Bleak prospects for 2023

Road haulage rates

Haulage rates stagnated in the final quarter of last year, according to survey data published last month by the Office for National Statistics (ONS). Rates in Q3 were 4.0% up on Q2’s – the biggest quarterly hike on record – but the rise in Q4 was just 0.4%, probably due to softer diesel prices in November and December.

Nevertheless, taking 2022 as a whole, typical rates were 10.8% up on 2021’s. This is the largest annual rise recorded in the ONS data, which stretch back almost 30 years. Soaring costs of fuel, drivers and finance charges were to blame.

In its review of services producer price inflation (SPPI), the ONS said transport and storage made the single largest upward contribution to the annual SPPI rate. This index, which monitors movements in the cost of all services bought by UK industry, rose by 5.2% in 2022, so haulage rate inflation was running at twice the overall average. The ONS data show that typical haulage rates in 2022 were 25% above their level in 2015.

Oil and fuel

The monthly average price of Brent crude oil dropped sharply in December, but it still left Brent’s 2022 average price at $100.9/barrel, an eye-watering 42% higher than in 2021.

Back in 2012, Brent was even more expensive, averaging $112, but bulk diesel that year averaged around 111ppl to 113ppl, rather less than last year’s typical average of 138ppl to 142ppl. This is despite last March’s 5ppl duty cut, some of which seemed to get lost in the noise of last year’s fuel market. The key factor is the 22% drop in the pound’s value against the dollar since 2012.

Brent rose throughout January, averaging $83. Typical monthly average bulk diesel prices were 127ppl to 131ppl. Recent forecasts indicate that Brent is likely to average $83 to $91 this year. This is lower than last year because global supply is expected to outstrip demand, but much depends on how quickly the post-Covid Chinese economy rebounds.

All in all, bulk diesel should be a little cheaper in 2023, perhaps averaging 130ppl to 135ppl. The

5ppl duty cut is set to expire on 23 March, but reports suggest the Chancellor may extend it for another year in his budget on 15 March, to avoid adding to inflation.

Truck registrations

Registrations of new heavy trucks (16 tonnes GVW and above) in the UK in 2022 were 13.4% up on the previous year, the biggest increase of Europe’s five major truck markets (see chart).

Data collated by the European vehicle manufacturers’ trade body ACEA shows that the UK’s registrations growth – based on an SMMT estimate – was double the EU-wide average of 6.5%. Registrations in Germany, Europe’s biggest truck market, were down by 0.9%, one of only a handful of countries to see a downturn last year.

Outside the UK, other countries with strong growth in 2022 included Hungary (30.4%), Netherlands (17.1%) and Spain (13.6%). The trend in each country’s truck market correlates reasonably well with the economic growth forecasts for last year, supporting the adage about transport being the barometer of the economy. The UK’s 2022 GDP figure will be published on 10 February.

The UK economy is tipped to contract in 2023, and EU economic growth is forecast to be just 0.3% to 0.5%, so the heavy truck market looks set for a quiet year.

Sterling

The pound bought an average of just €1.13 in January, the lowest monthly figure for two years. Currency traders reckon economic prospects in the eurozone are stronger than the UK’s, so the European Central Bank will probably continue to hike the interest base rate to conquer inflation.

The fragility of the UK economy is likely to deter the Bank of England from making many more rate hikes, however. Higher interest rates in the eurozone boost bond yields there, so demand for the euro rises and the pound suffers.

The pound-to-dollar exchange rate was at an all-time monthly low of $1.13 last October, but ster-

Haulage Rates

Average Brent Crude Oil Price

Truck Registrations Over 16 Tonnes Gvw

ling has recovered a little since then, averaging $1.22 in January. US inflation fell from 7.1% in November to 6.5% in December, so currency traders believe that with inflation receding there will be little need for more interest rate hikes in the US. This has cooled enthusiasm for the dollar, so while it remains strong, its value against the pound has softened of late.

The outlook for the pound remains poor. The consensus of latest opinions suggests its average exchange rate index score in 2023 will be 2% to 3% lower than last year’s. n

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