Road freight services defy inflation, with stable prices year-on-year

6th July 2023

Haulage and courier sectors weathering inflation storm with stable prices, but new threat of mechanics shortage looms

According to the latest data from the TEG Road Transport Price Index shows that year-on-year haulage and courier prices remain stable, despite inflation pushing prices up elsewhere.

This stability may be short-lived as the HGV levy is reintroduced and staff shortages become a concern.

In June 2022, the overall price-per-mile was 121.9 and has now risen to 122.3, resulting in a slight -0.3% change. Over the past month, courier prices increased by 1.2%, while haulage prices rose by over 3%.

But economic forecasts suggest that even these small changes may soon be a thing of the past.

The Bank of England is expected to raise interest rates to a 19-year-high of 6.25% by the end of the year. This could potentially lead to a recession, which would decrease the demand for road transport and affect prices.

HGV mechanic shortage threatening UK supply chains

UK logistics companies have dedicated significant effort to tackle the well-known shortage of drivers in recent years. One approach they have taken is enticing individuals to become drivers by offering higher salaries and attractive signing-on bonuses.

However, this strategy has resulted in a new challenge for hauliers: a shortage of HGV mechanics. More than half of the businesses surveyed by Logistics UK have encountered difficulties in hiring enough fitters, technicians, and mechanics.

This situation could have a detrimental impact on the supply chain, which is already in the process of recovering. Out-of-action vehicles may disrupt the reestablishment of a smooth flow of goods.

Return of HGV levy looming

From August 2020, HGV operators benefitted from the suspension of the HGV levy as they recovered from the Covid-19 pandemic. Now, the levy is set to return on 31 July, with a new focus on emissions, weight and time spent in the UK.

Even as diesel prices have fallen to a quarter of July 2022 prices, the reinstatement of the levy will be a challenge to many operators. It’s another factor that may cause some to re-evaluate their pricing strategy.

Lyall Cresswell, CEO of Integra, says:

“It is, perhaps, surprising that prices have remained so stable given the multiple challenges facing the industry right now. In addition to ongoing inflation, they now must contend with the return of the HGV levy and mechanic shortages.

“The problem for the industry is that many operators have paid mechanics higher salaries to become drivers and they’ll now struggle to attract new mechanics. Particularly if they can’t afford those high salaries.

“All told, it might be difficult for logistics companies to keep absorbing costs, particularly if demand is affected by slow economic growth.

“However, the silver lining right now is significantly lower diesel prices. The industry has been calling for lower prices and now they’ve finally come, which will at least help with everyday business costs.”

Kirsten Tisdale, Director of Logistics Consultants Aricia Limited and Fellow of the Chartered Institute of Logistics & Transport, says:

“I’ve said it before, but I’ll say it again: there’s no greedflation in road transport. Yes, both the indices for spot haulage and courier have risen compared to last month. But haulage continues to show year-on-year deflation and courier is only at 0.8% inflation.

“Of course, diesel prices have come down. But until fairly recently, even though the price was coming down, diesel was still inflationary when comparing it with a year previously: because of the speed with which it rose.”