The price of fuel has little effect on the profitability of logistics companies and isn’t the primary cause of failures in the industry, the Motor Transport Directors’ Club was told last month.
Speaker John Manners-Bell, chief executive of Transport Intelligence, told the gathering of the most senior people in road transport that there was a high correlation between freight rate increases and fuel price increases – meaning that operators were being successful in passing high costs on to customers.
“This isn’t to say that freight operators don’t bear pain,” he said. “There are significant cashflow implications [especially for medium-sized or small players] that have to outlay large sums of money upfront for diesel.”
He also said there was no correlation between the rising price of fuel and the lower number of failures in the sector.
However, he did exclude the large number of small and very small businesses at the bottom end of the transport industry from this comparison.
The main reason for poor profit, he said, was fluctuating and low volume levels – with the industry operating on an average margin of 3.5%, leaving little room for error.
Manners-Bell warned that the biggest threat to the sector was rising interest rates, which could curb spending in the retail sector and increase finance costs for operators.
