Operator costs are a case of deja vu all over again04 January 2022

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There were reasons to be cheerful going into 2021, as operators looked forward to coming out the other side of the global pandemic. However, the world had other ideas. John Challen reviews operational data gathered by trade associations the Road Haulage Association (RHA) and Logistics UK

Time has moved on, but much has remained the same over the past 12 months for those in the haulage industry. A global pandemic still looms large, increased paperwork and new trade rules remain a burden and the driver shortage issue has got worse, not better.

A lot of the talk at the end of 2020 was of stability and a return to ‘normal’ – even if it had been superseded by ‘the new normal’. Last year’s article in this slot read: “The big hope is that 2021 is not as disruptive as 2020 – the country holds its breath and waits.” The country is still holding its breath.

Having taken a big hit during the first half of 2020, GDP recovered during the second half of the year and continued this through 2021. There was a slight fall (-1.4%) in Q1 2021, but Q2 (5.5%) and Q3 (1.3%) were more encouraging. The improvement in Q3 – partly thanks to Coronavirus restrictions being lifted – left it just 2.1% below its pre-pandemic figure.

There was more positive news at the start of 2021 as more than 10,000 trucks were registered during Q1 – up 9.5% on Q1 2020. A similar number (9,493) of HGVs were registered during Q2, but those 20,000 vehicles for the first half of the year were still down by 28.8% compared with the corresponding period in 2019. However, Q3 saw a fall in registrations (-8.4%) compared with the pandemic-affected Q3 2020. But, as Q3 registrations have proved tough in recent years (8,419 in 2019; 9,852 in 2018), that 7,715 figure in 2021 was not totally unexpected.

The 2020-2021 period was the one that stopped the decline in total truck numbers and O-licence numbers, which can be traced back to 2015-16. The UK vehicle parc was recorded as 369,287 vehicles – an increased of 6,657 on the 2019-2020 figure. Meanwhile, O-licence numbers increased by 545 (from 68,983 in 2019-2020 to 69,528 in 2020-2021).

The RHA’s annual survey of cost movements (Haulage Cost Movement 2021), which informs this text, calculates that the overall percentage increase for 2021 was 11.76%. Tables in this article have been supplied by Logistics UK; for its commentary, new this year, see box, at bottom.


Inflation was relatively low (0.6%) on entering 2021 and remained around that level until April, when it hit 1.5%. That was the start of a steady increase over the summer months: by September, the rate had doubled from April to 3.0%. That trend continued during the autumn, when inflation rose at its highest monthly rate (1.1% in October) for 10 years, to reach 4.2% and, as we go to press, it has reached a 10-year high of 5.1%

The unemployment rate fell steadily throughout 2021, from its starting point of 5.1%. By April, it had stabilised at 4.8% before further falls to 4.3% in September. Fears over an immediate rise in unemployment following the end of the furlough scheme on 30 September 2021 were short-lived, with research from the Resolution Foundation suggesting that only 136,000 workers moved to unemployment or inactivity from the scheme.

Meanwhile, October saw a record number of employees on the books (up 160,000 to 29.3 million), while job vacancies hit a new record of 1,172 million, according to the Office for National Statistics.

At the end of August 2021, the Bank of England stated that pay growth had been “artificially boosted by COVID-related factors in the labour market”. It went on to estimate that underlying annual wage growth was lower than the headline data suggested, but that it would “strengthen as the economy recovers from the pandemic”.For reference, growth in average total pay for the three months between June and August 2021 was 7.2%, including bonuses.

Interest rates remained at the same low level of 0.1% throughout 2021. At the time of writing, an expected increase at the end of the year was likely to be resisted due to factors such as the rise of COVID-19 restrictions in the wake of the Omicron variant and slow economic growth of 0.1% in October 2021.


According to RHA members, tyre prices have risen on average 5% over the past year. Some members mentioned monthly increases, partly due to increased costs of raw materials such as natural rubber and also crude oil. Tyre breakdown cover and delays in getting tyres repaired at the roadside were also mentioned in the report as areas of concern and of extra costs.


Based on its 44-tonne artic model, RHA estimates fuel increases to amount to over £11,000 for the year. The biggest issue was the perceived shortage of fuel in September, which was more precisely a shortage of drivers. RHA reports it was due to a lack of a few dozen drivers, principally from one company. There followed huge queues at the pumps, by which time global oil prices had upped fuel costs, too. The UK faced record fuel prices towards the end of the year, beyond previous highs of 2012. (See also p24 for Logistics UK’s fuel views.)

Globally, fuel pricing has become a major concern, with various countries (USA and Japan included) considering releasing some strategic oil reserves to cool the market.

Meanwhile, costs of another fuel-related fluid, diesel exhaust fluid, better known as AdBlue, have increased beyond any normal pattern through 2021. The fluid has two base ingredients – urea and deionised water. The substance has a finite shelf life and is best stored out of sunlight. DEF costs have risen as a result of automotive-grade urea prices rising from €300 per metric tonne in September 2020 to in excess of €860 by October 2021.

Rising global demand for urea in general for agricultural use as well as a massive recovery in the usage of urea in the resins market for the manufacture of chipboard and MDF are among the driving factors, but also the rising price of gas, the principal raw material in urea manufacture, is to blame. The UK has no domestic production of urea, so it has to be imported and global prices pervade. Plastics costs have increased, too, which means more for the IBCs that many haulage firms will buy the product in.

In cost terms, DEF amounted to around 0.61% of the cost of operating at 44-tonnes in RHA’s model for 2020 – or £910. This year this has changed to 0.74% or £1,234. That is a 35.6% increase, and the concern is that prices will in the near term keep going up.


The costs of commercial vehicles and trailers have jumped this year, with reports of closed order books and long delays for new vehicles. However, the chancellor announced that the Annual Investment Allowance would be extending the temporary £1 million allowance level for capital expenditure tax relief until 31 March 2023.

While work continues at OEMs on more environmentally friendly versions of their vehicles, the diesel engine, especially at the heavy end of the market, is still very much the king.


Traffic volumes are back up to pre-lockdown volumes, but have not been that way over the total 12 months. RHA Insurance Services advises that, overall, the motor insurance market fell to a five-year low during 2021. The drop in part reflects insurers passing on claim cost reductions during previous national lockdowns.

Meanwhile, there have been some new usage-based insurers and connected fleet solutions entering the small CV market during the year. It is anticipated that these insurers could begin to bring capacity and solutions to the haulage market in the future.

Otherwise, there are no major changes to vehicle insurers’ underwriting approach. Hauliers’ costs are to increase by 5%.


Repairs and maintenance costs in percentage terms are nearly double that of last year, according to the RHA report, with the all-too-familiar note about scarcity and costs being passed on. There are certainly many cases of vehicles off road (VOR) while they await parts.

To continue working in London with the arrival of the Direct Vision Standard in March, many firms had to gear up, which meant added costs of between £1,000 and £2,000. Some firms were still not ready, delayed by parts and/or new vehicles. As a result, they used the three-month ‘safety net’ finally offered by Transport for London (TfL) as a grace period if they registered their vehicles. This scheme was backed up by reports at the time that TfL had only issued around 50,000 DVS permits, which amounted to only 12% of the HGV numbers in the UK and less than 60% of the 91,800 lorries in London and the South East.


RHA members reported large increases in overhead costs this year, with some of this money being on administration staff cost increases. In addition, there were other factors to consider, such as site overhead costs, including rent reviews and repairs – some of which might be left over from the previous year.

Unsurprisingly, personal protective equipment (PPE) is included in the list of unwanted but necessary extra costs, given the current requirements of the pandemic.


It was clear by May 2021 that RHA members felt they had to start offering better employment packages. KPIs were falling at this time and members were having to use agency drivers to plug gaps, typically costing up to 50% more than normal. For a period of time, there were daily news articles describing how companies were effectively outbidding each other to secure drivers, with some being offered sign on or six-month stay bonus packages along with much-inflated pay figures.

Reports in July suggested that drivers’ costs were estimated to have risen 12%, but it was quickly apparent that even that much of an increase wasn’t going to work in many areas. RHA member averages had risen to 18% by October. A combination of factors are involved, including location, local competition, whether agencies and/or self-employed drivers are still used and the sector. See also box, right, for Logistics UK’s view.


January is the start of another uncertain 12 months for those in the transport sector, as well as those in the wider world. For hauliers, the good news is that transport is in great demand, but getting the balance of availability right is key. The driver shortage is ongoing, but efforts have been made to reduce the burden.

One additional cost to note for the coming year is that of National Insurance (NI), which is due to increase in April 2022. The rise will see the PAYE employer rate of NI increase from 13.8% to 15.05% for income per employee above £8,840 per annum. In reality, this means an increase of more than 9%.

Vehicle-wise, the clock is very much ticking for trucks powered by fossil fuels. Most manufacturers are advanced in their overhaul of product ranges, so expect to see new alternative-fuelled models throughout 2022.

Increasing fuel costs are likely to continue, including for many from the loss of the red diesel rebate (from April 2022).

And finally, there will continue to be restrictions and delays caused by ongoing Coronavirus and Brexit-related activities. How much, when and for how long remains to be seen.


“The two main and significant upward pressures on vehicle operating costs in 2021 were fuel and wages. In the year to 1 October 2021, bulk diesel prices rose by 29% as the global energy crisis pushed oil prices to a three-year high and the COVID-19 pandemic, coupled with Brexit, drastically reduced the HGV driver workforce in the UK.

“To retain existing staff and attract new drivers, wages rose. According to Logistics UK’s Manager’s Guide to Distribution Costs, in the nine months to 1 October 2021, the average increase in basic pay for HGV drivers was 11.2% (which includes those who did not raise pay) and the average basic pay award (excluding those who did not increase pay) was 19.4%. These rises were not consistent across firms or vehicle types. Larger pay rises were awarded to artic drivers, especially shift drivers, while rigid vehicle drivers had relatively more modest increases compared with previous years.

“The road user levy (RUL), which applies to heavy goods vehicles of 12 tonnes or more, is suspended from 1 August 2020 to 31 July 2023 and has led to an overall 42.1% reduction in VED and RUL payments, but this is offset by increases in all other vehicle operating costs.

“Looking ahead to 2022, Logistics UK has been pleased to see recent government and industry interventions to help overcome the driver shortage. It remains to be seen how quickly and significantly these steps will impact the shortage, although there are early signs that some of these measures are cutting through.

“Wider supply chain issues that buffeted the economy in 2021, with container shipping disruption and a shortage of semiconductors, look set to continue. 71% of respondents to Logistics UK’s November Performance Tracker had difficulties purchasing or leasing HGVs or vans in the past year, with the leasing of new vans most problematic. However, logistics is a sector known for its ability to adapt, and we see reasons for optimism that the situation will stabilise over coming months.”

John Challen

Related Downloads
243230/Operator costs.pdf

Related Companies
Freight Transport Association Ltd
Road Haulage Association Ltd

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