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“It’s cutthroat.” UK hauliers continue to fall on their sword amid grueling market conditions

We speak to representatives of Pall-Ex, Pallet-Track and Mobile - People.Powered.Logistics to get the inside track on the daunting challenges currently facing the UK haulage sector.

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Last month, we took a look into the dire situation being faced by many UK haulage companies. Records show a significant upturn in UK-based road transport firms entering administration, and subsequent media reports have also documented how numerous hauliers suffered this fate during peak season.

Since that report, the Spring Budget has come and gone, and although some relief has been offered to the industry in the shape of a freeze on fuel duty, the situation remains harrowing for many in the sector.

In reaction to the Spring Budget, Richard Burnett, CEO of the RHA, expressed satisfaction that the Chancellor had taken on board some of the RHA’s recommendations, particularly the decision to extend full expensing to leased vehicles and assets. This move, he believes, will offer significant support to hauliers and coach operators, especially amidst the backdrop of higher interest rates.

However, Burnett also expressed disappointment that the Spring Budget did not provide direct short-term support for operators.

“We are however disappointed that the Chancellor missed the opportunity to provide direct short-term support for operators. With record numbers of haulage firms collapsing last year and the trend continuing, many operators were hoping for a temporary suspension of the HGV Levy and VED on HGVs as well as incentives for the take up of alternative fuels which can drastically reduce tailpipe emissions,” Burnett said.

Given the outlook remains especially challenging for the foreseeable future, we have taken the time to speak to a number of industry representatives to learn why the haulage industry is under unprecedented pressure, the circumstances that have led to the situation, and what could be done to improve matters.

Years of neglect

To begin with, it’s important to look back not just at the last few years, but the long-term historical picture.

Although the impact of coronavirus, Brexit and Russia’s invasion of Ukraine is undeniably significant, it is also apparent that a historical lack of support for infrastructure, and the haulage industry in general, has eventually come to roost.

“When you look through the history of road transport, it’s been under invested by every government since the end of the Second World War. There is no help for haulage companies when the country grinds to a halt, with a national pandemic and everybody sees how important we are, and that people had perhaps appreciated for a little while how we had been underinvested in as an industry by the government” Kevin Buchanan, CEO of the Pall-Ex network, told trans.iNFO.

Photo: Pall-Ex press materials

The lack of investment in infrastructure is also lamented by Ian Jolly, Director of Mobile – People.Powered.Logistics, who told trans.iNFO:

“It’d be lovely if we all had mega rail hubs, where we could cross-dock the freight. We could drive through, similar to a pallet network hub, and offload onto a high-speed freight train to the next city. At the same time, we could collect from there and do the final mile via electric vehicles. But we’re nowhere near having that type of infrastructure. It’s fantasy”

Should the logistics industry in the UK be right to expect support? Some MPs in the governing party have suggested that it should be up to the industry itself to fund lorry parking facilities among other things.

Countering that opinion, Buchanan told trans.iNFO that there should be state support for the haulage industry due to its strategic importance to the UK economy, similar to the support the agricultural sector receives:

“We give farmers grants because it is critical to our security and our economy. I would argue the haulage industry is equally important. You can grow everything you want, you can make anything you want. But if it never leaves the factory or the field, and never gets to the consumer, what’s the point? It’s a real issue that there is no investment in the infrastructure required for the road haulage industry to modernise and develop. It should be done in partnership, but the answer has always been to just let the haulage industry wholly solve the problem.”

The cost of the green transition

The issue of infrastructure has arguably never been more important given the ambitious targets the UK Government has for decarbonising logistics.

It goes without saying that hauliers will need sufficient access to charging facilities in order to have the confidence to invest in electric trucks – especially when you take into account the expense of these vehicles.

“You’ve still got to be able to charge the trucks and get into the cities. If you push the yards out into the country, there is less chance that the facilities will have the electricity wattage that is needed, and the time & distance for the final mile increases. That’s a significant barrier to entry,” said Jolly, referring to how many logistics facilities are being driven further away from urban environments.

Photo: Pallet-Track press materials

These issues haven’t gone unnoticed by Pallet-Track CEO Stuart Godman either:

“The cost to put an electric HGV on the road is extremely high, both in terms of purchase cost and insurance. So while there’s a willingness to do as much as possible, there’s also got to be an incentive and some form of subsidy due to the fact that margins are slender. Haulage isn’t a high-margin industry that’s awash with cash. We try to do our thing for the environment through solar energy and electric vehicles, including switching our company cars to electric. All that comes at a cost though. At the moment most businesses are working on survival rather than massive investment in charging infrastructure,” Godman told trans.iNFO.

How the turbulent events of recent years have had an impact

As referred to earlier, the challenge of navigating the effects of COVID, Brexit and the war in Ukraine has taken its toll on the industry too.

“Since COVID struck, the country has been hit by a range of turbulent events. Brexit for example, has made it twice as difficult for us as most other companies in the EU nations. Then there’s the war in Ukraine, not to mention some extreme political and economic naivety that exacerbated underlying economic problems. I think that the will for a lot of SME haulage companies to carry on is running out given they are making such small returns on the investments that are required,” Buchanan told trans.iNFO.

Putting into context the scale of the problems the industry has faced post-COVID, Buchanan added:

“To give you an idea, when the crazy boom came about in 2021 as we came out of COVID, we put up our operative wages by just under 20% just to stand still. Now, we increase pay every year, but that’s the level of uplift that we had in staff costs alone. Then you put fuel on top of that, plus more expensive insurance and other increased costs, and you’re left with haulage companies who were profitable and made a modest return, suddenly having to make serious efforts to make it worthwhile and just stand still. As business people they are thinking to themselves, ‘what am I doing this for?’”

One of the consequences of the “political naivety” Buchanan referred to has been higher interest rates. Ian Jolly told trans.iNFO that these rising interest rates have in turn had a significant impact on some haulage firms.

The Director of Mobile – People.Powered.Logistics also noted that these higher rates have come during an incredibly competitive period for the haulage industry:

“A lot of clients became very appreciative through the COVID years, which helped form some long-term relationships. But [freight] rates have had to go up at an incredibly steep rate because of the driver shortage and wider inflationary pressure across the supply chain. Now that we’ve come out the other side, some haulage customers have felt the pinch, and they want to return to a pre-COVID normality of sorts. That doesn’t exist anymore, though, as interest rates have gone through the roof. We’re lucky we aren’t massively exposed to variable interest rate charges that have been forcing some companies to refinance or risk running out of cash, even when profitable.”

Jolly continued:

“The problem is that transport procurers can often be their own worst enemies. Everybody wants a cheaper rate, and unfortunately, there are some desperate companies out there willing to take a risk. It’s great to be competitive and super lean, but if there is no fat left for a rainy day, it can be easy to catch a cold with the wrong client. In the long run, it’s just reducing options in the market. We can see what’s happened with the parcel sector, eventually, it consolidates, and you won’t have the same levels of choice. That means prices inevitably go up in the long run anyway.”

Watertight contracts few and far between

Another serious issue Jolly touched on was the issue of contracts, or rather the lack of them.

According to Jolly, it is very challenging to get agreements signed. Moreover, even if there are contracts in place, they may be terminated with a notice period of a month or even a fortnight or just a week.

Photo: Mobile – People.Powered.Logistics press materials

This naturally makes it very difficult for hauliers to make investments and plan long term.

“You’ve got all the kit in place for the client; the £120,000+ truck, the trailer, the driver, tax, and insurance. You have to invest in these things, and you’re working for a minimal margin. If the client leaves, you’re left with all the kit and you’ve still got to pay for it. If you lease it, then you’re in even more trouble, because there’s nothing you can do with it when market volumes are low. At least if you own the truck, you can sell it. When there’s an economic downturn like we have now, anyone who loses a multi-truck client and is stuck with all that kit, will be haemorrhaging money.”

Moreover, Jolly stresses that the situation is both serious and profound, and is putting “everybody at risk, no matter how big you are”.

“You’re always at that risk because there’s no firm, legitimate contracts that protects you or the client, either party can just jump ship. We had a client recently who had put a contract out to tender, and we were there or thereabouts. Then another offer came in that was 40% cheaper. This was just mind-boggling given how much it costs to operate a business in 2024. What you see is that clients can just end up bouncing around different carriers until they run out of choices. It’s cutthroat out there – unfortunately, there’ll be many more who don’t survive this,” the Mobile – People.Powered.Logistics Director told trans.iNFO.

Impending capacity crunch

In an exclusive interview with trans.iNFO published earlier this month, new Girteka CEO Eijsink predicted that a serious capacity shortage is on the horizon.

The theory behind this is simple; there is a significant shortage of skilled workers that’s being masked by the low demand we are witnessing on account of the economic downturn. Therefore, once the economy picks up again, there will be inevitable capacity challenges.

Asked about the possibility of this coming to fruition, Buchanan told trans.iNFO:

“We have a massive labour shortage in many areas – categories that people either don’t want to or haven’t got the skills to do. HGV drivers are one of them. And I think we are looking at the perfect storm in about 20-24 months. At the moment demand is suppressed because the economy is suppressed. That means there is a bit more driver availability. However, as the economics start to pick up, you need people to allow a country or a company or even the country to grow, and we have got a massive problem coming.”

Buchanan added:

“The average age of an HGV driver in this country is 56, so the reality is that we don’t have enough people of working age for all of the jobs in this country to solve its capacity issues. That’s definitely going to be felt more as the sector is seen as less attractive as people have the wrong perception of logistics.”

Buchanan’s comments were very much echoed by Stuart Godman, who told trans.iNFO:

“It’s probably fair to say that the driver shortage we saw through the pandemic is being disguised at the moment because of lower volumes in the market. When we get back into growth, we could walk into a challenge whereby demand increases but supply falls. There are also drivers that may have decided to retire or change profession. The average age of a driver I think is in the mid 50s, some of them may not be there. I could see the driver shortage reestablishing itself. Then costs would rise massively as you’re paying to retain and then you’d encounter another problem – who’s going to absorb that increase, is it yourself or the customer?”

The need to attract talent

Naturally, with the industry desperate to recruit and find the right people, companies are also having to go the extra mile when it comes to recruitment.

“People don’t necessarily see logistics as a sexy industry to go into. We have to work incredibly hard to try to develop all kinds of programs to attract young people. There’s graduate programs, apprenticeship programs and personal development programmes. You have to compete with all kinds of other industries to have any chance. It’s a frightening landscape,” Buchanan told trans.iNFO.

Photo: Pall-Ex press materials

This has necessitated a number of different approaches, as Buchanan explained:

“What we’re trying to do at Pall-Ex is to educate people in schools to offer opportunities to young people who can take opportunities with the business when they are older. We also recruit from military roles in our organisation because they’ve got great skills. We’re looking at markets where we can attract people in, and then catching young people earlier and educating them about the great career paths, whether that’s driving a truck or working in IT or finance. There are a wide variety of careers in logistics for everyone but it all requires time, effort, focus, energy and investment.”

Meanwhile, according to Godman, the lack of labour has emphasised the importance of actions to retain staff via high levels of job satisfaction:

“You have to make sure that you’re a great company to work for. Money is one thing, but that’s not normally the biggest driver of why somebody leaves a business. Respect, treating people well, giving people the right tools, these are important too. People will stay if they’re treated fairly and well. We put a lot of time into colleague engagement to ensure we retain our colleagues and we make Pallet-Track a good place to work. That way, if there’s a shortage of drivers or other professionals, staff will be more likely to stay and not be tempted by an increased salary elsewhere.”

Tackling the stigma associated with trucking and the haulage industry

Besides rising costs, a lack of skilled labour, and shortcomings with infrastructure, haulage companies are continually grappling with weight and emissions restrictions that are making route planning increasingly difficult.

Despite the pandemic evidently bringing the value of haulage to the attention of the public, the mood has quickly soured.

Reports of new HGV bans coming to villages and towns throughout the country are a fixture in the local press, while clean air zones are also restricting the access of some older vehicles to urban areas.

In addition to this, attempts to build infrastructure such as lorry parks continue to be thwarted by councils at the planning permission stage.

“The UK has beautiful cobbled streets, mediaeval towns, and other unique architecture that makes our cities charming. At the same time, this makes it even more challenging when trying to deal with heavy deliveries. You’re not going to transport big, bulky goods in multiple small vans, that’s just not going to happen and certainly not eco-friendly. It’s hard for people to sometimes appreciate what’s actually travelling in the truck and what it takes to actually move some types of products. You can’t put tall, bulky goods on cargo bikes with a 1.2 ton pallet. They would have to be broken down into three, meaning you would continually be returning for the next reload – you would definitely have some fit drivers though, if it were even possible to keep pedalling,” said Jolly.

Taking all of this into account, what can be done to improve the image of the haulage industry in the UK?

“People have to understand that our model [a pallet network] is the most efficient and has the greenest footprint of any part of the transport sector. I think educating people about this is really important. So they won’t just see a great big dirty lorry, but rather something that’s actually critical to the country’s economy and of a scale that makes it efficient and sustainable,” stressed Buchanan.

Moreover, Buchanan feels that the skills of HGV drivers are under appreciated:

“The other thing to consider is that unlike van drivers, HGV drivers require a special qualification to drive their vehicle. You are tested every year and you must keep your CPC training up to speed. Your tachograph shows how you’re driving too. You don’t get that with a van driver. So not only is using many vans less green, it’s probably less safe and it creates more congestion. But the average person doesn’t understand that, they just see big vehicles on the road and often think negatively about them” the Pall-Ex CEO told trans.iNFO.

Battling against adversity

The UK haulage industry is well-known for its incredible ability to continually adapt to the myriad of challenges that have been thrown at it over the decades. These are traits that are still evident today as the challenges mount up to arguably unprecedented levels.

However, it is clear that not everyone will make it through the perfect storm that hauliers in the UK and many other countries are currently driving through.

The insights from Buchanan, Godman and Jolly show how labour shortages, high interest rates, the prohibitive cost of zero-emission vehicles, and rising costs, are all taking their toll. Although hauliers can take action to mitigate some of the effects of these, it seems that addressing key underlying issues such as a lack of infrastructure will require state funding. Sadly, for now at least, such help appears unlikely.

Featured by Mike Bird