High fuel prices cut haulage margins

Tunbridge Wells: UK:  The high cost of fuel remains the biggest cause for concern amongst haulage operators, according to the July update of the Freight Transport Association’s Manager’s Guide to Distribution Costs.

Commercial vehicle operators continue to be squeezed by rising operating costs and pressure for earlier payment terms from suppliers whilst facing downward pressure on haulage rates and lengthening payment terms from customers.

The association’s latest update calculates that on average vehicle operating costs for rigid, articulated and drawbar vehicles have risen by 5.6% in the year to 1 July 2011 and remain close to the all-time highs recorded as at 1 April 2011.

The largest contribution to the rise came from an increase in the price of diesel, which has risen by 12 per cent in the year to 1 July 2011.  In addition, tyre costs have risen by 7.3% and overheads by 5% in the same period.

By contrast, increases in haulage rates have not matched the rise in operating costs.  Domestic haulage rates have risen by an average of 1.8% in the six months to 1 July  and international haulage rates have risen by an average of 1.5%in the same period according to the update.

Over half of the contributors to the update indicated that they had not increased their haulage rates since the start of 2011.

Bruce Goodhart,  research analyst at the Freight Transport Association says: “Hauliers were able to ride out the recession by reducing margins and delaying vehicle replacement.

“However, they are continuing to feel the pinch with rising input costs, the high price of fuel and pressure from their customers not to increase charges.  Economic growth is currently very weak in the UK and it is likely that some hauliers may not be able to sustain their business in these circumstances.”

The Freight Transport Association Manager’s Guide to Distribution Costs is produced annually based on data gathered from a survey of its members in April each year, as well as data from other independent sources.

The data on wages, vehicle operating costs and haulage trends is updated quarterly as at 1 July, 1 October and 1 January.

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