A dramatic increase in the number of road freight companies going bust highlights the urgent need for a cut in fuel duty to prevent further business failures, says the Freight Transport Association (FTA), the largest and most active membership association representing the logistics sector.
Official figures show the number of freight firms filing for insolvency between July and September was almost double the same period last year and has reached its highest level in five years. In the three months up to September 2016, 32 UK road freight companies declared insolvency. A year later, the figure had reached 59.
FTA, whose membership operates almost half the UK’s HGV fleet, says the sharp increase illustrates the impact of rising fuel pricesand a weakening economic outlook on the logistics industry. It is calling for the Chancellor Philip Hammond to use this week’sBudget to announce a cut in fuel duty of at least 3p per litre of diesel, which would not only support the freight industry but provide a significant boost to the UK economy.
Christopher Snelling, FTA Head of National Policy, says the government needs to take these new figures seriously: “This increase in logistics business failures should raise a warning flag for the government. While the figures are still relatively small, they show a dramatic turnabout in fortunes for the freight transport sector. Over the past six years, the number of operators declaring insolvency had been gradually falling. This sudden rise is extremely worrying and needs addressing as a matter of urgency.”
FTA research shows the price of diesel accounts for nearly a third of the operating costs for an average 44 tonne truck. Just one penny increase in the cost of a litre can add £470 a year to the cost of running one of vehicle. Many FTA members run fleets ofhundreds or even thousands of vehicles and the resultant cost of a duty rise can have a significant effect on operating margins and future solvency.
Snelling explains, “Fuel price increases adversely affect freight operators of all sizes. For larger fleets, their scale means evensmall rises can add thousands of pounds to the balance sheet. Smaller companies are often running on very low profit margins, so any increase in the cost of fuel can push them perilously close to being unprofitable.
“Every household in the UK relies on the successful movement of freight by road, whether it’s delivering food to the local supermarket or transporting construction materials to build new schools and hospitals. That’s why our formal budget submission calls for a cut in duty alongside other measures to support the freight industry and ultimately provide a valuable boost to theeconomy as a whole.”
FTA represents all modes of the UK’s freight and logistics sector, with its members operating half of the UK’s lorry fleet (more than 200,000 vehicles), moving more than 90% of the UK’s rail freight and consigning 70% of the country’s visible exports by sea and air. The UK remains a leader in logistics at a global level, ranked in the top ten countries in terms of logistics performance, and the sector contributes 11% of the UK’s non-financial business economy. In 2016, 2.54 million people were employed in logistics in the UK, approximately 8% of the UK’s workforce.