UK Haulage firms at risk

UK Haulage firms risk failure due to rising costs

New research reveals that record diesel costs and rising driver’s pay are putting a strain on UK hauliers, with nearly a third in danger of going bankrupt.

Nearly a third of hauliers, 28,557, have a Delphi Risk score in the ‘maximum risk’ category.
(Experian calculates the Commercial Delphi score, which is a proprietary credit rating system. Based on a company's performance and credit worthiness, this score is used to predict credit risk and potential business failure within the next 12 months. See table at bottom of page).

Maximum-risk businesses with a Delphi score of between 2 and 15 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.

According to Accountancy firm Price Bailey, the number of road haulage companies in this Maximum Risk category has more than doubled in the past year, from 14,020 at the end of March 2021 to 24,020 at the end of March 2022.

Haulage companies may initially try to absorb the increasing expenses of rising diesel prices, higher wages along with increased cost for spare-parts or replacement vehicles and trailers, but as their already small margins erode, 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 and with fuel surging at over 20% a month from 113p/litre in June last year to 177p/litre in May this year and expected to rise higher still, recuperating the costs will increasingly become more difficult.

During covid, 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 the course of 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.

Contact us to discover more about the Descartes solutions that are right for your business and its needs.