Release Date: 02 June 2006
Release ID: 427
Weakness in domestic road freight activity in Q1 2006 continues the overall trend reported by respondents to the Freight Transport Association’s Quarterly Transport Activity Survey (QTAS) during 2005. FTA says that this is due to the UK economy’s continued dependence on non-freight intensive activities, such as business services and finance. Production industries (ie manufacturing, utilities, agriculture and mining) as a whole generated 1 per cent less GDP in Q1 2006 than they did in Q1 2005. By comparison, services as a whole generated 3 per cent more GDP over the same period. However, there is more optimism for Q2.
A slowdown in activity by freight intensive sectors of the economy will encourage operators to optimise use of their own fleets, and scale back their use of third party transport activities, such as contract hire and hauliers, to accommodate lower levels of demand. Hauliers tend to be used for the long distance movement of manufactured and semi-manufactured goods as well as by the construction, mining and quarrying sectors – sectors where the UK economy has been weaker. Indeed, reported demand for contract hire has now reached its lowest level for seven years.
For industry sectors other than third party haulage/transport services, there is more optimism for freight activity in the second quarter. Retail, construction, utilities and manufacturing operations expect to see more buoyant conditions over the coming months. However, current optimism may not eventually result in better performance: out-turn freight activity levels for all sectors in Q1 were well below those anticipated by respondents in FTA’s January survey.
A further consequence of the sustained difficulty in the third party transport market is reinforcement of the long term growth of business failures in the transport industry as a proportion of total business failures. In 1999 the transport and communications sector represented 3.1 per cent of total company liquidations in England and Wales; by 2005 it had grown to almost 5 per cent. In terms of sole traders going bankrupt, in 1998 the transport and communications sector made up 10 per cent of business bankruptcies in England and Wales, and by 2005 this had risen to 12.3 per cent.
International road freight activity has been very weak throughout 2005 and Q1 2006 and there is little expectation of recovery. The impact of cheaper foreign competition from Eastern Europe, import growth to the UK, sterling’s relative strength against the euro (making UK haulage rates less competitive) as well as web-based freight exchanges, all conspire to make the international market extremely difficult for the UK haulier.
TRANSPORT STAFF TURNOVER IMPROVED SINCE 2002
FTA asked a sample of its membership for a guide to levels of staff turnover for various types of transport staff in the 12 months to April 2006. The average turnover for HGV drivers, both multi-drop and trunking, was 9 per cent. This represents an improvement on 2002, where HGV driver turnover was 10 per cent on average.
Staff turnover for skilled workshop staff was a little higher than for drivers, at 9.5 per cent. In 2002, FTA’s April survey reported an 18 per cent annual turnover for workshop staff. Drivers of non HGV vehicles were reported to have the lowest levels of turnover in 2006, 7.7 per cent, compared to almost 15 per cent four years ago. Staff turnover for warehouse workers was 13 per cent (roughly the same as 2002) and transport managers at around 15 per cent. By comparison, the Chartered Institute of Personnel and Development’s annual survey Recruitment, Retention and Turnover 2005 estimated the average rate of staff turnover across all industries to be 15.7 per cent in 2004 and overall turnover for management staff (all sectors) was 9.1 per cent.
A possible reason for lower employee churn within the transport industry is the economic climate: six years ago the UK’s economy was growing at a much faster rate than it is now, leading to greater choice of jobs for both existing drivers, young people choosing their careers and military leavers. The rate of GDP growth was 4 per cent in 2000 and 2.2 per cent in 2001. Last year (2005) GDP grew by just 1.8 per cent.
OPERATORS RUSHED TO ACQUIRE HGVS IN APRIL BEFORE MANDATORY FITMENT OF DIGITAL TACHOGRAPHS IN MAY
Few respondents expected to increase the size of their commercial vehicle fleets in the early part of 2006. Vehicle registration figures published by the Society of Motor Manufacturers and Traders (SMMT) also showed the market to be relatively benign. The notable exception to this trend was registrations of trucks in March and April. April saw 110 per cent more truck registrations than April 2005 as operators brought forward vehicle purchases to delay having to begin using digital tachographs – which became mandatory on new vehicles from 1 May 2006.
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