The slowdown in global merchandise trade is being echoed in a growth slowdown in the road freight sector across Europe. After growth of 9.4% in 2021, it is forecasted that the 2023 growth figure will be just 1.1%.
At the root of this growth slowdown – which affects air freight, sea freight, road freight and UK haulage – are the rising inflation figures across Europe – and worldwide. The rise in e-commerce trade has slowed down considerably. Not only that, the automotive sector – historically an important marker of consumer demand – continues to struggle. Spot rates declined for the second consecutive quarter in the first quarter of 2023. This has not happened since the peak of the Covid pandemic in 2020.
Higher energy prices and wage increases dent operating margins
Other significant factors that are causing a dent in operating margins in the road freight and UK haulage sectors are rising energy price and wage inflation. Even though diesel prices have come down considerably since the peak of Summer 2022, they still stand at a historical high. Wage inflation also continues to be an issue. The stubborn problem of the worsening labour shortage puts drivers in a strong negotiating position. The lack of skilled workers and the problems that UK haulage companies face with recruitment and retention of truck drivers has inevitably pushed up wages.
Across the continent, the conflict in Ukraine has exacerbated the problem. This is because Ukrainian drivers make up a significant proportion of the road freight workforce in EU countries, particularly in Europe.
As a result, operating margins – which rebounded positively following the end of Covid – are now in decline.
Effects of the EU Mobility Package
The EU Mobility Package – the series of new initiatives set up to unify road freight companies in terms of competition, performance, and social fairness across the EU – has had a major impact since its introduction in 2020. The changes and adaptations in operations that this has prompted has added extra costs for the road freight sector.
The transportation and storage sector saw the highest growth rate of bankruptcy declaration in the final quarter of 2022, with a rise of 27.5%. The period saw a period of consolidation, at best, for most road freight companies. Small-sized businesses have suffered the most – with Hungary, Slovenia, Poland and Spain being the most-affected.
Transport sustainability issues and the medium-term outlook
The medium-term outlook continues to look gloomy, as lower consumer and business deman is forecast. With higher energy and labour costs continuing, it puts smaller haulage companies at the risk of bankruptby. Road freight and UK haulage companies that transport essential goods, such as food and beverages, are expected to be in a stronger postion to ride out the storm.
Transport sustainability and stricter policy requirements continues to increase the demand for green transportation solutions. This is likely to cause additional headaches for hauliers in the years to come. As an example, earlier this year truck tolls were increased in Germany – doubling the costs for certain types of vehicles.
