Summary
While a post-Brexit-road haulage crisis was foreseen, this initially focussed on cross border road haulage operations. However, a combination of Covid-19 linked economic downturn and movement restrictions, a ‘hostile’ post-Brexit UK immigration policy and UK tax reforms linked to the employment of independent HGV drivers, has served to create an acute shortage of drivers for both HGV vehicles and lighter vans. This is posing serious challenges to the continued smooth functioning of food supply chains. This raises important issues related to the distribution of the losses and additional costs arising from the current road haulage crisis. These issues need to be addressed within ACP supply contracts, with the inclusion of provisions which insulate ACP suppliers from the worst of the emerging losses and additional costs. On the basis of past commercial experience of burden sharing this may require policy interventions if ACP suppliers are not to bear the brunt of the new costs and losses. However, the policy framework for such interventions is weak.
While there have been long-standing concerns over the road haulage challenges which would arise as a result of the UK’s departure from the EU customs union and single market (see box), the UK government’s decision to defer the phasing in of UK border controls on goods crossing from the EU until 2022 appeared to have averted ‘worst case’ scenario road traffic disruptions. Nevertheless, at the cross-border EU/UK trade level, the Brexit process has seen road hauliers virtually abandoning low-cost cross border movements of ‘groupage’ cargoes (cargoes consisting of multiple products) and a general increase of road haulage fees. This is linked to the complicated paperwork associated with ‘groupage’ cargoes and the need to accommodate the increased financial risk borne by road hauliers arising from the creation of an EU/UK customs and regulatory border.
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Longer- Term EU/UK Road Haulage Arrangements In regard to road haulage issues the COLEACP’s Brexit Readiness Assessment warned that while ‘the provisions of the EU/UK trade agreement allowing the continued operation of EU and UK haulage operation on each-other territory (with certain frequency of pick up and unloading restrictions) has averted more serious road haulage disruptions along triangular supply chains…. the existing shortage of licensed HGV drivers in the UK, and the high dependence of the UK road freight industry on drivers holding EU27 nationality remains and issue of concern.’ It highlighted how the ‘Covid-19 movement restrictions on the free movement of HGV drivers could impact on the availability of EU27 drivers in the short-term’, while the ‘future evolution of UK immigration policy and the general social environment in the UK confronting EU27 nationals involved in the haulage industry will also have a bearing on the availability of EU27 HGV drivers going forward.’ It further highlighted ‘the fragile financial state of many UK haulage companies arising from the trade and economic disruptions caused by the Covid-19 pandemic.’ This report, which was prepared towards the end of 2020, flagged many of the issues which have now become of critical concern in the UK road haulage sector. COLEACP, ‘Adapting to the UK’S exit from the EU Customs Union and Single market from 1 January 2021: |
However, the pre-existing challenges facing the UK road haulage sector (which included an approximate 80% dependence on EU27 HGV drivers) have been compounded by:
- The effects of Covid-19 on HGV driver training in the UK (with an intake of 30,000 drivers being lost in 2020 due to the closure of training centres (1)) and the reduced availability of EU27 HGV licenced drivers, with an estimated 1/3 of all EU27 nationals working as HGV and van drivers having returned home during the Covid-19 pandemic (2)
- A ‘hostile’ environment to EU27 job seekers in the UK post Brexit, which is making it more difficult for EU27 HGV drivers to return to the UK to take up employment (3).
- Tax changes for self-employed drivers which has seen the costs of agency drivers increase some 25% (4).
These factors, when combined with the pre-existing shortage of HGV drivers linked to low remuneration levels, anti-social hours and the low prestige of the haulage industry is generating a crisis in the UK road haulage sector. Press reports suggest a shortage of licensed HGV drivers of between 65,000 (4) and 100,000 (3).
The shortage of HGV drivers is reportedly extending to a shortage of drivers of lighter vans, where no HGV qualification is needed (5).
While the effects of this driver shortage initially impacted on the smaller convenience store trade, it is now spreading to supermarkets, wholesalers, food processors, the HORECA and farming sectors. The situation has become so acute the UK government has been warned serious disruptions of food supplies are possible throughout the summer and even in the run up to Christmas, if immediate action is not taken to address the acute shortage of HGV drivers (2).
According to Craig Taylor, the Group Logistics Director at Morrisons, ‘hauliers were “struggling” to deliver’, with the volume of goods received into the supermarket’s depots having ‘fallen by 7.5% in June.’ Meanwhile, Asda’s Head of Logistics, Chris Hall, pointed out to UK government representatives how it ‘has become “incredibly difficult” to source agency lorry drivers’, with costs increasing and delivering scheduled being missed. It was maintained the situation was currently ‘getting worse not better’, with ASDA ‘just about keeping our head above water’ (2)
For his part George Wright, M&S’s commercial director for food, has highlighted how ‘late deliveries and food waste were increasing’, with the situation likely to become ‘more acute’, as lockdown restriction are further eased. The Federation of Wholesaler Distributors (FWD) has warned supplies to schools could be disrupted, halting or curtailing school meals programmes (2).
The British Retail Consortium having earlier played down the scale of the HGV driver shortage (1) has now acknowledged the situation is ‘very difficult’ but still maintains it is ‘not yet critical’ (2).
Meanwhile food distribution charities are also facing challenges, while UK farmers are reporting the shortage of drivers to pick up crops, leading to produce going to waste (2).
This needs to be seen against the background of the financial crisis facing the UK road haulage industry linked to the reluctance of supermarkets to reflect rising costs in the prices they pay for transport services (5).
The haulage, retailing, wholesaling, farming, and food processing industries are all calling on the UK government for an immediate programme of action to address the HGV driver shortage and the general crisis in the road haulage sector. This includes calls for:
- Fast tracked training programmes for HGV drivers, including through the opening of new test centres, training of more examiners to test drivers and the introduction of ‘an intensive two-week training course with bed and board’, for fast-track licensing of drivers who already ‘have experience of driving bigger vehicles’ (5).
- Reinstating ‘the temporary extension of drivers hours (from 9 to 11)’ (5).
- Putting army drivers on standby for emergency food distribution deliveries (5).
- Government regulation to address the structural financial difficulties in the road haulage sector by prohibiting retailers from selling ‘food for less than what it costs to produce and supply’ (5).
- Adding ‘HGV drivers to the UK Shortage Occupation List’, and the introduction of ‘a Seasonal or Temporary Visa Scheme for qualified lorry drivers’ (5).
This latter measure offers the best hope for immediate relief to the HGV driver shortage. However, the UK government is reluctant to relax rules for the employment of EU27 HGV drivers, with the Home Office insisting ‘employers should focus on investing in our domestic workforce, especially those needing to find new employment, rather than relying on labour from abroad’ (4).
| Comment and Analysis While to date it has been ACP exporters serving UK markets via the EU who have been most affected by road haulage disruptions, the mounting driver shortage within the UK is now impacting on ACP direct exports to the UK. The supply chain disruptions the driver shortage is giving rise to are most severe for short shelf-life products. However, the solutions required to address the current driver shortage are likely to see an overall increase in road haulage costs in the coming years, with this coming to impact all traded goods requiring road transport.However, not all ACP exporters will be equally affected. Some ACP exporters have already begun to shift their mode of internal transport away from road to rail, on environmental grounds. This can require a re-routing of sea freight from traditional ports of landing to more modern ports with good onward rail connections (6). Where possible, other ACP exporters shipping to the UK will need to consider similar adjustments to take advantage of efforts to shift freight movements to the UK rail network. More fundamentally however, ACP exporters will need to review their contractual arrangements for the delivery of goods to customers in the UK, to try and reduce their vulnerability to the consequences of the deepening HGV driver shortage in the UK. A critical issue in this regard will be the point of delivery at which payment to ACP suppliers for the delivery of their products takes place. This will determine the extent to which payments to ACP suppliers are insulated from any wastage or losses on the final price resulting from the current road freight crisis. Clearly ACP suppliers where payment is made at the first point of landing in the UK or prior to export, will be least affected by the critical shortage of drivers now faced in the UK. In contrast, ACP suppliers where payment is only made after delivery to inland distribution centres will be more vulnerable to revenue losses arising from the critical shortage of drivers and associated road haulage disruptions. The most vulnerable however, will be ACP exporters who supply without any contracts and are paid on the basis of delivery to individual retail outlets. Such exporters will bear the full burden of road freight disruptions (for an example of how this can work out in practice based on recent experience see epamonitoring.net article ‘Impact of Yellow Vest Protests on Cameroonian Pineapple Exports Highlights Importance of Tackling UTPs along ACP-EU Supply Chains in Context of Potential ‘No-Deal Brexit’, 13 May 2019). Those ACP exporters who will be least affected will be those who are: a) Part of an integrated supply chain which has in place the infrastructure to deal with all components from within its own resources b) Part of supply chains which have already made the move to rail-based distribution (often on environmental grounds) and hence are only These more favourably placed ACP exporters tend to be part of sea freight-based supply chains. The most vulnerable tend to be part of air freighted specialty product supply chains, where low volumes are distributed to multiple outlets. Overall, ACP exporters of short shelf-life products will need to pay particular attention to these contractual issues. At the policy level, the emerging driver-based road haulage crisis raises important issues under the UK Groceries Supply Code of Practice. This being noted, unlike in the EU, the UK Groceries Code does not apply equally to domestic and third country suppliers and is limited to the largest supermarket chains (see epamonitoing.net articles, ‘UK Government Fails to Extend Scope of Groceries Code’, 26 April 2018 and ‘Role of UK Groceries Code Adjudicator could be extended’, 17 July 2017). As such it is far from clear whether there is a political willingness within the UK government to take up and address unfair trading practices within supply chains arising from the current HGV driver crisis.
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Sources:
(1) the Guardian, ‘UK faces chilled food shortage over summer, logistics industry warns’, 18 June 2021
https://www.theguardian.com/uk-news/2021/jun/18/uk-faces-chilled-food-shortage-over-summer-logistics-industry-warns
(2) ITV News, ‘Government told UK faces summer of disruption to food supplies unless it addresses driver shortage’, 2 July 2021
(3) The Guardian, ‘Lorry driver shortage: UK government and retailers in emergency talks’, 28 June 2021
https://www.theguardian.com/business/2021/jun/28/lorry-driver-shortage-uk-government-and-retailers-in-emergency-talks-covid-brexit
(4) iNews, ‘An escalating crisis Fresh produce left to rot and prices to rise amid lorry driver shortage’, 14 June 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/an-escalating-crisis-fresh-produce-left-to-rot-and-prices-to-rise-amid-lorry-driver-shortage
(5) Produce Business UK, ‘Deeper Issues at Heart of Driver Shortage as Crisis Sets to Intensify’, 29 June 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/deeper-issues-at-heart-of-driver-shortage-as-crisis-sets-to-intensify
(6) DP World London gateway, ‘Compagnie Fruitière to open a ripening facility at DP World London Gateway Logistics Park
https://www.londongateway.com/news-media/news/compagnie-fruitiere-to-open-a-ripening-facility-at-dp-world-london-gateway-logis