goods – not just with Europe, but with anywhere.
It’s still not as simplified as it should be. I have often offered to help people in positions of authority in how to do that, without much reaction.
Yes, they’re going to start sanitary checks from October. I do wonder about the necessity of those checks happening at the border, and why they can’t happen away from the border. We can be trusted to bring uncleared goods to an inland authorised warehouse, so why not do the same with phytosanitary goods?
I think that would massively improve flow. There must be some risk somewhere, but for most goods I would think that the risk must be pretty limited.
If there is something particularly scary, then yes, those could be dealt with at the border, but I don’t see why, for example, an export of honey from Poland should require a truck to stop at the border to be inspected?
The load could be declared at the terminal of an authorised operator and if somebody wants to go and inspect it, they can go there to do so. We shouldn’t disrupt the flow of trucks in order to have that type of product inspected.
We need a very coordinated government approach and a real determination to strip out complexity. Often the problem is that in government, different departments have lots of different requirements.
They end up layering up complexity after complexity after complexity. And to rip out all of that complexity, we have to effectively say to all those different departments, “sorry, you can’t have that – we’re just not going to accept that level of complexity going forwards.”
Back in May you announced that you would be trialling an electric truck. Both the UK and the EU have rather ambitious targets when it comes to the decarbonisation of road transport. There have been suggestions that the push to go electric is happening faster than the existing charging infrastructure and supply of vehicles allows. What is your view on the situation?
I think it’s an incredibly important but challenging situation that no-one yet has the answer to. When it comes to electrifying the fleet, it might be different for parcel carriers operating small vans, but in terms of heavy trucks, – 18-ton trucks and arctics, electric vehicles are not yet economic.
The depreciation on the vehicle is higher. And when you add in the electricity costs, that outstrips the depreciation on the diesel vehicle, plus the diesel costs. It’s just inherently more expensive.
When there are economic electric trucks, we’ll be able to use them. That is the reality of it.
Now, the government could tax us into a position where we have to use them. That would be difficult as it would force us to pass it on to our customers.
As for whether we should do that, I think it’s an economic question as to what extent we can just keep taxing British exporters and importers, thereby impacting competitiveness.
It all comes down to manufacturing heavy goods vehicles that are both economical and environmentally friendly. I know it sounds defeatist, but ultimately we’re an operator of trucks, not a manufacturer of trucks.
It’s the manufacturers of trucks who are going to have to solve that issue. The real answer is in the development of those vehicles, and to get those vehicles to a place where they are economic. We’re more than happy to shift away from diesel if there is an economically viable way to do it.
There needs to be an adequate supply of electricity and charging points – both at warehouses and out on the road.
We are doing what we can to reduce our emissions and have an initiative today where we work with a company called Pledge where we measure and report on emissions to our customers and where it’s possible to
Intermodal is also seen as a means of reducing emissions. We have nonetheless been hearing that plans for a switch to intermodal are being held back due to concerns over rail freight reliability and service levels. What are the prospects for you utilising intermodal services more often in the future?
So, if we’re talking about full loads, then I think there’s more scope in terms of intermodal. To be honest, it’s not a big part of what we do today.
The intermodal work that we do we subcontract. We have an unaccompanied freight business in Belgium and in the Netherlands, now a part of Europa Road. It is something that we are looking to do better and understand the opportunities better.
We have a certain operating area for that business and multimodal does not work there. Once you go outside of that operating area, from Zeebrugge and from Rotterdam, I think there are things that potentially work and we will look into that.
The issue we have now is when you look at routes from Italy and Spain to the UK, they have to go through France, where there are strike threats and other potential disruptions. Therefore, as it stands today, we would not use intermodal on our standard groupage lines because we wouldn’t get the level of transit time and reliability that we would get by road.
Of course, the UK Government alone cannot go and resolve that issue. That’s something for continental governments like France to resolve and deal with those issues.
That said, I think that there is scope for reliability to be improved. That would aid the development of intermodal. Ultimately, we would move more towards intermodal if the reliability and transit time was there.
Ultimately, for our customers, transit time and reliability are very important. So they wouldn’t necessarily thank us for doing something that was cheaper, but less reliable and slower.
Another much-talked about factor influencing the road haulage business concerns the labour market for drivers in the UK and the EU. We can see that wage rates rose in the UK following the autumn 2021 shortage. Moreover, hauliers in the UK now have very little means to recruit from abroad. Meanwhile, in the EU, there are some countries in which international hauliers have been able to tap into 3rd-country labour markets to access lower cost drivers. This has prompted some calls from industry figures in Western Europe for EU-wide legislation to provide fairer competition. What’s your thoughts on this?
So, firstly, on international routes we don’t use any British drivers. We haven’t had any in the time that I’ve worked in Europa, and we hadn’t previously.
The UK market, in terms of international transport, is completely dominated by EU trucks. There are hardly any UK trucks operating between the UK and Europe, and they haven’t been for decades.
In niche scenario’s, if for example, you’re transporting a band around Europe, you might use British drivers for better communication. But general distribution between the UK and Europe has been done principally via East European trucks for a long time now, and I don’t believe Brexit has made any difference to that.
Now, as regards the driver shortage in the UK, the cause was mainly that during COVID, nobody could get qualified to become a truck driver. Each year, you’ll get a certain number of people who retire and newcomers who get qualified. What happened during COVID is that a higher-than-average number of truck drivers retired and no one new became qualified. So that was overwhelmingly a COVID related issue. It was not particularly immigration related.
Now, of course, in 2021, between September and December, things were really tight in terms of truck drivers. That led to increases in driver pay. That in turn led to more people becoming truck drivers. By the time you got into January and February of the following year, the driver situation had pretty much stabilised.
So, a large part of that was stabilised because of more people coming into the profession and the DVLA getting their act together in terms of testing lorry drivers, and that more or less corrected the situation.
There were calls for the UK Government to use the option to let in qualified truck drivers from abroad. They could have said, we’ll add 50,000 qualified truck drivers, and they would have got 50,000 qualified drivers.
They didn’t though, and the consequence of this was better pay for lorry drivers. Drivers are getting treated better than they have in the past too; companies are recognising that it’s not actually okay to have toilets, showers and facilities for visiting truck drivers that are unsatisfactory. So what came of this was an improved situation in which truck drivers are getting looked after better as well as being paid more money.
The lorry driver shortage wasn’t just in the UK though. As I’m sure you know, it’s all over Europe.
When it comes to the EU driver market, the recruitment of drivers from 3rd countries isn’t particularly for domestic transport. The labour rate for domestic truck drivers in each EU country is pretty much determined by the local market.
However, in the international transport sector, it is dominated by Eastern European trucks, because they can use drivers who are less expensive and the use of 3rd country drivers is much more significant.
Obviously, the EU has enough people to have enough truck drivers. Obviously, it does. If you shut off all those third country drivers, all that would happen is the price of truck drivers would go up and more people would become truck drivers.
Allowing in 3rd country drivers, simply depresses the market rate for drivers, which means less EU citizens want to become truck drivers, which leads to driver shortages, which leads to more demands for drivers from 3rd countries…
Ultimately whilst imported cheap labour might be a good thing for the wealthy because it keeps down the price of goods, it is not good for ordinary working people.
Undermining pay rates for roles like that is damaging, because it means less well-off people get paid less.
That’s another curiosity to me. On the one hand, some people want to put up the minimum pay rate because they care about workers and want to look after them. However, on the other hand, often the same people are in favour of letting in cheap labour that undermines pay rates. Why do those two things simultaneously? What is it that this achieves? I really don’t know.