The UK transportation industry is facing its biggest challenges in living memory. From rising fuel costs, and driver levels to environmental pressures and new technologies, the industry faces a daunting road ahead.
Each week the industry news providers are full of haulage companies that have shut their doors (at least one per week if you read the headlines), crippled by the relentless pressure of the last few years. Data shows that insolvencies in the haulage industry rose 173% up to 30 September 2023, compared to two years before. And this trend continues well into 2024.
Further data shows that 33% of businesses in the haulage sector are at maximum credit risk, compared to 22% in the previous 12 months.
For those left standing, despite the challenges, there is resilience and a desire to forge ahead. In the face of such challenges, adaptability is a strategy for survival.
We’re proud that we’re still here and adapting to the challenging industry landscape as we see it. From our new DHL partnership to investing in the UK’s first 18-tonne E-Tech electric curtain-sided truck, we’re finding ways to remain relevant as the Mitchell family has for over 50 years.
Driver Shortage
Despite an easing of the driver shortage that badly impacted supply chains in 2021, the industry isn’t completely out of the woods just yet. Despite 72.5% of drivers declaring there is no shortage, the global outlook is different.
Half of European truck operators can’t expand due to driver shortages, and research by World Road Transport Organisation (IRU) shows over seven million driver positions could be left unfulfilled by 2028, including 745,000 in Europe. In the UK, the percentage of haulage businesses that have driver vacancies has remained about 20% since Q4 in 2022, versus 43% at its peak.
In the UK, there are a number of reasons why a driver shortage is still a concern. Data from the Office for National Statistics (ONS) shows that 55% of drivers are between 50 and 65 years of age, with retirement a concern for a lot of haulage companies over the next decade. In fact, 35% of businesses in a government survey cited driver retirement as the most common reason for drivers leaving. Only 1% of drivers are under the age of 25.
The industry also suffers from negative perceptions. The industry is seen to have difficult working conditions, long hours and unhealthy lifestyles, comparatively low salaries and poor roadside facilities. 28% of drivers who said there wasn’t a driver shortage admitted that new applicants to the industry weren’t incentivised enough to join the industry.
Other contributing factors include Brexit and the COVID-19 pandemic. Changes to immigration rules saw an estimated 20,000 EU-national drivers leave the UK. Complications with post-Brexit paperwork have also meant that the UK is a less attractive place for foreign drivers to work. And the pandemic saw over 40,000 cancelled HGV driver tests, with 25,000 fewer people passing in 2020 than in 2019.
Data from Driver Require, a driver recruitment business has deduced that “over the past 25 years, 235,000 HGV licence holders below the age of 45 have abandoned HGV or not taken up HGV driving as a career, and a further 156,000 HGV licence holders have maintained their CPC qualification but have chosen to work in a different occupation.” It’s a staggering number of people not working in the industry.
To address the issue the industry has worked on retaining drivers and filling in the skills gap. Some of the approaches taken by the industry include:
- Increasing pay to make the job more attractive.
- Incentivising people to join the industry through one-off payments.
- Training schemes and subsidised licences to get new drivers into the industry.
- Improved roadside facilities for drivers to take a break safely.
- Relationship building between companies and their drivers. A House of Commons Committee report highlights that not all companies that retained drivers during 2020-2022 were the highest payers, but they had good relationships with their drivers.
Of course, these initiatives cost money to implement, which has been greatly impacted by rising fuel costs and wage growth putting pressure on businesses.
Rising Fuel Costs
Rising fuel costs have been a key driver in the increase in goods since the end of the COVID-19 pandemic. That as well as geopolitical upheaval in the Middle East and the war in Ukraine has seen fuel prices soar over the last two or three years. Despite a recent fall in oil prices, the latest events in the Middle East have increased fears of a rise in oil prices. The slowing state of the global economy and record US oil output has largely pushed prices down, and ultimately kept the cost of fuel in check so far in 2024.
In fact, the US Energy Information Administration lowered its 2024 crude price forecasts by nearly $2 per barrel, and by $6.50 per barrel for 2025, as concerns over global demand growth outweighed the short-term uncertainty of potential disruption due to events in the Middle East.
An increase in fuel costs creates a number of problems for logistics companies and the supply chain.
Rising fuel costs obviously cause an increase in operational costs. These costs are passed on to customers, who in turn pass it on to theirs. This increase strains company budgets and reduces profits. Companies within the logistics industry are already working to tight profit margins in order to remain competitive, and the volatility of fuel costs can be a real headache.
As costs are passed down the supply chain, this can lead to increased inflation, which as we have seen in the cost of living crisis, reduces demand for goods. Lower demand for goods means a lower demand for logistics companies, further fuelling the issue.
Add into the mix that the UK has some of the highest fuel duties in Europe and it’s a recipe for disaster. The UK is currently ranked eighth highest in Europe for duty on petrol and the highest for diesel.
On a positive note, increases in fuel costs can lead to improved efficiency as logistics companies look to reduce their fuel consumption. Whether that is by switching to electric trucks and forklifts (which we’ve already done), or whether it’s by optimising routes, utilising vehicle capacity more or reducing vehicle journeys. These changes often remain long after fuel costs return to normal, saving companies money and reducing emissions.
Since becoming a founding member of Palletways in 1995, we’ve gone on to work with The Pallet Network, The Hazchem Network and Palletline. All of these networks allow us to improve our efficiencies compared to traditional A to B freight deliveries, reducing the number of vehicles on the road and reducing our impact on the environment.
Evolving Technology
The transportation industry isn’t immune to technological improvements. The biggest advancement in the industry has been the introduction of electric vehicles. As previously mentioned, we got the UK’s first 18-tonne E-Tech electric curtain-sided truck.
Introducing electric vehicles isn’t without its challenges, but it brings plenty of benefits. For example:
Lower Operating Costs: Electric vehicles bring long-term operational savings through reduced maintenance and the cost of electricity is generally lower than fossil fuels.
Tax incentives: Operators may be eligible for tax incentives on their electric vehicles, to encourage the switch.
Reduced carbon emissions and other environmental benefits: The switch has the potential to greatly reduce carbon emissions across the industry. According to Statista, road freight transportation and removal services produced 12.1 million metric tons of carbon dioxide emissions in 2022. In 2022, heavy goods vehicles (HGVs) accounted for nearly 17 per cent of UK transportation emissions. According to the RHA, HGV’s account for around 6% of the UK’s total carbon emissions.
The reduction in emissions leads to improved air quality and noise pollution is minimised through electric vehicles operating quieter than those with an internal combustion engine.
As an industry, we are under growing pressure to reduce our impact on the environment through government targets and our own moral compass. As a business, we want to make a positive impact in our local community. That’s why we have taken it upon ourselves to make positive changes now, well ahead of government deadlines.
We have partnered with Ecologi to offset our carbon emissions and we have initiatives in place such as the Carbon Co-Op and Carbon Free Days where our customers can also do their part to reduce carbon emissions. We’ve also switched the lighting in our warehouse to low-energy lighting to reduce our environmental impact.
Despite the known benefits of switching to electric vehicles, there are significant challenges that are resulting in slower progress being made.
Firstly, there is the initial investment cost. Purchasing a new electric truck isn’t cheap and for most haulage businesses this may not be feasible.
Secondly, the range of the vehicles between charges can be prohibitive. Traditional trucks can travel much further on a single tank compared to a single charge of an E-truck. Our E-truck has a range of 560 km on a full charge, compared to the 960 km a diesel truck could get on a good day.
The main challenge for haulage companies wanting to switch to electric vehicles is the current state of the charging infrastructure in the UK. As of December 2023, just 46 of the 119 motorway services have a target number of EV chargers above 50kW.
The charging points that are in place are not as numerous as petrol stations. According to Statista, there are 8,353 operational petrol stations in the UK. This makes it challenging when travelling long distances or to remote locations.
Another concern with charging is the time it can take to fully charge an electric vehicle. Our E-truck can take 2 hours to fully charge with a fast charger, versus the five minutes or so it can take to fill a tank with petrol. Battery technology at present is a hindrance.
Until battery capacity and charging stations are as common as petrol stations (with improved charging speed) it will be difficult for the industry to fully switch to electric vehicles, as much as the industry would like to. It is absolutely necessary to invest in a public charging network.
RHA research shows that 70% of electric trucks in the UK return to depot for charging. With longer-haul journeys impossible with the current battery and charging infrastructure, most electric vehicles will operate close to their depot. We use ours exclusively around Nottingham at present, rather than further afield.
Conclusion
The UK transportation industry is undeniably facing a complex landscape, characterised by a convergence of challenges including driver shortages, rising fuel costs, and the imperative to adopt sustainable technologies.
To navigate the future successfully, the industry must prioritise resilience, adaptability, and innovation. Resilience will be paramount in weathering the inevitable economic fluctuations and operational disruptions. Adaptability will be essential in embracing emerging technologies, such as electric vehicles, and adjusting to changing regulatory environments. Innovation will drive the development of more efficient, sustainable, and cost-effective transportation.
As the industry continues to evolve, it is imperative to invest in driver training and retention programs to address driver shortages. Furthermore, the expansion of charging infrastructure for electric vehicles is crucial to facilitate the transition to cleaner transportation. By developing a culture of innovation and collaboration, the UK transportation industry can position itself for long-term success and contribute to a more sustainable future.