Rising insolvency rates hit freight transport sector
The Freight Transport Association has called for a cut in fuel duty to help tackle rising insolvency levels in the logistics sector.
With more road freight companies going out of business between July and September than at any point in the last five years, the FTA has called on the government for help.
While 32 companies declared insolvency in the three months to September 2016, that figure had jumped to 59 in the same period this year.
FTA members operate nearly half of the UK’s heavy goods vehicle fleet, making them one of the leading representatives of the logistics sector.
Rising fuel prices and an uncertain economic outlook have taken their toll, as operational costs across a diverse range of industries have increased rapidly in recent months.
The FTA’s Head of National Policy, Christopher Snelling, has said the figures should act as a “warning flag” for the government, as despite being relatively small, they “show a dramatic turnabout in fortunes” for a number of haulage firms.
It is worth noting that increases in the last few months buck a six-year trend of gradually falling insolvency rates in the freight transport sector.
With the price of diesel accounting for nearly a third of operational costs for an average 44 tonne vehicle, an increase of 1p to the cost of one litre of fuel can add nearly £500 to running costs.
For businesses running hundreds, or even thousands of trucks, these costs can quickly mount up while fuel duty rises can also dent operating margins.
Meanwhile for smaller firms, many of whom are already operating on tight margins, the increase in fuel costs can make it perilously difficult to be profitable.
The UK is a logistics leader at a global scale and figures among the world’s elite in terms of performance, employing in the region 2.54 million people – around 8% of the UK workforce.
Should these firms struggle financially or even enter into insolvency, then the knock-on effects across other sectors will also be felt, given that FTA members are responsible for moving more than 90% of the UK’s rail freight and 70% of exports by sea and air.
By Phil Smith