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Leading operators have admitted they have been forced to pass on rapidly rising fuel costs to their customers by employing significant surcharges.

The news comes in a week that has seen the steepest hike in fuel prices for 18 years, triggered largely by Russia’s invasion of Ukraine.

The latest average price of a litre of diesel stands at around £1.61, prompting hauliers to review their fuel policies as already tight margins are stretched to breaking point.

The RHA has also repeated its plea to the government to freeze fuel duty, delay new rules affecting red diesel use and introduce an essential user rebate for HGV operators.

“Sadly we have to pass the price increases on to customers,” Kinaxia chief executive Simon Hobbs told MT. “It’s our second largest cost and the increase is so great that the margins aren’t there to absorb it.

“Drivers and fuel are about 65% of your cost base. A 10% movement in that and there goes your margin.

“We’re looking at weekly surcharges as opposed to monthly and when the price drops those surcharges will reduce. It’s purely a cost recovery, not a profit opportunity."

Most operators say their customers have accepted the new terms in light of the situation in Ukraine. However, Hobbs admitted he was considering scrapping some of the group’s smaller contracts where the potential for surcharges had not been written into the original deal.

“The majority of customers were on surcharges anyway and we’ve written to the few that weren’t stating why we need to do it,” he explained.

“If there is severe pushback from any I’ll probably reflect on whether I carry on doing the business. If we can’t recover the fuel price increase I’m not sure I can carry on doing it.

“It’s crazy that the price of oil has it’s gone up so significantly – in December it was about $85 a barrel, now it’s about $135."

Hobbs added that the other “major uncertainty” is that Kinaxia Group is having to order fuel now for delivery in three days’ time, without knowing what the price is going to be: “Normally you order it and you get a price. Now I order it and pay whatever price it is in three days’ time. So you’re buying a bit light,” he explained.

Clive Brooks, MD of Herefordshire-based ABE of Ledbury, said he was passing 100% of the rising fuel costs to customers.

“There used to be a monthly review and now it’s weekly because the price is skyrocketing,” he said.

“We benchmark at a £1 but anything over that we’ve got a fuel surcharge and it will vary by customer, whether it’s haulage or network. We can’t afford not to really.

“Customers are resigned to it. They’ve had lots of increases from everyone for everything. We’ve done rate increases more frequently generally, regardless of fuel, so we’re in that mindset.”

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Miniclipper Logistics said it also has a fuel surcharge in place for most customers and that the percentage it passes on is dependant on the length of the contract.

The Bedfordshire-based firm buys 15,000 litres of diesel every 10 days and said it is costing £4,000 more now than it was at the same time last year to fill up its tank.

“It’s a difficult one,” admitted commercial director John Parish. “We’re having varying degrees of success in passing on the costs. Our standard surcharge is 10.75%. Some customers are completely understanding as to where we’re coming from but some others are being a bit resistant to any form of cost increase even though they can see what’s going on in the world outside.

“It’s more difficult with some of the ones that have been contracted to us for some time. Especially as we’ve already had to implement rate increases due to a lack of drivers last year. This is yet another thing for them.”

Parish said the situation continued to be a “very big challenge” and that the company had taken the approach of reviewing when customer contracts started and the fuel costs at that point before working out a fuel surcharge based on what the price was then against what it is now.

“But we’ve also worked out what percentage of operating costs the fuel element is,” he said. "For us it’s about 33% and then we’ve worked out a fuel surcharge.”

Swain Group MD Matthew Deer said the company had “no choice” but to pass on rising fuel costs to customers.

“A lot of our customers have escalators already but it comes to a stage where you can’t carry it on,” he said.

“With some of our contracted customers where we’ve had a month’s adjuster we’ve had to reduce that down to a week. But they’ve been quite accommodating on that.

“By the end of the week I might have a different story but at the moment we’re passing on the costs and we’ve got no choice. With the low margins in the industry we wouldn’t survive without doing that.”

Deer added that Swain brings 70% of bulk fuel straight into the depot, but warned there are already potential restrictions on that.

“It’s getting harder to get fuel at the right price,” he said. “There’s a lot of haggling with suppliers.”

Neil Trotter, transport operations director at Boughey Distribution, said all customer contracts include a fuel matrix so if fuel prices increase, customers are aware that they will incur an increase in fees.

“Our standard charges track the current fuel price,” he explained. “When fuel costs are high, as they are currently, this represents significant supplementary distribution fees for our customers.

“As a business, we are not greatly exposed to escalation in fuel prices but understand that our suppliers are in the same position as ourselves.”

Lancashire-based 3PL Kammac said it was trying to share the cost of fuel hikes rather than pass on the entire amount.

“We take some and customers have also agreed to an increase over a two-week period while we look at it,” a spokesman said.

“We’ve just done one flat percentage fee across everybody. It means the cost is smaller for everyone.

"Nobody can hide from the situation; it will go on longer than two weeks but we’re reviewing it on a two-week basis in the hope that the world calms down.”