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Rising fuel prices not the cause of haulier bankruptcies

Brinkworth, Wiltshire:  Rising interest rates and falling volumes are far more likely to drive road freight operators out of business than the increasing cost of fuel, according to the latest research from Transport Intelligence.

The research, contained in Transport Intelligence’s latest report, European Road Freight Transport 2012, examines a range of factors influencing the performance of European freight companies including any link between fuel price rises and company failures.

The rising cost of fuel is one of the biggest political issues transport operators and governments face. In Europe, it was the reason for a wave of fuel blockades in the early 2000s, with operators protesting that increases in the oil price were driving companies out of the market.

However, the research shows that there is no evidence for this. Utilising official governmental statistics as a source, it seems that there is a much closer link between company failures and interest rates increases, than there is to the cost of fuel.

A much more important cause of company failure is not input costs or rates, but rather volumes the reports says.  It found that there was a high inverse correlation (-0.73) between retail sales and insolvencies: the higher the volumes, the lower the number of companies dropping out of the market.

The research also looked at the link between a diesel price index and a European road freight rate index.  The correlation coefficient of 0.85 (with 1.0 being a perfect fit) suggested that the relationship was very strong. This seems to show that despite received wisdom, hauliers are very good at passing on fuel cost increases to their customers, and one reason why increasing fuel costs do not lead to more company failures.

John Manners-Bell, chief executive of Transport Intelligence, says: “It may seem surprising that fuel costs are not the major cause of company failure, especially given the industry campaigns we’ve seen over the years. However our research shows that interest rates and weakening volumes are far more difficult for operators to deal with.

“From an industry perspective, policymakers should focus on stimulating growth, but without risking inflationary pressures or the higher interest rates that would result.”