Turbulent times for the UK haulage sector

The coming 12 months will see us released from lockdown, though challenges remain with the Christmas peak, IR35 tax reforms, VAT repayments and Brexit border controls coming into force. Not to mention the possibility of a second wave of Covid-19.

Our revised and updated report 'The impact of Covid-19: a roadmap for recovery in the UK haulage sector' sets out expectations for the haulage sector as we wade through the turbulent waters ahead.

Sectors are being given the green light to re-open for business and are accelerating at different rates. Agencies are proving instrumental in providing the flexibility needed to match a fluctuating demand for temporary staff as different sectors scale up and are in a unique position to implement the diversion of resources from those still dormant sectors to those that are experiencing a spike in demand as they clear backlogs.

Access to roadworthiness tests is proving one of the biggest challenges to hauliers due to the backlog created by Lockdown which in turn could limit the availability of fleet to respond to requirements as they arise.

LGV driver shortage

We no longer believe that we’ll see a chronic shortage of LGV drivers once we are beyond the recovery “bounce” that follows the relaxation of lockdown. Our report concludes that a 10% reduction in the employment numbers of LGV drivers and the predicted reduction in GDP will offset the perceived shortage of drivers.

IR35 reform and VAT

In April 2021, we will finally see the introduction of the IR35 reforms in the private sector. This will bring agency pay and charge rates into line with permanent employee costs and create a level playing field with more transparent margins, forcing agencies to compete on service quality and value.

When deferred VAT becomes due in April 2021, we predict a rash of insolvencies of both haulage companies and temporary staffing agencies as companies with unsustainable business models opt to throw in the towel.

This should contribute further to the “levelling of the playing field” brought about by the IR35 reforms.

Let’s not forget Brexit

Since the Covid-19 pandemic hit us, Brexit has very much taken a back seat and is only now returning to the fore. Negotiations are significantly delayed, and insufficient time remains to achieve a deal. Hopefully, we’ll have enough breathing space to avoid a supply chain crisis in Q1 2021, which would compound the challenges we already face as a result of Covid-19 and IR35 reform.

Cash is king

It is unlikely there will be any respite until a vaccine is successfully deployed and we have stabilised our European border controls. Realistically we cannot expect calmer waters until next summer.

In the meantime, the key to survival will be managing your cash. Businesses who survive through to summer 2021 with cash to spare will be in the privileged position to take on the business left by those who have fallen by the wayside.

Kieran Smith, CEO, Driver Require

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