The operating cost challenge

Figures from the latest edition of Logistics UK’s Manager’s Guide to Distribution Costs show that total vehicle operating costs have increased by 17.7% on average in the 12 months to 1 April 2022. And while rising fuel prices represent a key element in pushing up costs, there are many other business expenses that are also soaring.  

DIESEL PRICES HAVE RISEN BY A THIRD 

“Forecourt diesel prices have risen by 34% since the start of the year,” said Michelle Gardner, Head of Public Policy, Logistics UK, “That is an alarming increase for logistics businesses that already operate on very narrow margins yet rely on diesel to carry out their deliveries.”

With UK logistics operators already paying duty at a rate that is 63.5% higher than the EU average, Logistics UK has written to the Chancellor to request a further 6p per litre duty reduction, in addition to the 5p per litre cut that was announced as part of the 2022 Spring Budget. While the previous reduction was absorbed by the rising fuel prices, Logistics UK estimates that this further 6p cut would result in an average saving of £2,424 per year, per 44-tonne truck. 

VITAL COST SAVINGS FOR LOGISTICS BUSINESSES

The 6p per litre duty reduction would be a vital cost saving for logistics businesses that are facing other, significant, inflationary cost increases.

“Maintaining a safe fleet is vital to ensure the safety of drivers, and all other road users, and must remain a top priority,” Gardner said, “However, these maintenance costs have increased significantly in the 12 months to 1 April 2022.”

Overall vehicle maintenance has increased by 7.1% and the cost of tyres has risen by 12.7%. Insurance premiums have risen too, and with soaring energy prices and surging inflation, business overheads have also climbed by 11.2%.  

DRIVER SALARIES SOAR

As a result of the ongoing driver shortage, driver salaries have increased by an average of 12.9%.

Gardner said: “Attracting new recruits and retaining existing HGV drivers is a top priority for the logistics sector, which has worked hard over the past year to implement several initiatives to secure a sustained talent pipeline for years to come. However, as well as increased driver wages – and the introduction of successful apprenticeship schemes introduced by local authorities to do this – industry needs a renewed focus on the improvement of driver facilities across the strategic road network to ensure that drivers remain engaged with and committed to the industry.”

Logistics UK is urging government to continue working with industry so that the drivers who deliver the nation’s vital goods can be provided with the working facilities they deserve.

EARNED REPUTATION FOR ADAPTABILITY

Logistics is a highly adaptable industry, having successfully navigated a number of challenges in recent years, including Brexit, COVID-19 and the war in Ukraine. However, the sector already operates on very narrow margins and cannot continue to absorb increased costs on this scale. This is why Logistics UK and its members are asking the Chancellor to act on Fuel Duty, to help ease the inflationary pressure on our industry, which is so critical to every facet of the economy.

Gardner said: “Many members have reported challenges in passing increases along to customers and it is therefore important for the wider economy to understand the critical impact these costs are having on logistics. Logistics UK will continue to communicate with members to ensure accurate representation among key policy leaders and work to achieve the best possible solutions for industry.” 

*www.logistics.org.uk/campaigns/logistics-and-the-economy

Published On: 28/07/2022 16:00:08

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