Logistics: Bite-Size Insights - October 2021
Welcome to the latest edition of Logistics: Bite-Size Insights, where this month we focus on the shortage of HGV drivers, including the effects on the UK supply chain, recent changes to HGV driving tests and a comparison with other European countries.
Driver shortages – the new epidemic?
As is widely reported, the UK is currently experiencing significant shortages of HGV drivers which is causing serious delays in the UK supply chain. The impacts range from delays in getting our furniture delivered, having to go without our favourite Nando’s chicken or struggling to fill our car with fuel. The shortage has arisen following a number of factors, including Brexit paperwork, tax reforms, COVID-19 and restrictive immigration rules.
A recent survey by the Road Haulage Association estimated that there is currently a shortage of more than 100,000 drivers in the UK. It is worth noting that pre-COVID, the UK was already experiencing a shortage of approximately 60,000 drivers.
However, with the recent exit of tens of thousands of EU drivers from the UK, there doesn’t seem to be any immediate light at the end of this supply chain tunnel.
So how serious is the problem and why does it matter to insurers? With a breakdown of the supply chain, a delay in delivery has a number of ramifications, including:
- Damage to the goods, particularly time sensitive goods such as fresh or frozen foodstuffs.
- Penalties being applied by customers for late delivery.
- Storage issues where goods cannot be moved to final destinations
- Supply chain contracts being breached.
While these issues remain unresolved, it is important to ensure that liability, whether as customer, haulier or a driver, is managed and protected as far as possible. Insurers should consider reviewing the contractual terms to see whether there are any penalties for late delivery, and whether such penalty clauses can, in view of the current climate, be revised.
HGV test rules changed – is this the solution?
The government has announced changes to HGV driving tests which would result in only one test having to be taken, instead of two. It is estimated that reducing the test to one will result in 50,000 more tests each year being available.
The government has scrapped the requirement to test a. the reversing exercise and b. the uncoupling and recoupling exercise. Removing those two elements cuts testing time down significantly.
Whilst the government have asserted that the standard of driving required to drive an HGV will not be affected, others are not so convinced.
The scheme has been described as a “recipe for disaster” by Labour’s shadow transport secretary, Jim McMahon.
Only time will tell if this will be successful, however, it is not hard to see the issues that this could create. HGV road accidents are nothing new – neither is the ramifications of such accidents whether that be damage to the vehicle, the cargo or a third parties; all of which has an impact on contractual and insurance liabilities.
If a driver completes just one test and does not have any experience of, for example, reversing, it may arguable that the driver in question does not have the skill needed, or expected, for the job.
The result may be open ended liability with no possibility of relying on any contractual limits. This, in turn, may have an impact on insurance cover. These potential issues need to be considered by those in the haulage service industry and insurers alike.
How are other countries bearing up?
The lack of truck drivers in Europe has become one of the biggest problems facing the haulage sector. In Spain, the transport sector has been warning of this problem for many years. However, the trigger of the crisis has come with the COVID-19 pandemic and the experts consider that the current situation in Spain is that 15,000 drivers are needed.
In addition, another of the great problems in Spain is the lack of young people in the sector as a consequence of the tough training and personal requirements, the precarious employment situation and the little economic compensation they obtain in return.
In response to this, in 2020 the government modified the minimum age required to qualify as a driver, reducing it 18 years. However, this measure has not rejuvenated the sector as anticipated and more initiatives and training aids for young drivers are being called for.
Added to this is also the difficulty for self-employed workers to acquire a new truck (it takes approximately from six months to a year to buy a truck).
Haulage companies consider that the situation is unsustainable since, as a consequence of the lack of drivers, companies have had to raise salaries to retain them, which means that the entrepreneurs receive very low profit margins. This situation causes cost increases for companies, which are passed on to their clients and consequently to consumers.
Finally, experts consider that the necessary measures to solve this problem mainly involve improving the driver’s working conditions, providing them with training facilities and greater foresight in the face of technological changes.
France is also confronted with a significant shortage of lorry drivers. On 2 September 2021, Florence Berthelot, General Delegate at the French National Federation of Road Transport (the FNFRT) stated that the road transport sector lacks between 40,000 and 50,000 workers, mostly drivers. The sector has raised concerns around this issue since 2017, however the situation has worsened more recently due to:
- The flow of goods in transit keeps increasing with the continuous development of e-commerce (with a surge since the COVID-19 pandemic).
- The road transport sector has a retiring ageing workforce which is not compensated by new hirings. The sector suffers from a negative image that does not help attracting potential candidates (difficult working conditions and alleged unattractive pay and negative environmental impact (a reputation against which the FNFRT strongly advocates)). In this respect, the COVID-19 pandemic is said to have complicated further said working conditions.
Brexit has, however, not deemed to have influenced this issue in France.
In March 2021, Elisabeth Borne, the French Ministry of Labour, Employment and Economic Inclusion entrusted Philippe Dole, the Inspector General of Social Affairs, with the task of suggesting courses of actions to tackle the issue of shortage of staff in several industries, including the road transport sector. First results are expected to be presented this autumn.
The sector reports that this shortage has affected the competitiveness of French carriers, which sometimes have no other option but to turn down business opportunities.
Belgium is also facing an increasing shortage of lorry drivers. It was reported that between 2014 and 2018, the demand for lorry drivers in Belgium had tripled. In 2019, the shortage of lorry drivers was estimated at 6.000. Febetra, the Belgian Royal federation of Belgian transporters and logistics service providers explains that Belgium has historically faced a shortage of lorry drivers due the negative image of lorry drivers and the working conditions.
Currently there are approximately 35,000 drivers active in Belgium.
With more than 40% of drivers being over the age of 50, the demand will increase even more over the 10 coming years.
The current shortage has become even more dramatic since the COVID-19 pandemic. It is reported that many lorry drivers from Eastern European nationality, have returned back home due to the pandemic, and have not returned since. Due to the increased shortage of lorry drivers, transport companies are forced to turn down business opportunities, resulting in a reported 11% decrease in turnover.
Belgium is torn between its prominent role in the logistic chain industry between continental Europe and the United Kingdom, and the drivers shortage. Several institutions in Belgium are now offering shortened lorry driver programs, while interest groups continue lobbying for better working conditions and better infrastructure.
On the upside, the Belgian lorry manufacturing industry has reported an increase in demand. However, during the pandemic and its consequential shortage in supply of electronic chips, some Belgian lorry manufacturers had to temporarily shut down factories.