August ’22

6th September 2022

TEG Road Transport Price Index increases for the sixth consecutive month, as fuel prices continue to fall

Average price-per-mile for couriers has increased by 8 points in a year, whilst haulage index is back up by 1 point month-on-month

Integra makes sense of the road transport landscape. Get more insight with Integra, TEG’s enterprise solution.

Trends at a glance

The overall index increased by 0.4 points this month, although the index has dropped slightly year-on-year, by 0.2 points.

Courier prices decreased by just 0.1 points during August, falling from their all-time high in July. However, they have increasedby 8 points compared to last August. 

This time last year, haulage prices were much higher and have now fallen 10.9 points in 12 months. Midway through the month, haulage prices had dropped 2 points, but have now risen again to be up 1 point compared to last month.

Industry pulse 

Like every other sector, transport is doubtlessly feeling the effects of runaway inflation. Energy and staffing expenses are, of course, among the most obvious rising costs – while fuel costs are finally going the other way.

The overall price-per-mile and that of haulage are showing the effects of this, and yet the average price-per-mile for couriers has fallen. A significant driver behind this is a drop in demand, caused by fears of a recession just over the horizon.

Inflation soars

August was the month when inflation surged into double digits, reaching 10.1% and its highest level since 1982. The Bank of England is forecasting that it could reach 13% later in the year.

While rocketing food prices are the driving inflationary force and have little direct effect on freight prices, rising inflation puts pressure on all companies to boost wages, at a time when their own costs are shooting up. The transport industry must still keep wages competitive, even though recent research has shown wages generally aren’t keeping pace with inflation.

What’s more, there’s a general cooling effect at work, with the cost of living deterring consumers from making purchases and slowing demand down. According to ONS data, over half of people (57%) are changing habits and spending less.

With the prospect of a recession around the corner, demand for fuel has dropped significantly. According to ONS figures, the ongoing cost of living crisis is making the consumer think twice before getting in the car. Around 42% of the UK’s adult population (or 19 million people) are cutting back on non-essential journeys in their vehicle. 

Naturally, the price of crude oil has followed demand downwards – and we’re now seeing the most dramatic fall in prices at the pumps since the pandemic caused demand to dry up almost overnight.

Both diesel and petrol prices decreased by approximately 5p per litre between 1-8 August.

After consistently calling for action to reduce fuel prices, the road transport industry is now able to pass on savings at the pumps. That’s partly why we’ve witnessed a fall in the overall TEG Road Transport Price Index. The general public and government officials alike will now be hoping that consumer prices follow suit and the march of inflation will slow down.

Turnover & profit

As well as warning that inflation could reach 13%, the Bank of England has also predicted ongoing volatility, influenced in no small part by record-high gas prices. Recession, it says, will come in the fourth quarter of the year.

Industries such as transport are already seeing stifled growth, as months of high fuel costs and supply chain disruption devastate their profit margins. Companies now face entering this next period of uncertainty with lower cash buffers than before. They’re also more vulnerable as the country faces the worst cost of living crisis in decades. 

What’s more, without a functioning government in place at this time, SMEs can’t look to effective state intervention anytime soon. Careful planning and proactive steps are needed to help weather the storm ahead.

In summary

The underlying causes of inflationary pressures have now shifted firmly from the pandemic to conflict in Ukraine and ongoing labour shortages. If a recession does materialise – as many experts predict – it’ll only provide cold comfort from rising costs.

While road freight companies might find themselves with lower daily costs, a recession will certainly mean reduced demand. Companies will, therefore, have to become even more adept at capitalising on what demand there is. Whether they do that by embracing technology or find efficiencies another way, now is the time for the industry to prepare itself.

What’s certain is that we’re entering uncertain economic times and all industries will be affected. The TEG index will chart road transport price fluctuations as the wider economy evolves and impacts our sector.

Check back here in October to see how September unravelled, as we analyse the influences having the biggest impact on the industry.

Want to see more in depth data? Click below to visit the Integra Market Data report

Share this post on LinkedIn