Driver shortage or pay shortage?Dr Michael Galvin

Much indignant, hot air is being directed at TfL and other regulators concerning the current ‘driver shortage’. But the facts (an often-neglected concept in this industry) do not in my view apportion any blame on regulators for this particular predicament.

I would go so far as to point out that in most areas of the UK, licensed PH driver numbers are at historically high levels. We have seen over the past five years or so licensed drivers increase by a quarter and in some areas by more. Whatever is causing driver availability to appear elusive it is not the number of licences that is the problem. So, let’s agree there are a deeper issues at play here.

SO, WHAT IS THE PROBLEM?

Before we talk about ‘the problem’ let us consider the operating environment. Fares are at levels not seen in this industry for probably 40 years. At the same time, the surfeit of cheap labour and labour with relatively low earning expectations is waning fast, mainly due to Brexit.

That pool of labour, which was the source of many PH drivers, is in more demand than has been the case for many a decade thanks to the way we now live, work, shop and eat. Our industry has been disrupted in recent years. Not, as many, frankly ill-informed pundits may claim through disruptive technology, but through disruptive money. And it is now being impacted by the EU referendum, demographics, and behavioural and lifestyle changes.

Before the pandemic, we had previously respected consultancies, who should know a great deal better, standing up at transport conferences and presenting what they describe excitedly as “awesome disruptive business models”. In reality these were “profit prevention schemes”. We had car makers buying anything that had a hue of ‘mobility’ about it for vast sums. And we had venture capital companies that are happy to subsidise private hire journeys by up to 60%.

There was a clear bandwagon rolling – but that was only ever going to end in tears. It’s interesting to note that the same accolades quickly moved to food deliveries and are now “transforming” grocery deliveries.

So, what do these forays by VC companies, clapped and applauded by consultancies and financial page scribblers, have in common? They all dip into the pool of people who are looking at lowentry, flexible opportunities to earn money. Yes, the very people who not so long ago would have considered becoming PH drivers. What happens if people e-shop, e-eat, e-work and e-live? They use fewer cabs. Therefore, demand is not going to move back to normal levels any time soon. I know we all like to think we have been clever, but we have in this industry enjoyed the luxury of being able to quickly access a pool of people who needed or wanted to earn some extra money quickly when demand flexed up. We have been able to see supply return to normal levels when demand diminished, either seasonally or cyclically.

Well, that ship has sailed and we are now facing a world of fighting for flexible resources along with freight companies, goods delivery companies, grocery stores and food delivery. And this is not going to change any time soon.

The wiser operators have always recognised that finding and then holding on to good drivers was the key to their business growing sustainably. Well, nothing has changed except that some previously wise operators have allowed themselves to get sucked into reducing rates paid to drivers.

The outcomes are clear. We are in an inflationary cycle. It might not be the 26% inflation of yesteryear, but it is there and it is clear every time you fill up. The inflationary cycle on pay is moving up significantly, albeit distorted by furlough, additional universal credit payments and so on. But as labour shortages begin to bite, inflation will bite further.

An industry with mileage rates at 40-year lows in a market where the very resources they need are in high demand and where demand is pedestrian has a systemic, maybe even an existential, problem.

Mileage rates are going to have to go up and go up significantly if you are to retain your drivers. Will customers like it? Probably not, but in the words of John Griffin, a man who knows a thing or two about this industry: “Good service is remembered long after price is forgotten.” If people want service, they are going to have to pay for it. As operators, your service will need to be sufficiently good for them to feel comfortable doing so. The alternative is bookings but no drivers and another heated meeting with the regulator who has no mandate to run your business for you! n www.mobilityservices limited.com

Dr Michael Galvin https://mobility serviceslimited .com “So, what do these forays by VC companies, clapped and applauded by consultancies and financial page scribblers, have in common? They all dip into the pool of people who are looking at low-entry, flexible opportunities to earn money....”