The perfect storm is brewing for UK companies importing goods from Europe
Roughly 10 years ago UK hauliers started to hand over the reins of international transport to European hauliers. In particular the emerging Eastern European carriers with cheaper operating costs ie. labour, diesel, etc. UK companies simply could not compete and over the years a near complete exit from European haulage by UK hauliers has occurred. However, not only UK hauliers were withdrawing, but Western European hauliers in general found it hard to compete and began a slow retreat into more domestic business.
Poland who led the march now currently operate a quarter of all international movements. Other countries have made in-roads but are not able to scale to the level of Poland. Overall though, Eastern European hauliers with their low operating costs now control over 58.4% (2015) of the EU’s international road freight market.
This change of European transport ownership meant a new series of habits emerging. One big advantage was employing drivers who routinely roamed through Europe for months at a time before returning to ‘base’. They didn’t even have to come to the UK, rather bounce around countries racking up the mileage.
Drivers who did make a UK trip may not be seen in the UK for another few months such is the variety of options these nomadic haulage companies had in front of them. They simply could go where the money was, which was often longer routes to Southern Europe from Central Europe.
There was also the cultural change from using UK hauliers who regularly make trips where you knew they were coming home, to Eastern European hauliers who had little in common with their UK counterparts and had no allegiance to the UK, language and all.
This last point meant an opening for Austrian haulage brokers to straddle the legitimacy gulf between Western European clients and Eastern European hauliers and facilitate quite spectacularly intra-European logistics.
Add in the maturing of the wild west commonly known as freight exchanges, choice (at the expense of safety and quality in our opinion) has never been greater for carriers.
In 2016 things came to a head for EU hauliers running UK trade routes.
Brexit occurred causing some anti-British sentiment from Europe and worse, a subsequent plummeting Sterling meant freight prices began to rise quickly for the client, but not in receipt for the euro-counting haulier. Another big issue was at Calais where the main route in and out of the UK became a battleground between illegal immigrants, the local police and hauliers.
Those that did make the journey had to ensure enough compensation for the lack of exports from the UK, the ferry crossings cost and danger factor and simply shorter trips.
The UK suddenly looked a very unattractive place to go and the only compelling argument to go there was if it paid well. Very well. The UK was now for the first time competing for European hauliers with Europe itself. Thus began a series of price rises throughout the rest of 2016.
2017 began relatively stable as the price adjustments seemed to have made some ground up for hauliers and Sterling settled down, albeit with a much weakened position.
However by Easter 2017 shortages in import trailers began to appear again. Hauliers reported that as a consequence of trade picking up in Europe that they were being paid more for intra-European work.
Further problems began to emerge as many carriers started to suffer from a shortage of drivers. It was well known that Eastern European drivers are paid less than Western counterparts and that assisted in their companies competitiveness in the market. But that didn’t explain how some of these companies were becoming quite wealthy. One can only assume some at the top did not share with those at the bottom resulting inevitably in resentment and disillusionment with the industry from drivers.
So hauliers now had a recruitment issue to compound the problems already being experienced.
Risk assessment – driver shortages means the calibre of drivers being employed may be weakened due to desperate recruitment policies.
Less supply meant further price increases but this time with no guarantees of actually being able to do the job, either through driver resources or choice of mileage. Was there enough supply to service Europe, let alone the UK?
Here in the UK we had been so used to knowing our hauliers would service the UK that we created habits based on that such as JIT, short lead times, keeping less stock and long periods of price stability. Generally the wheels have kept turning at a steady pace.
Now we are entering a new era where something we expected to control we no longer can. Not the way we used to anyway.
This will mean habits will have to change and could mean longer lead times, more stock being held, a more flexible approach to deliveries and devising creative pricing strategies.
Thankfully we are already formulating successful new strategies for clients and are working closely with them analysing their complete supply chains and devising win-win options with EU carriers for UK clients to keep their businesses operating smoothly.
Interestingly with the advent of Brexit looming ever closer and prices potentially rising further we may one day see some things come full circle, possibly even the emergence of the UK haulier in Europe again for instance. Hold on to your hats for that one!
It may take some years to adjust to these new habits but in an age of uncertainty we can be confident that these changes will make a more resilient and stable UK supply chain going forward.
As they say ’the only constant is change’ and this industry is moving at a pace.
Our final words, if you wish Jordon to give your supply chain a health check please do get in touch so we can discuss some new and advantageous opportunities that could transform your business.
See you soon