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Haulage companies absorbing rising operational costs

Wednesday, March 15, 2023 - 09:17
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The haulage price-per-mile has fallen nearly 2% year-on-year and 3% month-on-month, despite diesel prices rising 12% in the last year.

In February, the average price charged by haulage drivers and companies fell for the second consecutive month. The year-on-price was also down, despite meteoric rises in inflation and operational costs over the last year.

The latest data from the TEG Road Transport Price Index revealed that haulage prices in February were 3% lower than in January, and 2% down on last February’s figures. In fact, they were at their lowest level since March 2021.

TEG Road Transport Price Index February 2023 summary

The data shows that despite cost and workforce pressures, haulage companies are still holding back their prices. But with the Windsor Framework potentially signalling closer cooperation between the UK and EU, hauliers will be hoping for an economic upturn and higher profit margins in the near future.

Over the past year, courier prices have told a different story, rising by over 10% year-on-year. In February, however, courier prices also fell by 4% as consumer spending grows slowly and focuses more on services than material goods relying on haulage/courier services.

To survive in such a challenging business landscape, logistics companies will need to devote time to business development. But they also have to increase efficiency and lower costs. One way to do this is by becoming more sustainable.

Cleaner freight: obstacle or opportunity?

Demand for lower and zero-emission vehicles is growing as the entire sector prepares to make the transition, hastened by fuel price volatility and the Russian invasion of Ukraine.

There are also seven clean air zones in the UK now, with Sheffield becoming the latest addition. Plus, the EU is calling for a 90% reduction in truck emissions by 2040, which will affect many UK-based companies, regardless of Brexit.

Truck manufacturers are already investing heavily to bring a range of electric, hydrogen and other new technology models to market. Those companies who can afford the initial investment in greener fleets will make significant savings on ongoing operational costs. But before they invest their capital in new vehicles, they might want to see higher profit margins.

Fuel Prices January - February 2023

Lyall Cresswell, CEO of Transport Exchange Group, says: “A price drop in February is nothing new. We’ve seen exactly the same pattern in previous years, and we’d expect prices to rise gradually as we head into spring.

“However, this year is somewhat uncertain as the UK narrowly avoided a recession and inflation remains high. Businesses are still scaling back, encouraging haulage and courier companies to keep their prices down, even as they contend with high costs.

“But the future for freight is still looking promising. There are huge opportunities for development in new technology and sustainability – opportunities that the industry must grab.”

Kirsten Tisdale, Director of Logistics Consultants Aricia Limited and Fellow of the Chartered Institute of Logistics & Transport, says: “Both elements of the TEG Road Transport Price Index continue to interest. The haulage element of the index still shows year-on-year deflation, which has been ongoing since June last year, despite significant rises in key operational costs. But the courier element carries on with inflation, which is now back into double figures.

“Bearing that in mind, it’s no surprise to hear that the Bank of England might raise interest rates again later this month, as the overall TEG index comes back out of the Bank of England’s comfort zone.”

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