Driver Require CEO reveals the wage-influencing factors that could spark the UK’s next severe HGV driver shortage
You can read this article in 15 minutes
Despite the UK leaving the European Single Market in 2021, ONS data cited in Driver Require’s latest HGV Driver Shortage Analysis has shown the number of EU nationals working in the UK as lorry drivers is now higher than early 2021. This relatively surprising development has coincided with the UK’s lorry driver shortage returning to the pre-pandemic norm of a chronic low-level shortage characterised by seasonal shortages. However, Driver Require warns that a “bleak outlook” still lies ahead due to market forces that could constrain wages to the point another severe HGV driver shortage becomes a reality.
In this trans.iNFO exclusive, we talk to Driver Require CEO Kieran Smith to get his thoughts on the HGV Driver Shortage report, as well as the reasons why market conditions could bring about another significant UK HGV driver shortage.
Read on to learn:
- How ONS data suggests the number EU nationals working as lorry drivers in the UK has increased
- Why the significant minority of EU drivers have been, and remain, a key component of the UK’s haulage industry
- The factors that have constrained HGV driver wage growth in the UK
- Why training schemes have not alleviated the shortage of drivers
- The scenario that could contribute to the UK’s next severe driver shortage
Commenting on the ONS data shown in Driver Require’s research, Smith expressed his opinion that the EU lorry driving workforce still makes an important contribution to the UK haulage market and have consistently constituted about 10% of the workforce.
Smith told trans.iNFO that, although there can be discrepancies in the ONS survey data, particularly due to the temporary pandemic switch to a telephone based interviewing system, the statistics are reliable from a trend perspective. While the number of EU national HGV drivers working in the UK fell considerably during the Covid crisis, this pool of drivers recovered to pre-Covid levels in late 2022.
According to Smith, many EU nationals prefer to work flexibly through agencies, which gives them the flexibility to return to their home country for prolonged periods, and he estimates that EU nationals still represent around 33% of the drivers on his agency’s books. Smith also elaborated on a previous Driver Require report that had shown how the EU HGV driving workforce has long provided the elasticity required in the UK haulage industry during peak periods and to cushion the impact of large fluctuations in demand for HGV drivers.
“What is interesting is that in our research, we have discovered that European workers buffer big increases or big drops in the lorry driving workforce by approximately 30%-50%.”
When you have a big change in the UK demand for haulage services, and thus lorry drivers, the contingent from mainland Europe are a big factor in absorbing either the increase or the decrease.
This shows that the Eastern Europeans, even though we have Brexit restrictions on freedom of movement, are still helping to cope with significant increases in demand,” Smith told trans.iNFO.
However, as Smith also points out, the Continental EU HGV contingent has never exceeded 16% of the overall UK HGV workforce:
“My position, and that of Driver Require and its Think Tank, is that the UK haulage sector has suffered a “chronic” (by this I mean “long term”) low level HGV driver shortage for 2 to 3 decades prior to the Covid pandemic.
During this time wages were suppressed by a highly fragmented haulage sector, where small to medium sized haulage operators competed fiercely for business from large customers with strong negotiating leverage, resulting in extreme pressure on their margins. Consequently, they placed high pressure on HGV driver pay rates and working conditions.
During this time, the Continental EU HGV driver workforce played a beneficial role by absorbing the impact of significant fluctuations in demand for HGV drivers, but they never exceeded 16% of the UK HGV driver workforce, so they always constituted a relatively small but significant minority.
To be clear, the Continental EU HGV driver community did not alleviate the UK’s chronic low level HGV driver shortage. They did help reduce the impact of demand fluctuations. Ultimately the supply of HGV drivers was balanced to exactly meet requirements by wages being maintained at the minimum level to achieve this; i.e. free market forces prevailed.”
Previous ONS surveys had shown that the EU lorry driving workforce in the UK had dwindled somewhat post-Brexit and post-pandemic. However, as Smith explains, the pandemic restrictions particularly influenced the numbers:
“I think a number of drivers actually went back to their home countries for extended periods, especially in the summer. They then didn’t come back to the UK until they really had to earn more money, because they knew they might not see their family again for quite a while,” Smith told trans.iNFO.
Smith was keen to stress that there is no concrete evidence that pinpoints the precise reason behind the slight post-pandemic increase in the EU lorry driving workforce in the UK. Even so, based on his observations and anecdotal evidence, Smith said:
“I believe [the EU increase] is a combination of people who are within the UK, who have settled status and have the option to do other jobs, but use their HGV driving licence as a backup for work.
They use the licence at times of peak as this is when they can get the best rates and where they can get contract work that gives them guaranteed weekly income.
Then, as soon as that becomes unreliable, which is generally the first half of the year, they go back to their other occupation. That could be taxi driving, parcel delivery or any form of trade.
You’ve also got another group that go back to their home country for a period of time but retain their address in the UK and maintain enough time in the UK to keep their settled status.”
Table: HGV Driver Shortage Crisis Where Are We Now? by Driver Require (figures sourced from Office for National Statistics)
Further evidence of EU lorry drivers becoming more active in the UK is Driver Require’s own lorry driving workforce.
“It has surprised me that post Brexit, we were able to increase the number of European workers, predominantly Eastern European, at Christmas last year, by 25%. It went from 40-50% for that three month period of peak before dropping back down again to 40% in the first quarter of this year.”
News of a rise in the number of EU drivers working in the UK, even if the numbers represent a small part of the country’s workforce, may still be of concern to truckers who believe Brexit has contributed to their wages increasing.
In the opinion of Smith, however, it is large companies with strong bargaining power that are predominantly responsible for constraining driver wages:
“People say that the European workers forced down the wage rates. It’s not true. What actually was forcing down the wage rates was the fact that the British, and most European, haulage sectors are highly fragmented.
Around 60% of the UK haulage sector have fewer than 15 vehicles. Everybody sees big branded companies like DHL, Wincanton, Culina and Stobarts on the roads, but the majority of operators are actually family owned or small businesses. And they are very weak from a negotiation perspective.
Yet, the predominant users of freight are the big companies like the supermarkets, high-street retail giants, construction companies and petrol distribution companies. These are incredibly powerful, and they dictate the haulage rates. Therefore, they have squeezed the margins of the haulage companies who don’t have the strength to fight back. And they compete incredibly aggressively.
You’ve only got three costs in a haulage company; the vehicle and its maintenance, fuel, and labour. Each one is approximately 1/3 of the cost, and you can’t simply reduce your fuel cost.
They index that as part of their contract because they have no control over the fuel costs. They do what they can to control the costs of their vehicles and their maintenance. But all of that is regulated, and it’s market driven. So the only thing they can really control is the labour cost, and they just push it down. That’s why we ended up with incredibly tight control of the labour costs and also working conditions.”
There have been at least some signs suggesting things have moved in the right direction when it comes to wages and conditions. The severe driver shortage of autumn 2021 that caused supermarket supply chain problems saw numerous firms raise rates to recruit HGV drivers. The shortage also brought the need for HGV driver facilities into the spotlight, and the UK Government has now allocated over £100m in funding for this purpose.
On the other hand, there are reasons to be concerned, which is reflected in Driver Require’s conclusion that a “bleak outlook” lies ahead.
The reasons for this dark forecast stem from a number of factors. One of them is the general pace of inflation eclipsing the positive impact of the 2021 wage rises. The other is increased haulage costs (e.g. high fuel prices, cost of fleet decarbonisation) that will continue to see companies do all they can to keep wage rises to a minimum.
This, argues Smith, will eventually see drivers leave the industry until another severe shortage causes wages to rise again, as in 2021.
“There will be wage erosion due to inflation. If the wages don’t increase as fast as inflation, there will be a real-terms reduction in wages over the coming years. At the same time, there will be the continuing effects of the driver workforce ageing while fewer young drivers replace them.
Drivers will continue to work until they realise that they can get paid more elsewhere. Then they’ll leave, while new drivers just simply won’t join.
In about 5-10 years we will have another slow but very very significant labour crisis and it will need to get to a point where it becomes so painful that wages go back up again. Then we’ll get a new influx of drivers, but it would be too late at that point, which is why I say there’s a bleak outlook for the sector,” said Smith.
Interestingly, Smith also challenged the narrative that free or subsidised training schemes have alleviated the UK lorry driver shortage – again stressing that working conditions are what need to be improved in order to improve attraction and retention:
“Another misconception is that the UK Government’s initiatives to subsidise and promote training of HGV drivers alleviated the “driver shortage”; this is incorrect, these initiatives did not alleviate the UK HGV driver shortage.
Naturally the government will promote this message, but the reality is that there was already sufficient training capacity in place. The real issue was that wages and working conditions were insufficient to retain the drivers who had been trained.
Many left the sector due to disillusionment with the wages and conditions, to the point that demand was just met by supply, but no more, making the market vulnerable to significant fluctuations in demand.”
Although some may be hopeful about automation being an answer to the shortage potentially coming our way, Smith believes that such an outcome, at least in the foreseeable future, is unrealistic:
“There’s no technology at the moment that is forecast to reduce the demand for drivers really.
There’s talk of convoying and driverless vehicles, but in all honesty, in the UK the roads are not designed for that. You can’t have convoys of driverless vehicles because it’s too dangerous – our roads are too congested and too unpredictable.
It’s different if you’re in America, Australia or some parts of Europe where you have long, motorway trunking distances. Even in the case of Europe, in France or in Germany the exit and entry lanes are too sharp for a convoy with driverless vehicles.”
A potential means of solving the pressure on driver wages, argues Smith, is for a collective bargaining process or a minimum HGV driver salary similar to what is in place in Denmark and the Netherlands.
“If you go to the Benelux countries, they have a level of unionisation, or at least government intervention in the pay deals that are made for HGV drivers. There’s nothing like that in the UK. The Unite Union is the closest we’ve got to a union that represents drivers. Even so, they only represent a small fraction of the drivers.
You do hear of pay disputes at some big companies that can result in 10 to 15% increases, but they’re relatively rare.
The crisis we had in 2021 was a result of rising wages across the nation out of necessity. But what will happen now is that there isn’t any representation of that workforce. And there is now a situation whereby supply meets demand. In fact, demand probably exceeds supply right now very slightly.”
Calls for collective bargaining of minimum HGV driver wages have nonetheless been thin on the ground. One of the few persons to promote the idea has been Unite National Officer Adrian Jones, who was quoted in 2021 as saying he would like to see the Dutch system, which involves two huge trade unions negotiating conditions with a group of employers, come to the UK.
Given neither the government nor the UK’s trade bodies have been enthusiastic about collective bargaining, the chances of the system coming to the UK appear slim.
Therefore, if the scenario referred to in Driver Require’s report were to become a reality, the UK could be faced with the unnerving prospect of a cyclical driver shortage everytime wage levels bottom out.