HAULAGE COST MOVEMENT 2019 - rha.uk.net Prepared in partnership with Road Haulage Association and Menzies LLP
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HAULAGE COST MOVEMENT 2019 rha.uk.net Prepared in partnership with Road Haulage Association and Menzies LLP
The purpose of this annual road haulage cost movement report is to assist members and their customers to understand trends in the industry. It reflects cost movements, reasons for changes, and makes predictions. Every firm has different costs and circumstances which are unique to each company but here we report on averages as provided to us by members in our annual survey. The haulage sector itself is responsible for moving 90% of the UK economy and the RHA represents over 7,500 haulage related businesses from owner operators, SME’s and 90% of the largest companies operating in the UK.
SURVEY ON THE
MOVEMENT OF COSTS
Period: 1 October 2018 - 30 September 2019
Foreword From Menzies
We are delighted to extend our partnership into a third year with the RHA regarding the production of the
annual RHA cost report which reviews the key factors affecting the industry over the past 12 months.
We believe that this report is a key document for the RHA members, providing a spotlight on the issues
and concerns facing businesses of all sizes throughout the industry.
At Menzies our aim is to provide proactive advice to clients, working collaboratively to find solutions to
industry issues by utilising our expertise in everything from business strategy and corporate finance, to
audit and tax advice.
A number of our clients in the sector have approached us over the past year to discuss their concerns
over the current trading climate and for what the future may hold. The recurring items seem to fall under
three key headings;
Brexit
Driver shortage
Margins
The Brexit conundrum is yet to be solved and the key point our clients have been crying out for is clarity
from the Government of what any deal would look like, and the terms of any implementation period.
At the time of writing, the hope is that the General Election will result in a conclusion on the subject and
ensure the industry has a clear direction and businesses can plan for the future.
For a number of years, the industry has been concerned about the age profile of HGV drivers and the
lack of new recruits to replace them. The apprenticeship levy was seen as a step in the right direction to
address this. However, the requirement to have 20% off the job training means that for most, this is an
uneconomic solution. Brexit has clouded the topic further with an estimated 60,000 EU workers covering
the shortfall. It is clear that the industry is facing an acute issue, one which needs intervention from the
top. At Menzies, our clients have been able to utilise our specialist people solutions consultancy to
consider ways to address this issue, with the key area of recruitment and talent retention high on the
agenda.
Finally, our most active area of advice is what can be done about margins? The haulage industry is
highly competitive, and the margins made on freight transport tend to be in the single digits. It is likely
that the future will see a market correction through either business failures or consolidation of firms, and
as such, it is imperative that operators position their business to reach their desired results. Historically
many operators have been supplementing their haulage income with the more lucrative warehousing
and handling elements of the supply chain. Whilst this approach or finding a niche sector (such as
refrigerated or specialised loads) has helped, one area that is consistently under-utilised is data analysis.
Every firm within the sector collects a huge amount of data, from telematics through to customer records.
However, what then happens with this data varies massively from business to business. Our advisory
team has had significant success in helping clients review and understand this data through various
methods, such as customer profiling and cost controls.
At Menzies, we see one of our key roles is to be an advisor that positively challenges our clients to drive
their businesses forward. Therefore we strive to help businesses and their owners be in the best position
to achieve their long-term goals.
Page 3 Haulage Cost Movement 2019BREXIT DELAYS & INDECISION
COSTING BUSINESS DEARLY
From the outset of 2019 the UK was under pressure to
solve the Brexit puzzle that resulted from the national
referendum on 23 June 2016. Political squabbling and
posturing wasted a great deal of time (that we were
advised to use wisely), making the decision go to the wire
several times already.
Where does that leave us now? The Christmas peak
should get delivered without the massive side issues, such
as ports and roads blocked, with goods waiting to get to
their delivery points. Of course, the country will need to go
through it all again in the New Year once Christmas and a
General Election are over.
RHA has remained neutral on Brexit itself, simply wishing to inform its members of requirements so that
borders can be as free-flowing as possible. The same applies for traffic concerns, especially around the
congested Dover Straight and Eurotunnel access routes in Kent. We also want (and need) transitional
arrangements in terms of access to the European market and mainland.
BACK IN BRITAIN
Road haulage operators want clarity to enable investment logically, especially surrounding emissions
issues such ULEZ in London and Clean Air Zones nationally. There are concerns over the Direct Vision
Standard which will be a permitting scheme to enter London. The safety scheme, which will come into
effect on 20 October 2020, is aimed at helping to protect vulnerable road users and gets progressively
tighter as time goes on with heavy fines for non-compliance. Application is free but you need to
remember to complete it. There are fuel duty concerns, even though it has remained consistent
(57.95ppl) since March 2011. The General Election result will likely determine what happens to fuel duty,
as well as what the future holds for, road pricing, as an example. We have called for the Government to
maintain and extend commitments to long term investment in roads, specifically the strategic road
network, the major road network and other major local roads ensuring that goods can be moved
effectively in a timely and efficient way.
The skills shortage is the biggest issue. In fact, 67% of members who completed a short survey
during the packed RHA Autumn Conference (October 2019) considered it their priority concern.
ECONOMIC FACTORS
Global recession appears to have been dodged, as reported by Reuters on 19 November, where it was
explained that world trade volumes had previously dropped 1.5% from June to August compared to the
same period in 2018. However, the report went on to explain that data following this period appears to
show that the slowing down had at least eased, citing manufacturing, industrial output (US, Germany &
Japan) and vehicle manufacturing (US) among the helpful contributors.
Page 4 Haulage Cost Movement 2019At home, the Bank of England (BoE) warned again at the beginning of October that a no-deal Brexit was
threatening the economy. Confirmation came in November that the UK had avoided a technical
recession after a growth of the slimmest margins. Gross domestic product (GDP) in Q2 showed a
decline of 0.2% but Q3 turned this around with a 0.3% increase. The Office for National Statistics (ONS)
reports that the economy shows signs of slowing with just a 1% growth compared to Q3 in 2018. This
itself is the weakest figure in nearly ten years (Q1 2010). The service and construction sectors gave
positive contributions towards growth.
Inflation figures under the Consumer Prices Index (CPI) showed a fall to 1.5% (previously 1.7%) in
October which was in line with the BoE forecast. Here, the transport and energy prices contributed to the
fall in 12-month growth rates for CPIH. The BoE, in its Monetary Policy Report (7 November), stated that
the reason for the sluggish economic (GDP) growth was Brexit-related but also due to weakening global
economics reducing demand for UK exports. It expects inflation will fall further next year on assumptions
that Brexit will deliver a deep free trade deal with the EU. Both interest rates and the Bank Rate will drop
below its current level of 0.75% which is actually higher than it has been for the past ten years. Specific
mentions in contribution to the projected lower 2020 inflation were falls in energy prices and water bills.
ONS reports (October 2019) that the value of construction (new work) in GB continued to rise in
2018, reaching its highest level ever at £113,127 million. Driven by growth in public sector work
of £2,697 million within private sector contributions of £750 million.
In Q1 of 2019 insolvencies were second highest in the construction sector (services were the highest) with
15% of recorded cases in that quarter. Construction data output for Q2 (April to June) saw a decrease of
1.2% described by some as ‘dropping like a stone’ with most blaming the losses on the Brexit waiting
game. Meanwhile most staff were being retained. Q3 (July to September) reversed this trend increasing
by 0.6% with new work on the increase but repairs and maintenance decreased.
UK car production has been disastrous this year, and in late October SMMT, it was announced that
September saw a -3.8% fall. To make matters worse, the year to date at that point showed an appalling
-15.6% situation due to a perfect storm of global demand declining as a result of political and economic
pressures. The sector is highly concerned about Brexit and in previous years we have described car and
other vehicle production as a barometer of the UK economy. The sector wants and needs to know whether
they will be operating under tariffs or not. Meanwhile, these very soft sales affect the UK operators whose
business it is to transport vehicles, and it goes without saying that they are not able to suddenly shift to
other work streams with extremely expensive and dedicated vehicle carrying trailers.
Retail volumes increased by 0.2% in Q3 of this year, which was the lowest growth since April
2018. It appears that only food stores were the main area to see any growth at all over the
three-month period while fuel sales did see growth in October itself.
In what appears to be good news, the Chinese firm Jingye announced in mid-November that it would
invest a huge £1.2 billion in British Steel in a bid to rescue the company and also thousands of UK jobs.
Based in the North East, the rescue should also mean that operators who work for BS also sustain their
work after a worrying period.
SDC trailers (Chinese owned) recently announced redundancies following loss of a Lawrence David
contract. However, they blame the as yet unknown number of redundancies on loss on trade as a result
of Brexit.
Page 5 Haulage Cost Movement 2019CONGESTION ‘SOLUTIONS’
The M6 toll generally alleviates the normal congestion on the main M6 route. However, the toll cost
increased again in June 2019, and at the time, we said the decision was unlikely to encourage more
operators to use the road. Logic might normally dictate that if you wished to increase footfall you
consider lowering the price, not increase it. The RAC went a step further and called for the toll section to
be integrated back into the Highways England network ‘toll-free’.
Last year we reported that the previous increase in July 2018 added another 4.54% to the HGV toll price
and the 2019 increase (50p to £12) for the 7am to 7pm peak amounts to another 4.3% for a standard
charge, while TAG holders receive a 5% discounted rate.
A DfT study of 2018 data recently revealed that many motorways had average speeds of just 25mph.
Regular users will not be surprised to find the M25, especially the approaches to the Dartford Tunnel,
have traffic travelling more slowly than the speed limit for built up areas. So-called smart motorways are
supposed to increase traffic flow, but this is at the expense of the lack of a hard shoulder. RHA has
recently stated that better refuge areas and clearer signage would make smart motorways safer. The
message seems to have got through with the Transport Secretary, Grant Shapps, announcing a review
into the safety of smart motorways.
SKILLS SHORTAGE
In its General Election Manifesto, the RHA calls for a reform of the Apprenticeship Levy as it is
not fit for purpose where the sector is concerned. It details that the approved apprenticeship
standards don’t reflect the skills generally required and that the funding doesn’t reflect the cost
of training to the required standard.
C+E (artic) training needs to be included as well because many operators only employ at this level in the
haulage sector. Our estimate is that the industry is critically short of around 60,000 HGV drivers with the
average age being 55, with just 1% under the age of 25. This is essentially a ticking time-bomb. Meanwhile
the estimate is that around £300m has been paid in via the levy but only around £20m has been drawn down.
For years now UK operators have relied on workers coming from other countries. Peak immigration to
the UK of EU nationals was reached in the year ending June 2016. Of course, it was in June that year
that the Brexit referendum was held and since then immigration has been in decline. Many will welcome
that, but not the many who are trying to fill employment positions such as drivers and warehouse staff.
Work remains the main reason for EU citizens to move to the UK. Not all immigration is from the EU
though and the total net gain in population was 226,000 when those from around the world were
included. Perhaps many were coming for specialised work?
Last year we advised how the number of EU nationals working in the UK had fallen by a huge 132,000.
However, this year we have seen an about face with a small increase of 6,000 working here. In total
there are 2.24 million EU nationals working in the UK and perhaps a better viewpoint might be that since
the 2016 Referendum the total of EU workers here has dropped by 21,000.
In November 2019 a consortium of UK business leaders called ‘Full Strength’ called on the Migration
Advisory Committee to lower the salary threshold for entry to the UK to £20,000 per year. It explained
that London alone had 148,000 foreign workers, and businesses would suffer greatly without such
access to this labour source. Of course, it is a doubled-edged sword with accusations that migrant
workers keep wages lower, something many UK workers are annoyed about. In some sectors, UK
workers simply won’t fill certain posts regardless of pay though.
Page 6 Haulage Cost Movement 2019LOGISTICS SECTOR
In his foreword of the 2019 Traffic Commissioners Annual Report, Richard Turfitt pointed out
The importance of mechanised transport to British life and industry was recognised by the
appointment of the first Minister of Transport one hundred years ago.
This is important. In fact, it is a vital sector to the existence of our islands. It is also a huge contributor to
both employment and the economy and pays a huge amount into the taxation system which operates the
UK.
The report then provides some overview details of the industry with UK registered vehicles undertaking:
Domestic freight (UK registered vehicles)
78% of goods moved by road
147 billion tonnes kilometres moved
International freight (UK registered vehicles)
5.4 billion tonne kilometres moved
As the 5th largest employer, the sector employs 309,000 drivers and contributes £124bn GVA to UK
economy. There are many large national and international operators in the haulage sector, but there are
also a great deal of small operators running just a few trucks. These smaller operators fill the gaps, often
sub-contracting for the larger companies. However, they are also less likely to have new trucks and don’t
have the benefit of economies of scale.
The logistics sector faces disruption from gig economy entrants and a cut-throat approach to pricing and
cost savings. Meanwhile it seems customers are ever-more demanding in terms of delivery times which
challenge the operational efficiency of a company. A substantial amount of established company
collapses took part in the front end of 2019, including Beamish (car transporters), Duncan Adams, TAS
Transport, Woodall Group, Simon Widdowson, Hawk Plant, Richard Read Transport, Bedfords,
Nicholsons Transport (Billingham) and NV Transport. For those companies, shrinking margins, rising
overheads, the driver shortage plus falling demand has taken its toll. Quarter 2 ONS data reveals
transportation and storage failures at just over 500 cases, placing them in the middle of the insolvency
table.
In the recently released Motor Transport Top 100 report, the return on sales ratio was reported to have
increased by 0.02 to 2.22%. Average pre-tax profit turned around with a 4.8% increase compared with
2018 figures which MT report as a show of resilience, suggesting those top companies (75% of the Top
100 are indeed RHA members) have focussed on maintaining profit. Remember, last year, the profits
were reported as a 17.7% drop despite a 10.3% growth in turnover.
What does this say? The top firms are taking the view that sanity is clearly preferred to vanity with
shrinking turnover growth but concentration on the bottom line. This could be seen as a warning to
customers wishing to keep their margins at the expense of their logistics partners.
HEALTH & SAFETY EXECUTIVE
From 6 April the HSE ‘fee for intervention’ shot up. Originally introduced in 2012 at £124 per hour, it rose
to £129 in 2016 and, seemingly without any warning, increased to £154 in 2019 which equates to a
whopping 19.38% rise.
Page 7 Haulage Cost Movement 2019CLEAN AIR ZONES (CAZ) ISSUES
The future of the HGV power source is becoming fragmented. HGVs powered by modern EURO VI
technology are still being demonised. For urban environments, smaller electric trucks will start to come to
the fore, and there are the gas-powered variants that are still held back somewhat by the lack of fuelling
points. The trouble is deciding what will be suitable and reliable both now but also in the years to come
during at least the pay-back (depreciation) period.
RHA has been responding to consultations throughout 2019 on proposed CAZ city approaches and our
policy specialist, Chris Ashley, has stated that Government needs to have a re-think to design better
policy to achieve clean air. It has certainly not helped values of previous EURO series trucks which adds
to operator concerns and increases overall logistics costs. In ‘collapse’ of market value is probably a
better description! Chris likens the current approach taken to the Dangerous Dogs Act, where dogs
deemed dangerous were put down, regardless of behaviour. In the case of trucks, they are deemed to
be polluting, regardless of emissions (think Bristol) and punitively charged or potentially banned. How, for
example, will future construction be carried out in such areas?
INTERNATIONAL
International figures from the recently released Traffic Commissioners annual report reveal that the
number of EU Community Licences held by UK operators increased during 2019 by 741 to 33,174. In
theory this is the amount of UK HGVs prepared/allowed to travel to other EU member states and
beyond. Of course, the reality is that the total UK fleet numbers undertaking such operations are way
below that figure, but what it must demonstrate is a sudden preparedness to undertake necessary
international operations.
The present situation for those undertaking such international work is that if a Brexit deal is done any
time before 31 December 2020, the UK will remain in the rules of the EU during an implementation /
transition period. In effect business continues as if the UK is still in the EU until at least 31 December
2020 which is when the implementation period is due to end.
The implementation period exists to allow the UK and the EU to agree a future trading relationship. It is
possible that the UK and the EU could extend that period for up to a further 2 years. At the end of the
implementation period in December 2020 or later, it may be the case that customs formalities will be
introduced. Traders will need to be mindful of the need to continue to prepare for customs under any
Brexit scenario.
Without a Brexit deal, the UK will remain inside the rules of the EU until 31 January 2020 at least. A
further extension of the Article 50 period may be agreed, but that is not certain. Keeping up with the future
changes for international transport is clearly difficult at present the RHA website has a dedicated link on
its home page which assesses what is currently required. This is updated as and when details change
https://www.rha.uk.net/policy-campaigning/brexit-and-the-uk-haulage-industry
DfT roll-on roll-off freight statistics for 2019 (Oct18 to Sept19) declare 3.4 million road goods vehicles
travelling from GB to Europe with the majority taking the Dover Straight route (55%). The next busiest is
the North Sea route which has a greater percentage of unaccompanied trailers but is roughly half the
volume of the Dover Straight. The Irish sea crossing is around half the volume of the North Sea. The
English Channel route is comparatively tiny at less than 3% of total movements and it lost 9% of its
volume in these latest statistics:
2.3 million were powered vehicle
1.1 million were unaccompanied trailers
Page 8 Haulage Cost Movement 2019The powered vehicles figures has dropped 100,000 compared to the previous year’s data but
unaccompanied remained the same. The previous year saw a 7% uplift. The share of UK registered
powered vehicles decreased 2% against the previous 12 months with:
0.3 million UK registered
2 million foreign registered
Poland took the largest market share at 462,000 powered vehicles with other East European countries
figuring high percentages of the volume too.
RHA has warned about the issues of migrant activity around ports and routes to port with the security of
the truck and the driver in mind. A recent example being an attempt to enter a member’s trailer by
migrants on the quayside at the port of Santander, Spain. Then there is the issue of organised smuggling
of migrants and/or people trafficking which came to the attention of the general public in late October
after the horrific discovery of 39 dead Vietnamese nationals who had taken the final leg of their illegal
journey to the UK in a refrigerated trailer. Loads ruined, drivers subject to potential violence and hefty
fines for migrants found on board, all take their toll on the operations to and from mainland Europe. What
this also showed was the unfair use of ‘flagging out’, where an operator uses a foreign HGV to basically
undercut the normal market place. Operators simply want a level playing field in which to compete.
TRAFFIC COMMISSIONERS ANNUAL REPORT
The Traffic Commissioners annual report, published in late October, explains that licenced operator
numbers had fallen in each category (1,784 total) and at a faster rate than the 2018 report at 2.5% loss.
Not only that but the number of vehicles declared had also dropped by nearly 5,000 HGVs in total.
Numbers of operators holding certified copies of European Community Licences seems to be the only
growth, where numbers increased from 32,433 to 33,174 which must have been a Brexit effect. In fact,
when you look at previous years’ annual data, it could be said that the shock of the Brexit vote made
operators consider that EC licences were no longer such a good idea and figures dropped to just over
30,000. However, in successive years since 2016 the numbers have simply swelled back up again.
The report highlights reputational management stating most operators can be proud of their standards
and display a high level of professionalism. Meanwhile, it points out that the “rotten eggs” - those who
cheat and bend rules, have a disproportionate impact and bad news always travels faster and louder. It
is those that are serially and seriously non-compliant that they will go after, including those who are
simply looking to maximise any profit regardless of potential issues.
COMPARISON OF DECLARED OF HGV DATA
In addition to Traffic Commissioners, the Department for Transport (DfT) keep statistics on the total
number of licenced HGVs. In GB terms the latest Q2 2019 information states there are 505,092 HGVs,
while the UK total is slightly higher at 529,810. These higher figures include HGVs available for short
term hire, as well as privately held and vehicles not requiring an operator licence. It is interesting in that
the total UK HGV number is 4,561 more than the 2018 quarter 2 figure, which is nearly the same as
those reported as lost in the O-licencing statistics for the year.
Page 9 Haulage Cost Movement 2019FINANCIAL STANDING REQUIREMENTS -
STANDARD & INTERNATIONAL OPERATOR LICENCES
The Statutory Document No 2 (Finance) was updated mid-November and advises there is no change
where financial standing requirements are concerned. These rates are normally adjusted annually and
must be based on the exchange rate with the Euro on the first working day of the previous October.
VEHICLES PREVIOUS RATE THROUGH 2019 RATE UNTIL 31 DECEMBER 2020
First Vehicle £8,000 £8,000
Additional Vehicles £4,450 £4,450
Restricted operator licences once more remain unchanged at £3,100 for a first vehicle and £1,700
thereafter.
Total Operator Licences and associated vehicles plus community licences
NUMBER OF GOODS RESTRICTED STANDARD STANDARD TOTAL CERTIFIED COPIES
OF EUROPEAN
VEHICLE OPERATOR NATIONAL INTERNATIONAL COMMUNITY
LICENCES* LICENCES
2014-15 39,896 (94,545) 27,739 (172,260) 7,960 (76,869) 75,595 (343,674) 33,121
2015-16 40,265 (99,567) 28,448 (195,487) 8,289 (82,694) 77,002 (377,748) 33,629
2016-17 38,132 (95,701) 27,140 (192,271) 8,186 (82,634) 73,458 (370,606) 30,174
2017-18 37,514 (95,282) 26,682 (199,575) 8,351 (83,619) 72,547 (378,476) 32,433
2018-19 36,475 (94,661) 25,940 (195,342) 8,348 (83,572) 70,763 (373,575) 33,174
O-Licences 18 v 19 Down 1,039 Down 742 Down 3 Down 1,784
Vehicles 18 v 19 Down 621 Down 4,233 Down 47 Down 4,901
*Associated vehicle numbers in brackets
DRIVER AND VEHICLE STANDARDS AGENCY (DVSA)
DVSA guidance on how they categorise vehicle defects in
roadside checks and tests were updated at the beginning of
November. Changes include:
Introduction of tyre pressure checks at roadside
for single fitment tyres
Engine malfunction indicator lamps defects
(plus emission control systems)
Extra notes for assessing lighting defects & number plates
Updates to indirect vision devices
New defects for modified seatbelts
A compliance perspective can be seen from DVSA inspections undertaken on randomly selected
vehicles at randomly selected roadside sites throughout Great Britain. There was no data available from
DVSA in our 2018 report as it did not become available until March 2019 and is now detailed in the table.
It appears to demonstrate relatively stable levels of compliance in the sample size checks.
Page 10 Haulage Cost Movement 2019DVSA FLEET INSPECTION COMPLIANCE DATA
FINANCIAL GB/NON- VEHICLE MECHANICAL PROHIBITIONS PROHIBITION TRAFFIC PROHIBITIONS PROHIBITION
YEAR GB GROUP CHECKS ISSUED RATE OFFENCE ISSUED RATE
CHECKS
HGV 2,530 279 11.0% 2,559 202 7.9%
GB
Trailer 1,360 159 11.7% - - -
2016-17 HGV 2,439 305 12.5% 2,526 336 13.3%
Non-GB
Trailer 2,382 437 18.3% - - -
Total 2016/17 8,711 1,180 13.4% 5,085 538 10.6%
HGV 2,525 269 10.7% 2,527 216 8.6%
GB
Trailer 1,392 146 10.5% - - -
2017-18 HGV 2,460 312 12.7% 2,526 263 10.4%
Non-GB
Trailer 2,408 449 18.7% - - -
Total 2017/18 8,785 1,176 13.2% 5,053 479 9.5%
Up to date DVSA data reveals that the number one prohibition reason is the condition of tyres.
This is both vehicle and trailer related, with the next most common issue again affecting vehicle and
trailer being brake-component related. Both are absolutely essential to road safety and should be a top
priority to operators.
Insufficient daily rest, followed by exceeding the 4.5 hour driving period, are the most common offences
committed by HGV drivers. Excess weight was 8th in these latest enforcement encounters, being
overweight is especially prevalent in the van sector.
THE 2019 SURVEY: 3.85% TYPICAL COSTS RISE (Excluding Fuel)
Results and table produced by RHA/Apprise Consulting following the 2019 costs survey to
members held in early October
% TOTAL COST COST CATEGORY % PRICE MOVEMENT % TOTAL COST
30.09.18 IN PERIOD 30.09.19
13.89% Vehicle, Trailer & Depreciation 2.74% 14.01%
0.81% Road Tax 0.00% 0.79%
2.89% Insurance 4.00% 2.95%
26.42% Driver Employment Costs 5.00% 27.23%
6.70% Repairs & Maintenance 2.25% 6.73%
2.43% Tyres: Replacement tyres, tubes etc. 2.20% 2.44%
16.89% Overhead Costs 4.00% 17.24%
70.04% TOTAL 3.85% 71.40%
29.37% Fuel -2.79% 28.02%
0.59% Additive 0.00% 0.58%
100% TOTAL = Fuel + Other Costs 1.88% 100%
Page 11 Haulage Cost Movement 20192016 Fuel ppl (25/09/16) 88.90
2017 Fuel ppl (30/09/17) 95.18
2018 Fuel ppl (30/09/18) 106.44
2019 Fuel ppl (30/09/19) 103.47
The uplift in percentage terms for 2019 based on our own member survey is 3.85% excluding fuel.
However, once fuel is accounted for, that figure reduces to 1.88% as an overall increase. The overall
cost therefore is just under 0.4% above the inflation figures referenced in the opening section of this
report.
The total cost 44-tonne model demonstrates a total of £151,691 over 75,000 miles and 8.3mpg. The cost
without fuel included (and AdBlue) is £108,304.
Full details of the calculations can be found in the 2020 cost tables document which is prepared
by Apprise Consulting. As ever, members should carefully use their own workings to ensure
costs are covered before attempting to apply any profit margin. Fuel pricing can be volatile and
where possible should be separated as an indexed cost linked to a fuel mechanism, so that this
can be dealt with on a frequent basis. Failure to adopt this will mean loss of fair revenue.
Parking should be viewed as a cost-per-job and built into the costs as such. Available spaces, especially
safe and secure areas, are at an absolute premium in key regions such as Kent. The M25 is of course
always busy and the Cobham Extra Services (J9/10) on the Surrey stretch announced a welcome 75
new spaces available in late November. Charges associated with official parking though were mentioned
as ‘aggressive’ in some cases with typical fees of around £30 per night.
VEHICLE & DEPRECIATION: 2.75% (TRAILER 2.7%)
HGV new registration data from SMMT shows strong year-to-date position (first three quarters) with
nearly 19% growth over 2018 at 36,021 units. This is based on demand before new requirements in
June came in and demand in Q3 was not so positive with a -13.9% decline. More than half of these
registrations were for artics making them the most popular option. This dovetails with our members who
say they typically operate artic/trailer combinations and of course in a no-deal situation these are faced
with a higher tariff for import at 16% than rigids (10%).
Members are increasingly turning towards leasing methods. Although 58% of our members still
purchase, growing numbers do not put all their eggs in one basket, but instead opt for a combination of
both methods. Most operators buying HGVs opt for depreciation periods between 5-7 years with the
average being 6. For leasing, the most typical period is 3 years although a fair number also opt for
5-year deals.
Single shift trucks appear the most popular at 57.5%, with nearly 29% advising double shifts. Another
mention was four-on four-off working periods.
The main vehicles mentioned were:
Artic 63%
26t rigid 9.6%
18t rigid 12%
Page 12 Haulage Cost Movement 2019Other power sources are available as mentioned in the CAZ piece earlier. However, they come with an
initial outlay cost, which could be £30,000 more than diesel for gas. There is also the knowledge that fuel
duty on CNG is fixed until 2032 at 24.7p/kg (approx. 18.6ppl). As such, there is the potential to save over
£4,000 on fuel per year at current rates. Fuel stations catering for CNG although gaining, are still only in
double digit numbers for UK locations compared to 8,000+ forecourts catering for diesel, of which around
1,200 accept all sizes of HGV. The best situation is where gas fuel supply can be sited on your own
premises.
VED + LEVY: 0%
No change for VED or Levy from those brought in from February 2019.
Current Levy cost £1000
EURO VI rate from Feb 2019 £900
EURO 0-V engine types £1,200
INSURANCE: 4%
Generally, all H&R has seen increases
over the past 24 months. There has been
a lot of market capacity lost. While our
survey result indicated a 4% increase for
insurance, both our own specialist insurer
and others agree that the overall market
was actually closer to 7%, with insurers
looking to gain anything between 4 -10%
in 2020 in a push to either return this
class of insurance to profitability or
withdraw, meaning a much more
aggressive stance.
RHA Insurance Services has some
general insurance market commentary
plus some sage advice on what to do to
help mitigate future increases on
premiums:
The number of insurers in the market has remained more stable in 2019 than we have
seen for some time, which is most welcome. The long awaited correction to the Ogden Rate
was something of a disappointment when Justice Secretary and Lord Chancellor David Gauke,
in one of his final acts in government, disregarded the government actuary’s advice to set the
rate at +1% and instead set the rate at -0.25% Whilst an improvement on the widely discredited
2017 rate, it was much lower than the rate the industry had been told to expect and which many
insurers had already priced in. This has not led to the premium reductions that we had all hoped
for and in fact may lead to some increases in certain areas. We therefore predict that, on
average, premiums will increase by between 4 – 7% during 2020.
The Civil Liability Bill is expected to become law by June 2020, which should help reduce the
overall costs of whiplash claims and this can only have a positive effect on future premiums.
Page 13 Haulage Cost Movement 2019However, the justification for installing a good quality 360-degree camera system remains as
strong as ever in protecting drivers (and companies) against spurious claims from third party
motorists. Investing in risk management (e.g. driver training plus cameras) remains one of the
best ways to reduce claims costs and thus reduce insurance premiums.
Finally, we have to mention Brexit – In the event of a no-deal Brexit, the short-term
requirements for issuing “Green Cards” for European travel are likely to be somewhat
cumbersome and time consuming (as many of you will have already experienced). Hauliers are
reminded of the need to make arrangements for the issue of green cards at least 72 hours in
advance of any trip post-Brexit. This is because in the short term it is anticipated that the
original paper document may need to be produced for inspection.
DRIVER EMPLOYMENT COSTS: 5%
As we have mentioned, both the shortage and quality of available HGV driver labour is the biggest
concern to operators this year. We now believe that driver shortage is nearer to 60,000, while there is no
change to the average age of the driver, who is typically a white male aged 55, with only 1% under 25.
Quite simply, there are not enough young drivers coming through to replace retiring drivers, plus there
needs to be greater diversity and inclusion within the sector.
We believe that around 60,000 drivers currently supporting UK operations are non-UK EU nationals.
The second five-year DCPC training deadline ended in September, which resulted in operators and
drivers trying to cram in far too many training modules, instead of spreading this out sensibly over 12-18
month periods. We might see changes in DCPC legislation but doubt it would reach as far as one
module every 12 months.
Recent data from the Office for National Statistics (ONS) advises that annual growth in average weekly
earnings in GB was 3.6% (total and regular pay). It is not surprising to see once again that driver costs
increase is above the general level.
The RHA publishes an annual survey regarding employee remuneration within the haulage industry
and this is due to be published early January where we will look further into the driver role and related
pay.
APPRENTICESHIPS AND THE LEVY IN ROAD HAULAGE
The Institute for Apprenticeships has so far chosen to ignore the needs of the sector where many
companies either exclusively operate or have fleets with high percentages of articulated vehicles or use
trailers with rigid vehicles both requiring the C+E driver qualification – this is estimated at 40% of the UK
fleet. This means that those companies may well be paying a Levy that they simply cannot draw down
from themselves.
The industry is acting to accelerate the closing of the skills gap with initial seed funding support from
Government already agreed. Our Road to Logistics initiative will help to address the issue in the coming
years. This programme will work alongside other RHA diversity and inclusion initiatives that help
encourage diverse groups into our sector.
We welcomed the introduction of a specific trailblazer apprenticeship scheme and will continue to
support uptake. However, it currently does not work well enough and as things stand the industry has
paid in over £300 million while only being able to draw down on around £20 million.
Page 14 Haulage Cost Movement 2019REPAIRS & MAINTENANCE: 2.25%
Last year the R&M increase was 2% and there was a slight increase on that this year at 2.25%. In our
44-tonne model this equates to £225 per year extra. With the greater inclusion of leased vehicles with
fleets many operators are cutting out on specific R&M costs though as they can be included in the
package price.
What some responders to the survey explained was that due to new fleets their running costs have
dropped. Fuel efficiency is an obvious improvement but also with less age on a vehicle the requirement
for expensive upkeep is lessened.
The Traffic Commissioners continue to push for better brake testing after cases such as the Bath
disaster in 2016 brought matters to public attention for all the wrong reasons. It appears that things are
improving, and the message has been passed on, for instance at RHA regional briefings, that brake tests
must be meaningful and recorded.
TYRES: 2.2%
Tyres cause more roadside inspection failures than any other issue, that is for both tractor units and
trailers. What this says is that drivers are not adequately carrying out daily walk round checks.
It is estimated that 85% of roadworthiness infringements could be avoided if the driver carries out a
thorough walk around check before each journey.
The key points to focus on when looking at tyres are the remaining tread depth, checking pressures and
any visible signs of distress – including bulges, cuts or any lumps and bumps. All drivers should be
trained to ensure they know these basic warning signs.
Tyre condition has a significant impact on a vehicle’s steering, handling and braking, with under or
over-inflated tyres increasing fuel consumption and causing wear and tear.
Michelin advise just how vital it is to monitor tyre pressures, making sure they are at the correct level for
each individual axle. Running on tyres just a few psi below the manufacturer’s recommended pressures
will reduce a vehicle’s fuel efficiency on every journey. The combined cost for fleets could be significant.
OVERHEAD COSTS: 4%
Support staff wages lag behind those of drivers typically at present as companies do their best to
maintain and attract drivers wherever possible. However, they still have increases in general terms and
along with salaries other notable concerns were:
Payroll services 15%
IT/software 3%
Cleaning 3%
Water 10%
Business rates 2.2%
Page 15 Haulage Cost Movement 2019FUEL: -2.79%
(@103.47ppl price attributable to
27 September 2019)
MPG in our model 44-tonne
articulated combination is 8.3mpg
over 75,000 miles. Fuel consumption
is dependent on many factors
including the vehicle, operation,
geography, and load type. Skilled
drivers also contribute to this.
The year started with an immediate ‘tax’ rise to aid the clean air push under various ‘obligations’
Renewable Transport Fuel Obligation (RTFO)
Development Fuel Obligation
Greenhouse Gas Obligation (GHG)
Each of these elements added to the cost of a litre of diesel. RTFO which had been set at 4.75%
(percentage of biofuel per litre of diesel) from 2012 increased to 7.25% (total) in 2018. From January
2019 this again increased to 8.5% but with road fuel set and now labelled as B7 (up to 7% biodiesel
content).
The Department for Business, Energy and Industrial Strategy (BEIS) gathers data on oil and oil products
with road fuels coming under this. They report that demand for road diesel fell by 1.9% including biofuel
in Q2 of 2019 while unleaded fuel also fell by 1%.
The reductions were attributed to a 0.6 billion mile reduction in vehicle miles, mainly for light and heavy
good vehicles. Their reporting also notes the trend back to petrol powered cars after years of
diesel-powered dominance (oil and oil related products, section 3.5, 26 September 2019).
In total transferring the ‘tonnes’ data to litres BEIS indicate that 30.3 million litres of diesel were
consumed by road in 2018, with 16.15 million litres of unleaded.
Our survey fuel price last year was based on 106.44ppl (ex.VAT). However, at the same point in late
September a year later, our bulk survey fuel average was down at 103.47ppl so a reduction of 2.79%.
In annual terms it meant the difference between £43,725 (2018) and £42,505 (2019) or
£1220 per average 44t HGV.
So why the difference? The price of diesel is highly dependent on the price of oil and in the case of the
benchmark, Brent, the average barrel price in September 2018 it was $78.85. Roll forward one year and
that average has dropped to $59.70 with an average in 2019 of $64. Demand for oil compared to its
availability creates the price (in US $) and then there is the exchange rate with Sterling currency to take
into account. Since the Brexit referendum, the exchange rate swap has been poor (or devalued) from the
UK perspective with an average 127.3 cents to the pound this year, whereas in 2016 to the end of June,
the average then was 143 cents. There is also the product demand itself and globally this is down.
Page 16 Haulage Cost Movement 2019Brent spiked in April and May of 2019 and pushed diesel prices up several pence per litre for a five-week
period peaking at 104.59ppl ex vat (bulk). Prices then lowered generally for the rest of the year with the
occasional push upwards. The reason for that peak was a ramping up of tensions in the Gulf as Iran hit
back against the US deployments to the region. Four ships were damaged, and the British navy seized
an Iranian tanker and held it in Gibraltar. Iran hit back in July with the capture of the British flagged
tanker Steno Impero with oil, over time the situation calmed down with prices getting back to following
economic reasons for up and downs.
MONTHLY
RHA AVERAGE
ROUNDED AVERAGE
MONTHLY BULK BRENT BARREL DIESEL PER
EXCHANGE RATE
DIESEL PRICE PRICE $ TONNE $
£ v $ (SHOWN IN
PPL EX. VAT
CENTS
Oct 18 108.66 130 81.14 748.47
Nov 18 105.70 129 64.59 669.88
Dec 18 100.79 127 57.35 584.47
Q4 (2018) Average 105.05 128.67 67.73 667.61
Jan 19 99.36 129 59.47 607.38
Feb 19 101.14 130 64.08 639.19
Mar 19 101.64 132 66.13 642.25
Q1 (2019) Average 100.71 130.33 63.23 629.61
Apr 19 102.70 130 71.29 659.67
May 19 103.53 128 71.09 660.02
Jun 19 100.19 127 64.11 602.49
Q2 (2019) Average 102.14 128.33 68.83 640.73
Jul 19 102.05 125 64.04 622.15
Aug 19 102.17 122 58.96 605.33
Sept 19 103.08 124 62.75 634.08
Q3 (2019) Average 102.43 123.67 61.92 620.52
Oct 19 101.94 126 59.70 621.70
Nov 19 100.86 129 63.27 621.18
Last year there was concern that red diesel (such as for powering refrigerated units) would be effectively
removed as a tax advantage by the Chancellor. Fortunately, that did not come to fruition. Red diesel
(gasoil) has had clogging issues from bio content with advice to undertake supply tank maintenance as it
is costly to deal with after contamination. This is also filtering through to road diesel in bulk storage
although known cases at forecourt do not seem to be prevalent due to the regular throughput and
maintenance regimes that are undertaken.
THE FUTURE
Adopting C+E into the Apprenticeship Levy would be a step in the right direction towards plugging the
skills gap and we hope to make inroads here in 2020.
In early October, at the Oil & Money Conference in London, three energy firms estimated that oil would
be in the $50 range in 2020. At the end of that month a Reuters poll of 51 economists and analysts
forecast Brent at $62.38 for 2020 which would be around $2 under the 2019 average at the time.
Page 17 Haulage Cost Movement 2019Shipping costs will increase because of the International Maritime Organisations IMO2020 requirement
for use of low sulphur diesel fuel worldwide. We have mentioned this for the past few years now and
indeed some ferry operators have now given their new schedule of fees including an element to cover
increases due to this. That really isn’t any different to haulage operators using an established fuel
escalator. This is a direct effect where shipping is concerned, but there is also the potential cost to road
diesel as more users compete for the same sort of product. It was expected that this would show on fuel
prices in the last quarter of 2019, but this does not appear to have happened as stocks remain high and
global demand is weak.
Of course, there has been no Budget in 2019. However, it is expected that the party that wins the
December General Election will move to get its fiscal policies into place as soon as possible into the New
Year. Depending on who wins will also probably mean the difference between a potential drop in fuel
duty or an increase and an ending of the freeze. The value of Sterling will affect what we pay for fuel in
the UK and again that is dependent on the outcome of Brexit and the result of the General Election.
Many operators also have warehouses and space is very much in demand and has grown in preparation
to the Brexit ‘jump off’ dates. In a recent survey for Property Week, some 60% of occupiers responded
that they would be looking for additional space over the next two years and 86% of investors,
developers, agents and landowners believe demand will either stay the same or rise over the next year.
It’s not all Brexit related however, and much of it started with Amazon bursting onto the logistics scene,
hugely accelerating the current swing to delivery via the internet. This has been at the decline of the high
street which is desperately struggling for survival and business rates there would surely need to change.
COST TABLES
This report highlights cost movement and provides a commentary on key issues. The figures are
median averages and are not the cost changes for an individual transport operator but an overall
reflection of the market. All companies are different, but any firm should bear in mind that various
aspects of an individual job need consideration, such as time, distance and job-related costs
(subsistence, tolls, escort vehicles etc), not to mention of course the addition of profit margin.
The RHA also produces a cost-tables document as an example method, with updated information and a
formula to allow operators to look at and model their own unique costs relating to their haulage
operations.
It is pointless to rely on costs relating to another firm. A company can monitor basic shifts and
trends of competitors, but they need to understand their own costs and from that work out where
they need to be.
Key points:
Manage your costs
Do not rely on per mile or per day only charging
Use a fuel mechanism
How to make a profit
The Cost Tables will be available to members via www.rha.uk.net
Page 18 Haulage Cost Movement 2019© Published December 2019
Road Haulage Association Ltd
Roadway House
The Old Forge
South Road
Weybridge
KT13 9DZ
www.rha.uk.net
For further information or comment,
please contact:
Nick Deal
Manager
Logistics Development
T: 01932 838910
E: n.deal@rha.uk.net
Menzies LLP (Heathrow)
Centrum House
Station Road
Egham
Surrey
TW20 9LF
Tel: 01784 497100
Menzies LLP (Solent)
3000a Parkway
Whiteley
Hampshire
PO15 7FX
Tel: 01489 566700
Apprise Consulting Ltd
2nd Floor
50 Holton Road
Barry
Vale of Glamorgan
CF63 4HE
T: 01446 500231
www.appriseconsulting.co.uk
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