The latest data from the TEG Road Transport Price Index shows that year-on-year haulage and courier prices remain stable, despite inflation pushing prices up elsewhere. However, the reintroduction of the HGV levy and staff shortages on the horizon means that stability might not last long.
The overall price-per-mile in June 2022 was 121.9 and is now 122.3 – a marginal 0.3% change. In the last month, courier prices rose 1.2%, while haulage prices increased by over 3%.
But if some economic forecasts are to be believed, even small increments like these could soon be behind us. By the end of the year, the Bank of England is widely expected to raise interest rates to a 19-year-high of 6.25%. This might then lead to recession, reducing road transport demand and prices.
In the past few years, UK logistics companies have been focusing on cutting the well-publicised driver shortage. One tactic in this fight is tempting people into becoming drivers with greatly increased salaries and signing-on bonuses.
This led many HGV mechanics to make the switch to driving jobs, which means hauliers have traded one skill gap for another. Over half of the businesses surveyed by Logistics UK have struggled with hiring enough fitters, technicians and mechanics.
Unfortunately, the end result here could be out-of-action vehicles impacting a supply chain just re-finding its feet.
From August 2020, HGV operators benefitted from the suspension of the HGV levy as they recovered from the Covid-19 pandemic. Now, the levy is set to return on 31 July, with a new focus on emissions, weight and time spent in the UK.
Even as diesel prices have fallen to a quarter of July 2022 prices, the reinstatement of the levy will be a challenge to many operators. It’s another factor that may cause some to reevaluate their pricing strategy.
Lyall Cresswell, CEO of Integra, said: “It is, perhaps, surprising that prices have remained so stable given the multiple challenges facing the industry right now. In addition to ongoing inflation, they now have to contend with the return of the HGV levy and mechanic shortages.
“The problem for the industry is that many operators have paid mechanics higher salaries to become drivers and they’ll now struggle to attract new mechanics – particularly if they can’t afford those high salaries.
“All told, it might be difficult for logistics companies to keep absorbing costs, particularly if demand is affected by slow economic growth.
“However, the silver lining right now is significantly lower diesel prices. The industry has long been calling for lower prices and now they’ve finally come, which will at least help with everyday business costs.”
Kirsten Tisdale, Director of Logistics Consultants Aricia Limited and Fellow of the Chartered Institute of Logistics & Transport, added: “I’ve said it before, but I’ll say it again: there’s no greedflation in road transport. Yes, both the indices for spot haulage and courier have risen compared to last month, but haulage continues to show year-on-year deflation and courier is only at 0.8% inflation.
“Of course, diesel prices have come down. But until fairly recently, even though the price was coming down, diesel was still inflationary when comparing it with a year previously: because of the speed with which it rose.”