The International Road Transport Union (IRU) have called on governments „to take urgent action” to prevent a „looming wave of bankruptcies” and have warned that the road transport industry is on the brink of collapse.
The IRU went public on the need for simulus after its analysis of governmental measures in 80 countries showed that most road transport operators, 80% of which are SMEs, did not benefit from support measures.
In addition, the IRU believe that severe problems with cash flow and revenue growth, as well as fixed asset turnover, are all indicators of „an upcoming wave of bankruptcies”.
„Grim” outlook for 2020
In the November update to the IRU’s COVID-19 Impact on the Road Transport Industry report, it is said that the outlook for 2020 remains „grim” across the sector. The report forecasts that road transport companies globally are set to lose USD 679 billion, which represents an 18% decline compared to 2019.
The IRU’s November update argues that while airline and railway companies have received massive bailouts, road transport operators, whose decline in annual turnover is estimated to exceed 1 trillion dollars, have received „almost no financial support”.
Road transport operators in Europe at maximum risk
When it comes to business default risk, the IRU’s report finds that road transport operators in Europe carry a level 10 risk – the highest possible in the 1-10 scale. In other regions, the level was 9. The reason for this is mostly due to supply chain disruptions during pandemic peaks.
The risk level is based on an estimate of corporate defaults, payment periods recorded by buyers, corporate financial results and the status of payment terms and credit allocation.
What needs to be done
In the aforementioned November report, it is argued that loans and furlough schemes have proved to be insufficient for the road transport industry. Therefore, in order to prevent the industry from collapse, the IRU claim that governments across the globe need to provide cash grants and cut taxes.
Unfortunately, a survey of IRU members from 79 countries found that 75% of their respective governments had failed to provide cash grants to SMEs or road transport operators. Overall, only 19% of companies were satisfied with their government’s aid packages.
Moreover, the International Road Transport Union strongly encourage the use of digital solutions to allow the contactless exchange of paperwork related to the transfer of goods.
Last but not least, the organisation is fiercely critical of what it calls the rapid and „uncoordinated implementation of rules and restrictions” in several countries.
If these concerns are not addressed, the IRU warn the consequences are as follows:
- Mass insolvency of road transport companies is inevitable.
- The global recession will be more devastating and longer than currently predicted.
- People and essential goods will not be transported to where and when they are needed.
- Economic development and recovery will come to a standstill
Why governments need to step up
The IRU stress that the global economic and social recovery from the pandemic is dependent on a well-functioning road transport sector. This in turn depends on millions of road transport operators staying in business, which is why government support is so vital.