Change afoot as hauliers steel themselves for Brexit

Even though the Brexit process has hardly started, hauliers are already experiencing changes both positive and negative as a result of the June vote for the UK to leave the European Union.

Most of these have been triggered by a consequent decline in the value of sterling against other major currencies.

In general, the feeling is that the move has been good for exporters and producers, but bad for importers and consumers.

The first impact for most hauliers was in the price of fuel. Diesel, like other oil products, is globally priced in US dollars, so an increase was no surprise – but some hauliers report that their suppliers increased prices with suspicious rapidity.

“The price of fuel went up immediately… the day following the vote… and we’ve had a series of gradual increases ever since,” said Huw Owen, managing director of South Wales-based Owens Logistics.

“We enjoyed lower fuel prices earlier in the year, and they were a big help while they lasted,” he added.

The fall in the pound has had an under-reported benefit: it has taken some of the pressure off the UK’s beleaguered steel industry which was suffering because of chronic global over-capacity and excessive costs. A reduction in the value of the pound has restored some of its competiveness on the world stage.

Owens has been carrying steel for decades, and earlier in the year was extremely concerned about the future of Tata’s south Wales plants, products from which form a core part of its work.

“The steel is holding its own… volumes certainly have not dropped since the vote. The plants are ticking over OK: that’s my view,” Mr Owen said.

“Steel is still very big for us, and long may it continue.”

It now looks likely that Tata’s South Wales operations will be sold to ThyssenKrupp of Germany, and the German company said that a combination of steel price increases since March and the fall in the value of the Pound had helped assure the future of steel making (and steel transport) in South Wales. As for Brexit, ThyssenKrupp finance director Guido Kerkhoff described its impact on the deal as “actually neutral”.

Another operator enjoying an unexpected boom in steel-related exports is Chambers & Cook (Eastern), the Lincolnshire-based division of the Birmingham logistics company which operates an unaccompanied trailer service on the North Sea – this time thanks to a turn-around in fortunes at the once-threatened steel works at Scunthorpe.

Under new management, the steel maker returned to profit in just 100 days after its purchase from Tata, and it is now recruiting again as the new owners, operating under the British Steel name, plough in a £50 million investment.

However, Chambers & Cook (Eastern), which runs a fleet of German-built trailers, has already been warned by one supplier that trailer prices will go up as a result of currency fluctuations and by another that they can only be held at the present level for a very short time.

Company manager Nigel Wilkinson said that new German-built trailers held in stock by the manufacturers’ UK importers had been rapidly snapped up by continental operators when the Pound first dropped, and exported back to mainland Europe!

Huw Owen said he had seen little or no sign of increased prices for vehicles or spares since the Brexit vote.

However, Peter Collins, chief executive officer of MAN Financial Services, said that the Brexit vote had discouraged some operators from acquiring vehicles as on-book assets.

“Customers are less confident now as a result of the vote,” he told Transport Operator.

“Consumer confidence has remained high so far, but our customers don’t want to be committed to ownership of a vehicle. We can write them contract-hire deals with break clauses etc, instead.”

Looking ahead he foresaw an increasing price differential between new and used trucks.

“The used market is saturated with stock, so we have to get the metal out,” he admitted.

“We can offer Euro 5 TGX XLX 440 6×2 tractors for £249 a week. The rise of the euro against the pound will make new trucks more expensive, but we expect interest rates to remain low, keeping finance affordable.”

Mr Collins said that people from Eastern Europe who had been working as employed drivers in the UK were now looking to set up here as owner-drivers, but wondered if this trend would continue once the Brexit process was fully underway.

The Road Haulage Association feared that an exodus of Eastern European drivers had already started, as the decline in the value of sterling made working in the UK a less attractive proposition.

It also highlighted rising fuel and vehicle costs resulting from the decline in value of British currency.

Nigel Wilkinson said his international unaccompanied trailer operation was already facing rising costs as a result of Brexit: “Much of what we buy – sea freight and continental traction services, for example – is priced in euros. If our cost of buying euros goes up, then our prices have to go up.

“I’m not sure what Brexit will bring in terms of the impact on business, but it is going to be challenging. About the only certainty is that the fortunes of business will be dictated in terms of cost and price: they always are.”

Meanwhile, the falling value of the pound against the euro has meant hauliers are likely to have to demonstrate marked increases in financial reserves in order to operate legally, the Freight Transport Association (FTA) has warned.

The association pointed out that financial standing requirements for standard operator licence holders – which demonstrate to traffic commissioners that an operator is solvent and therefore less likely to engage in cost-cutting measures at the expense of safety – are set in European law in euros, and are reassessed each year at the start of October, before coming into force the following January.

While official figures have yet to be announced, FTA anticipates that for the first vehicle, the required figure will rise from £6,650 to around £7,800, and from £3,700 to £4,300 for each subsequent vehicle.

Financial standing for restricted operator licence holders are set by the Department for Transport, meanwhile, and do not usually change from year to year.

Es Shepherd, head of member advice at the FTA, said: “The potential hike may create difficulties for hauliers as they now need to demonstrate to the traffic commissioners that they have over 15 per cent greater reserves available.

“The increase would come as a sudden shock to operators who will need to demonstrate these extra reserves by the New Year.”