Sleep walking into a perfect storm

Sleep walking into a perfect storm: The LGV driver shortage, Brexit and IR35 reforms

The prospect of empty supermarket shelves, disruption to deliveries and the impact on the economy and recruitment industry is drawing alarmingly closer. Government and transport associations agree there is a shortage of around 51,000 LGV [large goods vehicle] drivers in the UK and, according to the REC, 98% of transport recruitment agencies are experiencing a shortfall.

We haven’t yet seen critical delivery failures but with the uncertainty around Brexit, EU worker immigration has already dropped substantially. Add in the effect of IR35 in April 2020 and we’re facing a potential exodus of tens of thousands of foreign drivers. Meanwhile, IR35 could force British agency LGV drivers to seek permanent driving jobs or go into other professions. For the first time since 2005 we have increasing LGV driver requirements with no EU nationals to make up the shortfall – the recipe for a perfect storm.

A key government report concluded hauliers are depending more on agency drivers, beyond covering seasonal variations, needing them to sustain ‘normal’ operations. Meanwhile agencies have become more dependent on foreign drivers, with over 40% of agency LGV drivers coming from Eastern Europe.

We are perilously close to failure point. We’ve had to offer significant pay increases and loyalty incentives to agency drivers during peak periods, while some of our competitors have been offering eye-watering bonuses to satisfy desperate clients. Furthermore, drivers are choosing to holiday in their home countries during peak periods.

Since 2003 the combination of recession and the influx of foreign, mainly Eastern European, workers has averted a driver shortage crisis. Meanwhile restrictive insurance practices preventing newly-qualified British LGV drivers from working through agencies, along with rising training costs, stringent regulations, poor facilities and depressed pay rates have created a formidable set of disincentives to new drivers. The result is an ageing LGV workforce, with 56% of drivers being over 45, and an over-dependence on foreign workers to make up the shortfall.

Should we be concerned? Not in the medium-to-long term. The FTA [Freight Transport Association] estimates 370,000 LGV drivers are required to meet demand, with 320,000 already working. According to the Department for Transport there are over 900,000 UK residents with LGV licences: 400,000 are Driver CPC (DQC) qualified to drive commercial LGVs, 80,000 have a DQC but aren’t driving for a living and a further 500,000 are without a DQC. The issue isn’t a lack of qualified drivers but one of insufficient compensation for working conditions.

New LGV qualifications are up, generating a yearly net addition of 33,000 LGV drivers to the market, which could eliminate the shortage within 2½ years. This could be accelerated if we can encourage some of the 580,000 to return to driving.

Brexit and the devaluation of Sterling have created a hostile environment for our foreign workers, but it’s the impending IR35 legislation that’s likely to be the event that throws the logistics sector into disarray. It’s unlikely that hauliers will rapidly increase charge rates, so agencies will be unable to pay enough to maintain drivers’ net pay, causing an exodus of foreign LGV drivers and an immediate critical shortage. This will force up agency pay and charge rates until enough drivers are attracted back into the UK market or from the 580,000 inactive driver pool to make up the deficit. This could take months or even years.

The only other mitigating circumstances could be that IR35 is delayed or before it hits another recession is triggered, perhaps by a botched Brexit, and the demand for LGV drivers drops enough for the IR35 effect to be irrelevant. Watch this space…

Kieran Smith is CEO of Driver Require

This article first appeared in the Recruiter Magazine 12 February 2019