What they need to do to keep on trucking
The large trucks for various UK and international haulage firms traveling up and down our motorways used to be one of the most common sights you could see if you spent any time on the road.
While they are still there in their hundreds, it’s undeniable that there are less than there used to be.
Haulage industry insolvencies 2019 to 2022
Since 2019 there have been 1,167 insolvencies in the road haulage sector – of which 40% (417) occurred in the last 12 months alone.
The Covid-19 pandemic and subsequent lockdowns and government support provided support for the sector during this time and artificially depressed the potential numbers of haulage businesses that would otherwise have gone into administration or closed down via a liquidation process.
In 2022, all of these support mechanisms were finally removed so we saw an annual increase of 47.8% in insolvencies.
Why are haulage companies so vulnerable?
Haulage companies are businesses like any other and as such are subject to the same economic pressures facing all businesses, together with a range of sector specific factors that will have an ongoing bearing on them:
- Rising fuel prices – as such a heavily fuel dependent industry, haulage is particularly susceptible to any spikes or sustained increases. Petrol prices rose on average by 23% in 2022 with diesel increasing 27%. An average HGV doing 100,000 miles a year would pay £467.50 to fill their tank which is an increase of £127.50 or an extra £6000 per year. A haulage company with a fleet of 100 would see their monthly fuel expenses increased by just under £50,000 – which annually would equate to £2 million across the fleet – a £600,000 annual increase.
- Driver shortages – a lack of trained and qualified HGV drivers caused by an aging workforce, relatively low wages and a lack of new entrants taking their place has had an effect. This leads to increased costs on haulage companies to recruit and retain staff drivers or having to pay even more to hire agency drivers
- Regulation and compliance – the haulage industry is subject to many more regulations than several others including vehicle emission standards, maximum working hours directives for drivers and other health and safety requirements
- Economic issues – the flatlining economy and cost of living crisis will have downstream effects for haulage as customers will be rethinking their own strategies based on how they are experiencing the wider economic picture. The energy crisis will also have exerted downward pressure on prices and demand, which will have a negative effect
- Technological disruption – the rise of electric vehicles and the implications of them being adopted into the UK’s delivery and logistical supply chains will not be lost on directors of haulage companies. When is the right time to go electric? What will this mean for the existing fleet? Before he blotted his copybook with his running of Twitter, Elon Musk had some interesting ideas at Tesla including autonomous driving which might be closer to being viable and released than we might expect. This is one area that could completely revolutionize the haulage industry, with disruption and chaos accompanying it.
- Brexit – the UK leaving the European Union has had several negative downstream effects for the haulage industry, as the TV pictures from Dover over the Easter weekend have driven home to the wider public, scenes directors will already be all too familiar with. Increased customs bureaucracy and delays are compounding the issues for international import and export companies and UK based firms. Potential harmonization of existing standards, agreements and rules would help the industry – such as removing customs checks in the Irish Sea between the UK and Northern Ireland but they of course are yet to be implemented.
- Business and financial issues – like every other company, haulage businesses are not immune to bad decisions and complications such as poor cash flow management, late and non payment from customers, high overheads, bad cost control, risk management or strategic planning, and/or existing high levels of debt which high interest rates will make even more expensive to service.
Chris Horner, insolvency director with BusinessRescueExpert, said: “Like a lot of other sectors, the haulage and road transportation industry has had a rough time of it over the past few years.
“Their fuel costs have gone through the roof along with the rising energy costs every business has had to absorb as well as soaring inflation and interest rates eating into their profits instead of letting them reinvest them.
“Haulage firms that operate in the EU are also having to deal with the effects of Brexit which further hampers their ability to be competitive against rivals from any of the other 26 EU member states.
“Several are looking at mitigating strategies including cost management, diversification and adopting new technology but none of these in isolation could completely turn around a company that is already undergoing financial strain.
“One thing the haulage industry is rightly renowned for is strategic forward planning. So even if they are not in a bad position at the moment, they should absolutely consider getting some impartial professional advice to ensure they won’t be.”
We offer a free initial consultation to any director or business owner who wants a better understanding of what options are available to them to help their business.
Whether they are looking to protect and strengthen an existing business undergoing hard times or to close down an unviable one – our expert advisors will be able to guide them through a range of choices that they could follow depending on their own circumstances.
Help is at hand but only if they get in touch first.