Road freight

Record number of haulage businesses going bust

Record number of haulage businesses going bust

In the last 12 months, a record 463 haulage businesses have gone bust. This is more than twice the number which was recorded two years ago by data acquired by Price Bailey, a leading chartered accountant.

Acquired under the Freedom of Information Act, the data indicates that haulage firms who entered insolvency rose from 225 during 2020/2021 to 363 the following year and then last year increased further to 463. A rise of 173% over two years. 

The Financial Impact on Haulage Companies

The financial impact on haulage companies has been severe. With slim profit margins and increasing operating costs, many businesses have struggled to stay afloat. Rising fuel prices have significantly impacted their bottom line, making it difficult to maintain profitability. Moreover, the ongoing driver shortage has led to increased labour costs, making it even more challenging for haulage companies to remain financially viable.

Price Bailey also revealed that the UK haulage business was in the maximum risk category, ie considered at imminent risk of collapse, and virtually impossible for hauliers to find additional funding without personal guarantees from company directors.

The situation arose due to adverse factors squeezing the life blood from the industry. Huge rises in fuel and wages, together with soaring interest rates has made servicing debt increasingly difficult and expensive.

The Bank of England’s rate rises from 3.5% at the start of the year to 5% at the end of the second quarter, hit haulage firms hard. Many haulage businesses finance their fleets, premises and, to a certain extent, their day-to-day costs with finance. When debt payments rise continuously, it creates a perfect storm. Interest rates coupled with high inflation mean that many haulage companies are struggling like never before.

There is little margin in the haulage business and due to a reliance on debt finance for new vehicles and day-to-day costs, margins have gotten tighter. As haulier’s overheads have risen, more and more have found themselves in debt with big names and successful operators feeling the pinch.

Brexit’s Impact on Haulage Businesses

Brexit has undoubtedly played a significant role in the current crisis facing the haulage industry. The introduction of new customs procedures and regulatory requirements has led to delays at borders and increased administrative burdens. These disruptions have resulted in additional costs and logistical challenges for haulage companies, further straining their operations and reducing their margins as they try to compete with EU operators. The uncertainty surrounding future trade agreements has also caused businesses to hesitate in making long-term investments.

Further factors contributing to the crisis in the haulage business.

Other factors that have contributed are regulation and compliance, health and safety requirements and maximum working hour directives for drivers.

Driver shortages have also added to costs as companies have had additional spending on recruitment, training and hiring of agency drivers.

Cost of cabs, trailers and diesel.

Considering the vast increases hauliers are facing with the cost of new and even second-hand cabs and trailers, it’s not surprising that many are in trouble. A unit costing £85,000 plus VAT, which used to have a 3-month wait for delivery, is now £115,000 plus VAT with at least eight months delivery time. You also need to consider the rising insurance costs for vehicles and trailers when the sector is seeing further fuel increases as the war in the Middle East continues. Most transport companies pass on the cost of fuel to their customers, but with the price being so volatile, it is almost impossible to predict the cost of diesel for the next few months, let alone the following year.

The RAC states the price of diesel rose 11% from 17 July 2023, 1.44.36p per litre, to 160.44 pence per litre, 9 November 2023. This steep fluctuation means that although costs are reviewed monthly, the haulier cannot recover from the previous month quickly and easily. A haulage business with a fleet of 100 would see its monthly fuel bill increased by just under £50,000, £2 million across the fleet and an annual increase of £600,000.

Since October, we have seen some large hauliers go under – Cross Transport from Birmingham with a fleet of 200 vehicles; KNP, who employed 750 people and had 350 trucks and 500 trailers; Tuffnells went in June; and Mark Stewart from Humberside in October.

The importance of haulage companies to the UK economy

In 2022 the haulage industry moved 226 million tonnes of food by road by GB registered HGVs in the UK according to figures produced by HMRC. Food is one of many commodities that can’t be moved by rail, so it is essential for the UK economy to keep our haulage companies in the black and our supply chains moving.