The industry has given a mixed reaction to new data suggesting nearly a third of the UK’s hauliers are at risk of imminent collapse due to record diesel prices and rapidly rising driver wages.
Accountants Price Bailey checked the credit risk scores of all 96,102 businesses in the UK haulage sector and found nearly a third - 28,557 - have a Delphi Risk score in the Maximum Risk category.
This makes it difficult for them to access funding without personal guarantees from directors, which the report said made them highly likely to be subject to winding up petitions or intention to dissolve notices in the next 12 months.
The number of road haulage businesses deemed Maximum Risk has more than doubled over the last 12-month period, Price Bailey said, rising from 14,020 at the end of March 2021.
It added that many hauliers have no option but to absorb cost increases from rising oil prices and wage demands, eroding already wafer-thin margins.
The report also warned that the rising cost of road freight due to the dislocation of supply chains caused by Brexit and Covid-19 led many bulk cargo owners to negotiate lengthy contracts with hauliers in anticipation of a hardening market. This locked in the price-per-mile significantly below the current rate on the spot market, which has spiked over the past month due to the war in Ukraine.
“In the long run hauliers can put up prices but those locked into fixed-price contracts will just have to bite the bullet for now," said John Warren, partner at the Price Bailey. "Many of our haulage sector clients are having to wait up to 90 days to get paid on top of seeing their fuel bills jump by thousands, creating a cash gap and potential solvency issues.”
The price of new and second-hand cabs and trailers has also rocketed over the past year or so, he added, with a corresponding increase in insurance costs.
RHA executive director of policy and public affairs, Rod Mackenzie, played down the report, describing it as "very alarmist".
"I’ve not seen any evidence or heard any anecdotal evidence of this sort of problem in the industry," he said. "Certainly times were tough last year with the driver shortage but many firms are reporting record work with business booming, although the rising cost of fuel and wages is obviously a massive headache."
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However, RHA chairman Moreton Cullimore, MD of Cullimore Group, admitted that although there had been a surge in work for the pallet networks last year this was now slowing.
"I am not surprised by what this data is saying at all," he said. "There was a spike - a boom if you like - but that has definitely backed right off. While hauliers are busy, the increase in costs has not been reflected in the ‘selling price’ in an industry of low margins.
"I am significantly concerned for my transport company and others because all I see is our costs at their highest and our selling price not increasing at the same rates; there isn’t a comfort zone in the middle to cope with the difference.
"And if we raise our rates we won't get the work. There are too many clearing houses and multinationals that will just do it for rates that an independent can’t do it for as they don’t have the scales of the others."
Pall-Ex group chief executive, Kevin Buchanan said firms outside the pallet sector would need to adapt to survive in the current climate: "Now we have the ongoing challenges of wages and fuel inflation, I expect we will start to see a higher rate of business failures in the haulage sector," he said. "Although the pallet network sector is traditionally recession resilient, other parts of the haulage sector will be more vulnerable as we move increasingly towards formal recession.
"Those who fail to adapt and change quickly to adverse market conditions could find life very tough indeed."
Meachers chairman Bob Terris agreed that there are currently "situations where difficulties will occur" unless customers cover the cost increases.
"This will be compounded because the rates charged were too low before costs increased," he said.
"We have seen a drastic increase in the number of businesses that are being offered for sale, probably pre-empting the difficulties highlighted.
"The other major problem is if the price increases implemented cannot be sustained when the volumes drop, the cost versus revenue ratio will suffer dramatically. These are certainly worrying times for the industry."