Third of UK Hauliers at Risk
According to accountancy firm Price Bailey, a third of UK hauliers have a Delphi Risk score in the ‘maximum risk’ category.
In their analysis, they checked the credit risk scores of all 96,102 businesses in the UK haulage sector.
They found that 28,557, have a Delphi Risk score in the ‘maximum risk’ category.
This number has doubled in the last financial year. At the end of March 2021, the number stood at 14,020.
What effect does this have on businesses?
Maximum risk businesses will find it increasingly difficult to get funding. Company directors will be subjected to signing personal guarantees to attain any new funding.
Without funding streams, the likelihood of winding up petitions or intention to dissolve notices will increase.
In the meantime, costs will be passed on to customers.
What has caused the problems?
Several factors have converged to cause these issues:
- Record diesel prices
The price of diesel has jumped by 58% since June 2020, from 113 pence per litre (ppl) to 177ppl - Rising wages for drivers
As a result of the driver shortage, there have been numerous reports of HGV drivers receiving double-digit pay rises - Rocketing vehicle prices
The cost of new and second-hand cabs and trailers has rocketed over the past year Units costing £85,000 plus VAT with three months delivery last year are now costing £115,000 with at least eight months delivery - Increase in insurance costs
- Geo-political events
Covid, Brexit and war in Ukraine have contributed to the dislocation of supply chains
How will this affect customers?
As previously mentioned, the rise in operating costs will be passed on to customers. And as the price of fuel fluctuates, it will cause inconsistent prices and contractual issues for customers.
Comment
John Warren, partner at Price Bailey, said:
“The road haulage sector is facing a wave of business failures. Nearly a third of hauliers are at imminent risk of collapse in the coming months, more than double the number 12 months ago.
Businesses deemed maximum credit risk will find it almost impossible to access extra funding unless directors provide personal guarantees. Few directors will be brave enough to risk their personal assets to secure emergency funding in the months ahead.
In isolation these would prove a difficult challenge but in combination they are likely to prove fatal to many haulage businesses.
Haulage is a low margin business. In many cases, the fuel price rises we have seen over the last month will have completely wiped out any profits hauliers would have made on margins of just a few per cent.
The hardening road freight market over the past year spurred many cargo owners to lock hauliers into longer-term contracts.
When diesel prices jumped by 16% over the last month many hauliers were left having to service those contracts at close to zero margin or even at a loss.
In the long run hauliers can put up prices but those locked into fixed-price contracts will just have to bite the bullet for now.
Many of our haulage sector clients are having to wait up to 90 days to get paid on top of seeing their fuel bills jump by thousands, creating a cash gap and potential solvency issues.”
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Third of UK Hauliers at Risk