Road freight prices ‘up 15% on last January’

An industry index has reported a 15 per cent year-on-year increase in the average price of haulage and courier services between January 2021 and last month, amid rising interest rates and high inflation.

The Transport Exchange Group (TEG) Road Transport Price Index tracks changes in the pricing of road freight services using data from millions of aggregated, anonymised transactions, calculating price-per-mile figures each month against a January 2019 baseline.

TEG reports that average road freight prices increased from 101.5 to 116.8 points on the index between January 2021 and January 2022.

While the figures represent a drop of 13.5 points following the Christmas surge, 2022 still began with the highest January prices for the sector since the index was launched three years ago.

For haulage vehicles, TEG reports that January prices fell by 18.6 points compared to December 2021, but showed an 18.8 point increase against January 2021.

The figures come at a challenging time economically, with rising prices across the economy and widespread cost-of-living concerns.

TEG pointed out that surging inflation is closely linked to supply chain bottlenecks and soaring energy costs; the more it costs to make and transport goods, the higher their prices.

It added that the pandemic and associated lockdowns had resulted in much reduced economic activity, setting a low base rate against which inflation is now being measured.

Kirsten Tisdale, director of logistics consultants Aricia Limited and Fellow of the Chartered Institute of Logistics & Transport (CILT), commented: “The TEG Index is telling us two stories about road transport as we enter 2022. First, despite the large seasonal drop in January, price increases have come to stay – the TEG Index is at a completely different starting level to the previous three years.

“Second, the haulage and courier elements have re-converged, at least for now, suggesting that there was an element of (understandable!) panic about HGV drivers going into the peak demand period.”

Meanwhile, Transport Exchange Group CEO Lyall Cresswell (pictured, right) highlighted a number of other factors aside from inflation that could impact supply chain costs this year.

“Cabotage rules were changed to ease a shortage of drivers and supply chain disruption, allowing international companies to send lorries with foreign drivers to the UK to make unlimited deliveries in a 14-day period,” he said.

“Previously, cabotage rules only allowed international drivers to make two cabotage journeys within seven days of entry into the UK.

“This will again be the case when cabotage rules revert back in May, reducing the number of loads international drivers can carry.

“This will not, of course, help the driver shortage. In addition, cabotage loads are priced lower, so less of them means higher costs all round.”

He continued: “Significantly, new regulations in May will mean smaller vehicles (between 2.5t and 3.5t) will require an operators’ licence. This requirement for international goods vehicle operator licences for carriage of goods previously only applied to larger vehicles, therefore this rule extension is another big industry change that we’ll soon see reflected in the TEG Road Transport Price Index.

“Businesses transporting goods between the UK and the European Economic Area will need a licence from May, adding to costs for a great many firms.”

Cresswell also cited the growth of the on-demand economy as another driver of transport costs.

“Platforms like Uber started the real upscaling of the on-demand economy, but now we’re seeing the rise of ultra-fast, hyper-local grocery delivery,” he said.

“There is fierce competition in this space, particularly since lockdowns made us dependent upon these services.

“This growth has put immense pressure on the transport and logistics sector to meet demand, recruit quickly and adapt to new technological requirements. Needless to say, this has contributed to rising costs in the sector for some time now.

“However, the appetite for so many on-demand services could prove fickle, particularly when the pandemic winds down, and companies may find commercial sustainability elusive.

“As with so much else in the transport industry, much depends upon the course of the pandemic in the next few months and how consumers respond to changing circumstances.”