Road Transport Price Index – June’23
6th July 2023
Road transport price index shows prices stabilise even as UK economy remains volatile
Both haulage and courier road transport price index show only slight increases during June, with diesel prices falling sharply to near parity with petrol
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TEG Road Transport Price Index - Trends at a glance
The latest data from the TEG Price Index shows a generally stable picture. The average price-per-mile for haulage and courier vehicles has dropped slightly year on year – by 0.3 points (0.25%). Month on month, however, the index is up 2.5 points (2.10%) from May.
That monthly rise is due to both haulage and courier prices rising – by 2.9 points and 1.9 points.
Year on year, the data is a little different. Only courier prices are showing a modest increase, rising 0.4 points (1.54%) to reach their highest-ever level for June.
Despite haulage prices dropping a little (0.08 points), it appears as though they could soon leave the extended period of deflation they’ve experienced since June last year.
Industry pulse
The spectre of inflation is still haunting the road transport industry – and is threatening future growth.
But of more immediate concern to operators is the return of the HGV levy on 31 July, which will add to already-high costs. However, a significant drop in the price of diesel will provide some relief.
The month of June brought welcome news at the pumps for road transport operators. After months of campaigning, they’re finally seeing diesel prices at similar levels to petrol prices.
Diesel prices dropped by around 2.5% in May, but they dropped at double that rate in June, falling by 5.8%. Remarkably, diesel is now almost a quarter cheaper than it was a year ago, representing a significant reduction in everyday costs for operators.
The looming levy
The UK Road transport market is expected to grow at a modest compound annual growth rate of 2.16%. Less-than-truckload is the fastest-growing segment in the UK market.
However, HGVs are soon to be hit by the return of the HGV levy, which will affect any growth and could place financial strain on operators during tough economic times. On the upside, the levy will mean more funds for road maintenance and improvements, which should lead to better driving conditions in the medium term.
Interest rate rises continue
With inflation refusing to fall as far as the government had hoped, interest rates are expected to rise further. They could potentially hit 6.25% by December, a level not seen since 1999.
Not only will this add weight to operators’ overheads, but it could also force the UK into recession. Of course, this economic slowdown would reduce demand for road freight, with knock-on effects for operators’ profits and prices.
Supply chain worries
The UK logistics industry had begun to show signs of recovering from global supply chain issues, with 2021 revenues 19% higher than 2020 revenues. However, 2022’s energy crisis hit hard, and supply chains are now threatened by a shortage of HGV mechanics.
Some have undoubtedly left the UK after Brexit, while others have switched to driving HGVs to earn more in that role. Whatever reasons individuals have, the result is that supply chains could be impacted by vehicles being out of action. According to Logistics UK, over half of the businesses surveyed have struggled with hiring enough fitters, technicians, and mechanics.
In summary
In the short term, it seems that road transport operators will gain on one hand and lose on the other. As diesel prices finally come down towards petrol prices, HGV operators will be paying out for the returning levy.
Many businesses are also suffering through a shortage of mechanics, which could cause supply chain problems.
But aside from these issues, there are much larger question marks around the future of the UK economy. The Bank of England now seems almost certain to keep hiking interest rates for some time, raising fears of a recession. If that happens and demand falls, operators might have to rethink their pricing strategies as they look to ride out challenging economic headwinds.
Come back next month to see how the Road Transport Price Index changes through July.
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