UK Haulage firms risk failure due to rising costs

New data has revealed that a record 463 British haulage businesses have collapsed in the last 12 months, according to accountants, Price Bailey.

When looking at haulage firms' credit risk scores it was discovered that 41% can currently be classified as being at maximum risk, only 26% a year ago. 

Businesses at risk with a high score will have a hard time obtaining capital without personal guarantees from directors, and they're also more likely to face winding-up petitions or intention-to-dissolve notices in the coming year. 

The cost of operating an HGV has risen by more than 10% over the past year, while road freight volumes have reduced due to lower consumer demand brought on by the high cost of living.

Haulage companies may initially try to absorb the increasing expenses of rising diesel prices, and higher wages along with the increased cost of spare parts or replacement vehicles and trailers. However, as their already small margins erode, and as they try to service the debt they already have with interest rates rising from 3.55% to 5% in the last 6 months, they will eventually need to pass on the higher costs to their customers.  

These additional costs are usually passed on via a “Fuel Surcharge”, but haulage firms often can’t recuperate costs until the following month or longer. During COVID-19, many firms looking to secure freight contracts may have also signed lengthy contracts, locking them into fixed price-per-mile deals significantly below the current market rate, which will lead to losses and delays before prices can be increased. Add to this, settlement payments of up to 90 days and the number of companies facing insolvency could increase rapidly as cash flow becomes more of a problem. 

Companies must therefore do everything possible now to mitigate rising fuel costs. They should start by making sure their delivery capacity is fully optimised, vehicles should be driven safely and economically, and delivery routes used must be the most efficient, which is not always the shortest route. 

Even if only a short distance can be taken out of a delivery route or just one extra delivery can be added to each HGV or van, this will soon add up to a significant saving over several days and across an entire fleet. The key to reducing costs is delivery route planning software, and the solution is to implement a delivery scheduling and route optimisation system that works with both diesel vehicles now and electric vehicles in the future.

Significant savings can be achieved by increasing delivery capacity and creating more efficient routes.

Get in touch with us to learn more about the Descartes solutions that suit the demands of your company.