Seamus Leheny, Logistics UK Policy Manager-NI

Seamus Leheny

Policy Manager - Northern Ireland. Logistics UK

PRESSURE MOUNTS AS COSTS CONTINUE TO SOAR

Operators are facing mounting pressure as a result of increased operating costs, which are placing an unsustainable burden on logistics businesses. Figures from the latest edition of Logistics UK’s Manager’s Guide to Distribution Costs show that total vehicle operating costs have increased by 17.7% on average in the twelve months to 1 April 2022. And while rising fuel prices represent a key element in pushing up costs, there are many other businesses expenses that are also soaring.

Forecourt diesel prices

have risen by 34% since the start of the year; an alarming increase for logistics businesses that already operate on very narrow margins yet rely on diesel to carry out their deliveries. With UK logistics operators already paying duty at a rate that is 63.5% higher than the EU average, Logistics UK has written to the Chancellor to request a further 6p per litre duty reduction, in addition to the 5p per litre cut that was announced as part of the 2022 Spring Budget. While the previous reduction was absorbed by the rising fuel prices, Logistics UK estimates that this further 6p cut would result in an average saving of £2,424 per year, per 44-tonne truck. This would be a vital cost saving for logistics businesses that are facing other, significant, inflationary cost increases. Maintaining a safe fleet is vital to ensure the safety of drivers, and all other road users, and must remain a top priority. However, these maintenance costs have increased significantly in the twelve months to 1 April 2022; overall vehicle maintenance has increased by 7.1% and the cost of tyres has risen by 12.7%. Insurance premiums have also risen, and with soaring energy prices and surging inflation, business overheads have also climbed by 11.2%.

TOP PRIORITIES

As a result of the ongoing driver shortage, driver salaries have increased by an average of 12.9%. Attracting new recruits and retaining existing HGV drivers is a top priority for the logistics sector, which has worked hard over the past year to implement several initiatives to secure a sustained talent pipeline for years to come. However, as well as increased driver wages – and the introduction of successful apprenticeship schemes introduced by local authorities such as Armagh, Banbridge and Craigavon Borough Council – to do this, industry needs a renewed focus on the improvement of driver facilities across the strategic road network to ensure that drivers remain engaged with and committed to the industry. Logistics UK is urging government to continue working with industry so that the drivers who deliver the nation’s vital goods can be provided with the working facilities they deserve. From speaking to members in Northern Ireland, Logistics UK has identified several key points on the strategic road network that require attention and once the Northern Ireland Assembly resumes, Logistics UK will be making representations for infrastructure funding.

RISING CHALLENGES

Logistics is a highly adaptable industry, having successfully navigated a number of challenges in recent years, including Brexit, Covid-19 and the war in Ukraine. However, the sector already operates on very narrow margins and cannot continue to absorb increased costs on this scale. This is why Logistics UK and its members are asking the Chancellor to act on fuel duty, to help ease the inflationary pressure on our industry, which is so critical to every facet of the economy. Many Northern Ireland members have reported challenges in passing increases along to customers and it is therefore important for the wider economy to understand the critical impact these costs are having on logistics. Logistics UK will continue to communicate with members to ensure accurate representation among key policy leaders and work to achieve the best possible solutions for industry.