The impact of COVID-19 on the UK Haulage market


 

The transport and logistics sector has been heavily impacted by COVID-19 over the last 13+ months, with 3 national lockdowns of differing length and intensity, with heavy restrictions in everyday life in between these lockdowns.

Now that we are easing out of the 3rd (and hopefully final) lockdown, with “normality” returning on the 17th of May with the full opening of pubs and restaurants for example, Isis Insurance gives our take on the last totally unexpected 13 months and how we see the future of the haulage industry panning out in 2021 and beyond.

 

The past 13+ months…

The haulage industry has suffered enormous disruption in 2020 and 2021, but this has not been evenly distributed across all sectors.

The supermarket companies and grocery suppliers have been operating at near maximum capacity, home delivery is in overdrive, while medical and PPE supplies have been top priority.

Online orders have increased by 34% from 2019 (source: British Retail Consortium) however this must be offset against many non-essential retailers being shut down due to lockdown restrictions.

Unfortunately, hauliers operating in the catering, events and service businesses – plus to a certain extent manufacturing and construction – have remained inactive for much of the Lockdown period.

At the height of the initial lockdown, it is estimated that 50% of HGV drivers and 46% of trucks were parked up and off the road. There is no doubt here at Isis Insurance that many HGV Insurance policies were either paused, cancelled or not renewed during this period and it is only now the insurance market is truly returning to near normal.

A study by the Road Haulage Associated (RHA) last year to UK Hauliers found 73% said their cashflow was worse (with margins pre COVID-19 tighter than ever), 83% said volumes were down and a frightening 95% said that backloading (utilising the truck on every leg of a journey and not returning empty) was down.

There can be little doubt that unless you were a haulier heavily involved in vital food or medical supplies, or you didn’t diversify quickly enough, then revenues and profits will have been hugely negatively impacted.

This is despite a Government statement in May 2022 declaring “The whole nation will owe haulage and logistics workers a huge debt of gratitude,” from Parliamentary Under Secretary of State for Roads and Transport Security, Baroness Vere of Norbiton and many hailing HGV drivers and operators as key workers.

It needs to be remembered, especially at the start of the pandemic, that Truck Drivers were unable to access hot food, changing and toilet facilities. This would have had an impact on mental health in an already heavily isolated job role.

Drivers who are required to travel to the EU have also had to deal with increased queues at the border due to COVID testing and increased documentation due to Brexit, a real double whammy.

Drivers have also had to adhere to more stringent safety guidelines. Hand sanitiser in the cab, wear gloves if possible, keep 2 metres away from others and clean/wipe down cab when shift is finished.

It’s fair to say that COVID-19 has had a huge impact on the transport and logistics industry, but they have shown great adaptability and resilience and we believe this has put them in a position to come back even stronger in the second half of 2021 and into 2022.

 

What does the future hold for the haulage industry post lockdown?

At this point, we’d like to point out that whilst everything looks very promising in the UK as we ease out of lockdown – infection rates and deaths are at all time low with an impressive vaccination roll out across the UK (35m people at the time of writing) – we are certainly not out of the woods yet.

However, we will write our predictions with the current optimism in mind.

In the longer term we will be living in “a new world” with some potentially fundamental changes to our strategic priorities and the way we work and live.

Since March 2020, on-line orders in all sectors increased dramatically as did home deliveries. This increased level of demand for online distribution is predicted to continue after Lockdown due to natural caution, the inconvenience of having to queue everywhere (with masks on) and evolving habits and behaviours.

We can therefore anticipate continued growth of the home delivery operators with associated increased demand for competent multi-drop delivery van drivers. It is likely that general hauliers and pallet network operators will experience an increase in home deliveries, offset by an equivalent reduction in bulk business deliveries.

Customer expectations continue to rise, with same day or next day deliveries and click-and-collect becoming the norm. This places pressure on both the retailers and the haulage companies to move to 24-hour operation and dramatically improve the efficiency of their distribution operations. Traditional HGV vehicles will do the bulk of the distance of course, but with “last mile” distribution by vans and LGV’s continuing to grow at a rapid rate.

The Internet of Things (IoT) is now becoming commonplace in the haulage sector, with it being used primarily for asset tracking and monitoring, as well as fleet management, where it conveys valuable information on the operating status of vehicles.

The entertainment and leisure sector – by far the worst hit within the haulage sector – should show promising signs of recovery in the second half of 2021. Given the lack of theatres, cinemas, sporting events and the like in the last 13 months, people are craving a return to normality and “fun” events. But will we see some COVID-19 caution along the way too given it is still an active pandemic?

We would recommend all Hauliers to remember that “cash is king”. Especially with the likely dent in cash reserves over the course of the pandemic. Choose your customers carefully and make sure your payment terms are not too long and as robust as possible. There will be companies struggling for revenue right now and looking for excuses to delay (or even not pay) their bills and of course there is a risk of companies going into administration too.

Maintaining gross income and conserving cash is vital.

Flexibility and agility will be paramount for hauliers to exploit opportunities as they arise.

In summary, the Haulage industry is bouncing back and should continue to do so as we continue to ease out of lockdown. The second half of 2021 should see a return to normal levels of HGVs on the UK road networks, in particular a return of the events and leisure industry.

Cash flow for Haulier will be crucial however so ensure your customers pay promptly and don’t allow too much credit or rely on a small number of customers unless you are sure that their business is robust and profitable.