Flatlining for the foreseeable future

Numerous recent conversations with those in the industry have clearly established one thing –most companies are undertaking less work than last year. This situation is not peculiar to this industry. Restaurants that normally require pre booking two weeks in advance are a third empty and accepting walk-ins.

We may not be in a technical recession but what we are all seeing is a long way from normal. The pattern of flattish demand has been about since shortly after the Covid bounce-back so it is somewhat disconcerting to see flat demand turn to reduced demand. Further evidence, if it was needed, can be discerned from the reduction in siren voices calling out driver shortages. Low demand has at least resolved, albeit temporarily, that issue. So how long will this last? Will next year see less demand than this year? What can we do? No doubt these questions and many more are being asked around the industry. Well let’s look at the causes.

Dr Michael Galvin https://mobility serviceslimited .com

amongst consumers and businesses. The outcome is less money to spend and more focus on saving where that is possible. The City of London used to say that taxis and barbers were the first victims of any downturn and the first sign of any upturn – I believe there is a lot of truth in that maxim.

These are serious, impactful issues. None of them are disappearing fast and few of them can be resolved or mitigated by the cab industry. So, I think the most optimistic among us would be thinking that this year is not going to see any improvement and we will continue to trend lower than last year.

What about next year? Will government prime the pump prior to an election? Will inflation halve, which would still maintain historically high rates of inflation. While inflation persists above 2% there is no realistic chance of interest rates being cut. At best I think we can predict a flat year next year, with trading similar to this year.

A Less Reliable Industry

The driver shortage impacted service, of that there is little doubt. If a cab occasionally shows up late it is annoying. If it becomes the norm, and even sometimes if no cab arrives at all, then the public seeks alternatives. I have no doubt the reliability issues experienced almost everywhere have reduced demand and sent people back to their cars.

A More Expensive Service

Galloping inflation, increased fuel costs, increased vehicle replacement and repair costs have pushed up fares and provided some welcome recovery from the deflation that has impacted and injured this industry for far too long but this will have burnt off some demand.

Convenience Of The Service

The impact of Low Traffic Neighbourhoods (LTNs), congestion charging, cycle lanes and various restrictions that impact picking up and dropping off are all contriving to push up the cost of the service and have made the service less convenient.

Fiscal And Monetary Policy

If people have to pay more tax or end up in a higher bracket due to fiscal drag and if they are hit by interest rate increases the outcome is that they have less money to spend on holidays, eating out, celebrations etc. All of these directly hit this industry.

Cost Of Living And Inflation

Higher tax, higher interest rates, increasing prices especially on essentials (food, electricity, gas) and wages not keeping up with inflation suck money out of the economy and reduce confidence

However, although it sounds crazy, that is an optimistic view. I would offer odds of no more than 50:50 on that outcome and given any serious event or systemic shock (more bank failures) we could see the decline continue and perhaps gain considerable speed and have a substantial impact.

WHERE TO FROM HERE?

Against that backdrop what does a responsible business do? The old adage ‘save on the way down and spend on the way up’ remains, in my view, good advice. I would also add take the opportunity to do all that is possible to improve your service and your reliability.

Nurture good staff, nurture good drivers and be ready for the upturn when it comes. Think the unthinkable what happens if this downturn continues at current levels or if it accelerated, acting quickly and seriously what cutbacks could you make? What would your plan be? It is worth preparing for the worst even if we hope for the best.

Preserving cash, keeping customers, keeping drivers and ensuring you have the right people will get you through a shallow downturn it may not see you through a prolonged and possibly deeper downturn.

From a political and regulatory perspective, the current government is unlikely to rush through any legislation – they have had thirteen years to do so and resisted the temptation, a new cab act won’t stimulate many votes! Likewise, a new government won’t see us at the top of their list of priorities either. So, there are no reprieves there.

We are on our own, and every decision will be important during the hopefully coming months but possibly the coming years. Its not only other peoples’ businesses that fail. The time to plan is now.

n www.mobilityserviceslimited.com