Prepare for higher wage costs to beat driver shortage

Recruitment agency Driver Require has warned that agency rates and driver salaries are set to rise steeply, as a combination of an HMRC clampdown on agency drivers working as limited companies and Brexit is likely to lead to a flight of drivers away from the British logistics sector.

It further cautions that attempts to increase the pool of drivers available – for example, by seeking more women and minority ethnic recruits – will have limited success, as wages and conditions within the industry are poor. The shortage will persist until these issues are addressed, as there is actually a large surplus of qualified drivers over driving posts.

A white paper released by the company – Investigating the UK’s LGV Driver Shortage, by Driver Require’s CEO Kieran Smith – charts how the number of LGV drivers in employment rose by 10 per cent to 330,000 from 2000 to 2005. But numbers in employment actually fell from then until the recession in 2008, in spite of nearly 30,000 drivers joining the UK workforce from the EU.

Despite this influx of new blood, and decline in employment, there were still complaints from employers of a driver shortage.

“We can only assume that the number of drivers leaving the market was greater than could be made up by UK new starters combined with the incoming EU workers,” the report says.

The recession saw the number of LGV drivers employed in the UK drop from 320,000 in 2008 to 260,000 in 2013, before rising again to today’s figure of 320,000, with an influx of drivers from Romania making a large contribution.

However, the rate of increase has fallen in the last two years, the report warns, citing a decline in numbers of entrants from outside the UK and a failure of the industry to add more from the UK labour pool.

Due to Brexit, and the consequent decline in the value of the pound and fuelling of xenophobia “making our foreign workers feel increasingly unwelcome in our country”, the UK is looking ever less attractive as an employment destination, the report warns.

“If demand continues to grow, we can no longer rely on foreign workers to fill the gap, and we will have to encourage more UK workers to join the LGV driving workforce. This is unlikely to be something we can achieve quickly,” it cautions.

New IR35 legislation originally due to bite in April 2020, but now postponed for 12 months due to the Covid-19 outbreak, will see the cost of agency drivers currently working through limited companies rise by 25 per cent if they are to retain pay parity as PAYE workers.

Although the repeal of the so-called Swedish derogation – which will mean all agency workers will become legally entitled to parity of pay with comparable permanent staff – may raise PAYE rates, the report warns that this increase may not be enough to stop UK-based drivers seeking work abroad.

Recruiting sufficient new drivers to fill this gap will be very difficult in the short term, but the report points out: “We can, however, prevent drivers leaving the UK market by ensuring that wages and agency pay rates remain competitive in relation to other UK sectors and competing European LGV driver markets.”

It warns that Germany and Benelux are also suffering driver shortages, and many Eastern Europeans would find these countries attractive destinations.

This: “could push the UK LGV driver shortage into crisis, forcing up pay and charge rates as companies fight over scarce resources. These elevated pay rates will cost the haulage sector more than if hauliers had paid a smaller wage increase to retain the drivers in the first place.”

“At least the effect of an excessive pay rise will be positive in the longer term, as the artificially high pay rates will attract more UK workers into LGV driving roles and workers back from the continent,” the report postulates.

It reiterates a point made by transport consultant Kirsten Tisdale almost four years ago – that there are many qualified drivers in the UK who have chosen not to work as truck drivers (Transport Operator 51) – pointing out that two thirds of LGV licence holders are not currently driving for a living.

There are currently 80,000 LGV licence holders with CPC entitlement who are not working as drivers, and 500,000 LGV licence holders without CPC entitlement who are not driving either: a total of 580,000. If the industry is 50,000 drivers short, as suggested by recent figures, it is a gap that could easily be filled by persuading just 10 per cent of the non-driving licence holders back to the industry.

The report highlights long and unpredictable hours as being a major deterrent to returnees. It points out that the Freight Transport Association (FTA) estimate of drivers’ annual income of around £30,000 achieved over an average 48- hour week is insufficient to support a young family without a second income, and makes driving very unattractive to the 20-40 age group.

Additional factors the report identifies as driving people away from the industry include: “Stress… caused by unrealistic scheduling and aggressive micromanagement by telematics, overzealous enforcement, and road conditions, combined with aggressive or distracted behaviour of other road users.

“The poor quality of roadside facilities, especially at truckstops, is a big issue but it is also worth noting that this concern applies equally to the hauliers’ distribution depots as well as the receiving customers’ locations.”

The driver pool is increasing by a net total of 30,000 drivers per annum, but, crunching the numbers, the report calculates that, in the last six years, 80,000 candidates have taken their truck-driving tests but not taken up driving roles in the industry.

Concluding, the report says: “In the short term, if we wish to avoid a driver shortage crisis aggravated by IR35 and the possible exodus of drivers from the sector, our only choice will be to increase driver pay rates. In the longer term, if we wish to prevent chronic attrition and rebuild the driver pool, the only solution is an improvement in working conditions alongside maintenance of higher pay rates.”

The white paper can be accessed at the Driver Require website.