Our report into the UK Road Haulage sector finances published last month described a shrinking industry with a deteriorating financial risk profile as well as a wide range of challenges, few of which have eased over recent years. In this article, we look at some of the practical challenges faced by this market and the current impact.

Managing increasing demands

Well over half of consumers look at their order status online at least once a day, while more than three quarters of them see same-day or next-day delivery as the minimum acceptable standard. This means huge pressures for transport companies and no wiggle room for delay or errors in the logistics process. If road haulage companies have not yet invested in last-mile delivery capability, it is becoming critical that they do. Capex and operational commitments will need to encompass a range of aspects for regular review and investment planning, including:

• Fleet modernisation
• Vehicle telematics
• Warehouse automation (and wider business processes automation)
• Data analysis for business intelligence
• AI implementation

Further threats

This is a challenge for businesses in this market when profit margins are already tight, and further threats are faced by the sector:

1. Skills and labour resources shortages

The road haulage labour force is lacking in both numbers and skills, creating a major issue for supply chains generally and for the wider logistics industry. We examined the driver shortage problem in September 2024, since when little has changed. Among the ongoing headline issues, according to the Road Haulage Association (RHA) are:

• A shortfall of 50,000 HGV drivers, according to the Road Haulage Association (RHA)
• 40,000 new drivers will need to be recruited each year for the next five years – as per RHA
• 6,000 fewer delivery drivers in the UK during the year ended March 2023 as per research by the Office for National Statistics
• 55% of HGV drivers are aged between 50 and 65

There are a number of government-led initiatives aiming to reduce and eventually eliminate the labour capacity shortfall, including funding for HGV driver training. Unfortunately, these statistics show that although the worst pressures from the immediate post-Brexit and then the pandemic periods have eased, the problem is very far from over.

2. Unsatisfactory driver facilities

There is an urgent need for improved driver facilities, in particular greater numbers of secure parking spaces, enhanced amenities and stronger security measures. According to the RHA, there is an estimated shortfall of 11,000 HGV parking spaces. Lorry parking spaces have an average utilisation rate of 83%, and in some regions, that figure rises to as high as 93%.

The lack of safe and secure parking and welfare facilities means drivers are obliged to spend their rest periods at the roadside in their vehicles and with limited access to even the most basic hygiene facilities. In addition, these problems significantly magnify the risk of freight crime.

3. Sustainability

Sustainability is becoming less of a ‘nice to have’ aspiration for road haulage businesses. Despite climate change policies coming under increasing political pressure, the number of consumers voting with their feet is growing, avoiding some brands over sustainability concerns and actively choosing others for their environmental efforts.

The RHA is campaigning hard for greater action on sustainability, noting that HGVs account for around 6% of overall UK greenhouse emissions. Strategies to boost the industry’s performance in this regard include:

• Implementing robust recycling measures
• Adopting alternative fuels
• Using electric manual handling equipment
• Investing in solar power
• Optimising routing through better use of technology
• Upgrading to more fuel-efficient vehicles

4. Infrastructure

Road congestion right across the UK leads to longer and less predictable journey times, which undermines road hauliers’ productivity and competitiveness. Poor road conditions increase vehicle repair and maintenance costs, impacting profitability and pricing.

A survey in 2023 by Transport Focus revealed significant discontent among freight sector users with the major road network. Satisfaction levels were down to less than 50% then and all drivers, commercial or leisure, know that road conditions have deteriorated significantly since then as public spending restrictions have reduced essential maintenance work.

The RHA is calling for the government to commit to long-term road network investment, especially in strategic roads, major networks and vital local routes, as well increasing the green re-fuelling infrastructure.

Escalating costs and small profit margins

Just like other businesses in the UK, rising direct and overhead costs are threatening the viability of many haulage contractors, especially smaller businesses with little financial fat. The RHA has recently reported that the cost of operating an HGV has risen by another 10% in the past year. The ability of companies to recover higher costs by raising prices is limited by intense competition in the industry. Equally, the scope for cost cutting and re-investing is restricted after years of trimming back their outgoings.

The major issue with overcoming the issues we have highlighted, is the investment required. The potential solutions do not come cheap, which is especially difficult with the imminent impact of the cost hikes imposed by last October’s Budget measures.

These increases will be difficult for all sectors of the economy, but particularly so for an industry with wafer-thin margins of only 2 – 3%. Too many hauliers are faced with tough decisions about their future and, sadly, too many will decide that the game is no longer worth it.

 

If you have concerns and are considering professional advice for your business, Opus is here to provide independent assistance. You can speak to one of our Partners, who can discuss options with you. We have 14 offices nationwide and by contacting us on 020 3995 6380, you will be able to receive immediate assistance from our Partner-led team.