Road Haulage (Industrial Report) - UK - February 2014
“The recession in the UK consolidated a trend that saw own account haulage, carried out ‘in-house’ by manufacturers and retailers, increase markedly as firms retrenched and reduced demand for third party haulage.”
– Ben Harris, Industrial Analyst
This report addresses the following key questions facing road hauliers in the industry:
- How will UK hauliers’ competitiveness be affected by the introduction of the HGV Road User Levy in April 2014?
- Will driver shortages affect the industry as new training standards are enforced from September 2014?
- To what extent will rail industry subsidies and rail infrastructure investment push business towards rail freight transport and away from road haulage?
- Will hauliers increase investment in Euro 6 standard trucks through 2014?
- Is third party haulage likely to see an upturn following many firms’ decisions to take distribution in-house since the recession in 2008/09?
In terms of inland road freight transport, the UK is one of the largest markets in Europe, with only France, Spain, Germany and Poland accounting for more freight moved in terms of billion tonne kilometres. The road haulage market competes with other methods of freight transport, including rail, water, air and pipeline. At 19% of goods moved in the UK, freight transport by water is the second most common method, while rail freight accounts for 10%.
Rail is currently regarded as the most competitive alternative to road haulage, with successive UK governments having committed investment to improve rail infrastructure and subsidise freight transport by water and rail in order to ease congestion and reduce the environmental impact of road haulage. However, despite significant infrastructure investment, for the majority of customers rail freight is less flexible than road transport, with depots not always close to fast and reliable rail services. As a result, road haulage has an underlying competitive advantage.
Water freight’s advantages include reduced fuel costs and better environmental performance, however it remains for most firms a back-up form of transport and depends upon large freight volumes for its economies of scale to make it a competitive proposition. In addition, like rail freight, water transport is restricted by the location of the infrastructure and limited number of points for delivery and collection.
Road haulage operators typically serve companies operating in the retail and manufacturing industries, which require regular transport of goods between factories, warehouses and retail outlets in the UK. However, other sectors which use road haulage include the petroleum industry, defence sector and the construction industry.
Road haulage firms in the UK range from smaller, family-run firms that operate a limited fleet of vehicles to the larger logistics companies, which in addition to road haulage may offer other modes of freight transport, warehousing and added value services such as packing services, supply chain consultancy and record management.
Haulage firms will work closely in partnership with customers to ensure they are meeting key performance objectives and to ensure they guarantee the flexibility to provide a distribution service to companies operating manufacturing processes where more frequent, but smaller, consignments are required. For hauliers, they must demonstrate that they offer a service that is more efficient, reliable and cost-effective than their customer could manage themselves if they chose to insource this aspect of their business.
Typically, haulage contracts run for between three and five years. This in turn, allows the development of a close partnering arrangement based on criteria other than a strict lowest cost consideration. The nature of the contracts varies but examples are fixed fees based on a pre-agreed volume of goods to be carried, or a fee per delivery. Where purchasing power is greater, the former type allows low costs to be negotiated, while the latter contract type gives flexibility.
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