Unfortunately, the struggles of the aforementioned hauliers are not unique. You need only go back a few weeks to find news of Youngs Transportation, HMF Services and Gwnyedd Shipping entering administration.
What are the factors responsible for this? What can hauliers do to avoid suffering a similar fate? And to what extent could pallet networks be impacted by the market conditions we are seeing at this moment in time? This article seeks to answer all of the above questions and more.
What the data says
To get an idea of the sheer scale of this trend, back in November 2023, a freedom of information (FOI) report produced by accountancy firm Price Bailey found that 463 haulage businesses had gone bankrupt in the previous 12 months. In the equivalent report issued around the same time of the year in 2021, the figure was ‘just’ 225.
It isn’t just small, family-owned companies getting caught up in the turbulence either. Yodel was in trouble until a takeover deal was announced this week, while Northern-Ireland-based Morgan McLernon, which was owned by haulage giant Culina, has also suffered financially. Even Wincanton, a well-recognised name in the UK haulage business with a large fleet, was sold to Ceva Logistics last month after the board considered it an opportunistic moment to sell.
The impact of rising costs
So why are these UK haulage firms entering administration or going bust entirely? Commenting on the aforementioned 2023 report, Matt Howard, head of the insolvency and recovery team at Price Bailey, said:
“Business failures among hauliers are rising at a rate unheard of in more than a decade. We are seeing a perfect storm of high inflation and interest rates at a time when many haulage businesses are on life support.”
Howard added:
“Aggressive interest rate hikes this year have really turned the screw. Many hauliers rely on debt finance to fund everything from fleet acquisition to day-to-day running costs, making them vulnerable to rising interest rates. Rising overheads as a proportion of turnover are pushing many haulage businesses into the red.”
In a recent update on its website concerning the upcoming Spring Statement, the Road Haulage association (RHA) also blamed rising costs, as well as falling volumes, for these bankruptcies.
“The cost of operating a 44-tonne HGV rose by nearly 10% (excluding fuel) last year as more than 450 haulage firms went bust amid falling freight volumes,” said the RHA.
In the same statement, Richard Smith, RHA Managing Director, called on the UK Government to “tackle the major challenges the road transport industry currently faces to ease cost pressures on operators.”
To reduce those cost pressures, the RHA would like to see, among other things, a temporary suspension of Vehicle Excise Duty on HGVs and the HGV Levy, the introduction of an essential user rebate on fuel duty for commercial operators, reform of business rates to support transport businesses operating warehouses, as well as a reduction in insurance premium tax which “disproportionately impacts road transport operators due to the number of mandatory insurances”.
Petition launched to help the road haulage sector
The crisis was also recently spoken about in the UK Parliament, where Martyn Day, MP for the constituency of Linlithgow and East Falkirk, referred to a petition calling for more government support for the haulage sector.
Addressing others in the chamber, MP Day said:
“Virtually everything we eat, wear and consume travels by road haulage. It’s a very vital industry for all of our constituents. The industry, however, faces multiple challenges with road freight rates increasing at an alarming rate through a whole range of cost factors such as the reintroduction of the HGV levy, clean air charges, rising fuel, and a whole multitude of other costs. The petitioners therefore request that the House of Commons urge the government to consult with the road haulage industry to introduce tailored support to ensure that companies can continue to operate.”
Should any of these recommendations be taken on board during the Chancellors Spring Statement on March 6th, they will likely apply from that date onwards at the earliest. The worry for some small companies in particular will be that even if support does come, it could be too late.
What can hauliers do on their own account?
As for what hauliers can do themselves, Paul Sanders, founder and chairman of the Association of Pallet Networks, told Trans.INFO:
“Hauliers must watch their cash flow. Most operations would be wise to remember that not all business is good business and to review those accounts which pay late, or whose credit score may have changed. Efficiency is also important. Vehicle data must not be ignored, telematics, monitoring fuel and driver behaviour too. For example, overwhelming evidence says that it saves fuel. These marginal gains from running the most efficient business rather than simply the ‘busiest’ business can be the difference between profit and loss when the economy is hard.”
A disappointing Q4 2023
One of the factors that is believed to have hit hauliers hard was the significantly low demand observed during the pre-Christmas peak period.
As the table above shows, there were a number of reported incidences of UK haulage firms falling into administration during this time.
The lack of demand was such that Paul Sanders even told Trans.INFO that most people in the industry were of the opinion that “Christmas didn’t happen”.
“The general consensus in the industry at large is that ‘Christmas didn’t happen’. I think the whole freight industry will have found Q4 volumes disappointing. We’ll now have to see how much the continued conflict in the Gulf and higher interest rates continue to affect freight customers and consumer spending,” said Sanders.
Pallet Networks “ideally placed to help companies ride out challenging periods”
Given the amount of small hauliers that are under strain in the UK, are pallet networks also experiencing knock-on effects?
Despite the economic situation, Paul Sanders said he was “cautiously confident” about the resilience of the pallet sector this year.
“Efficiency is exactly why the networks originated. The pallet network model was designed as the way to make national overnight transport viable for smaller regional companies, and that collaborative consolidated model is still one of their most effective safety nets,” said Sanders.
The founder and chairman of the Association of Pallet Networks added:
“Overall, we are cautiously confident about the resilience of the pallet sector in 2024 and the hauliers which maintain it. There’s no doubt that sector volumes are down, and that always requires adjustment from network members. However, the sector delivered 28.4m pallets in 2023, which is still 5% higher than in 2019.”
Sanders also stated that pallet networks were “ideally placed to help companies ride out challenging periods”:
“While there are certainly challenges in the economy at large, including steep price rises for customers and road transport providers, pallet networks are ideally placed to help companies ride out challenging periods. For road transport companies, pallet networks allow them to offer more comprehensive and cost-effective services. Their customers can flex between full or part loads, and pay-as-you-go palletised freight consignments depending upon what is most cost-effective for them at the time, or the volumes they need to deliver.”
Interestingly, Sanders added that despite costs increasing, most customers are still opting for faster but more expensive deliveries:
“Customers can also flex between economy and premium services, which enables them to minimise their transport costs or to prioritise service as they see fit. That said, next day deliveries still account for more than 60% of pallet volumes, so there isn’t significant evidence that customers are choosing the cheapest option.”
2024 to be a “challenging one for freight”
As we wrote earlier, MP Martyn Day referred to “road freight rates increasing at an alarming rate” in his speech to Parliament. However, the latest TEG Price Index shows that rates in January were actually the lowest since March last year, when the HGV Levy did not apply.
In the press release accompanying the Transport Exchange Group Price Index for January, the Transport Exchange Group stressed that the outlook for the rest of the year looks tough:
“With prices low, operators will be able to attract more business in the quieter months of the year, before prices are predicted to increase later on in 2024. However, the upcoming year will be a challenging one for freight. Pressures continue to mount on smaller hauliers as they struggle with the transition towards zero emissions, with significant expenditure required to modernise fleets.”
The Transport Exchange Group did also add that advancements in technology should result in zero emissions vehicles becoming more affordable, with accessibility expected to improve over the course of the next year. However, given the immediate cost pressures some firms are under, they could be forgiven if fleet upgrades are not top of their agenda.
Photo: EDDIE / Flickr / CC BY-ND 2.0 DEED