Two MT Top 100 operators have warned that a double whammy of the continuing driver shortage and falling fuel prices could make 2016 a challenging year for the contract logistics sector.

Speaking off the back of strong financial performances in 2015, the heads of both Jack Richards & Son and Meachers Global Logistics said rising drivers’ wages, soaring agency costs and the effect of passing on fuel rebates to customers is making for a tough start to the year.

Peter Brown, MD at Norfolk-based operator Jack Richards, said: “Last year was good, but this year is being more difficult with the prime reason being the driver market. Wages had to increase, and rightly so, but agency costs and the shortage of drivers has really put pressure on us, as it has all hauliers.”

He added that the extra driver wage bill had been exacerbated by declining fuel prices due to the nature of contract logistics customer agreements, which include fuel surcharge and rebate mechanisms.

“This means we are very well protected when fuel prices go up, but when the fuel price goes down, we have to hand it all back to our customers,” he said.

Last year the company saw turnover rise 5.1% to £35.6m for the year-ending 31 May 2015, boosted by two contract wins worth £4m and rising volumes in its Palletways operation. Pre-tax profit rose 16.7% to £951,007.

Meachers MD Stuart Terris also warned against escalating driver costs as the labour market continued to be squeezed.

“We’re on top of it as we speak, but we’re anticipating more problems around the corner because driver costs are escalating more rapidly, particularly with own-account operators,” he said. “The likes of Tesco can afford to pay their drivers £15/hour just by adding a penny to the price of beans, but we can’t do that.”

Meachers which has given its drivers a “significant” increase, has a Warehouse to Wheels programme to train up employees as HGV drivers and offers to upskill existing drivers.

The Southampton-based firm has a fuel surcharge mechanism to track prices as they rise but although recent drops have positively affected cashflow, Terris said: “It’s not the huge benefit everyone expects as we pass that on to our customers.” Falling fuel prices do nothing to offset the firm’s expenditure on AdBlue, he added.

Turnover at the firm rose to £25.5m during the year (2014: £20.3m) while pre-tax profit hit £2.1m (£1.2m).

By Hayley Pink and Robin Meczes

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