Summary
The shortage of HGV drivers in the UK is particularly acute and is intensifying. Food and drink supply chains particularly for shirt life products being severely impacted. This raises the issue of burden sharing along ACP export supply chains serving UK markets. Escalating road haulage costs and the value losses resulting from delays need to be taken up and addressed in Incoterms covering ACP exports to the UK, if ACP exporters are not to bear the full burden of escalating costs and value losses.
The HGV driver shortage in the UK is beginning to seriously impact on the functioning of UK supply chains, with the latest economic assessment suggesting it is beginning to act as a drag on economic recovery. Reports in The Guardian, based on data from the Office of National Statistics, maintain ‘Britain’s economic recovery from the winter lockdown virtually stalled in July despite the removal of most pandemic restrictions’ (1) This was in part attributed to supply shortages in key sectors arising from supply chain bottlenecks, not least of which is the shortage of HGV drivers. Analysis suggests the shortage of HGV drivers is ‘is threatening to boil over into a crisis for the UK food and beverage industry’ (2).
While there were concerns the situation would deteriorate from October 2021, given the coincidence of heightened seasonal Christmas demand and the phased introduction of full UK border controls on goods crossing over from the EU, the UK’s decision to again defer the introduction of these controls, has eased these business concerns (see companion epamonitoring.net article ‘UK Announces a Further Deferment of Full Border Controls on Goods Crossing Over from the EU’, 23 September 2021).
However, the existing strains are already beginning to tell in food and drink supply chains, with some empty shelves emerging in supermarkets (4), some fast-food chains withdrawing some items from their menus (3) and some restaurants and pubs being forced to sell a more limited range of meals and beverages (5)
Supermarkets have warned of inevitable price increases, while insisting they will try to limit such price increases as much as possible (4). This, however, could easily see the burden of rising costs and value losses being pushed onto the backs of suppliers, given the inequalities in power relationships along supermarket supply chains.
Against this background, at an extraordinary meeting of the UK Trade and Business Commission at the beginning of September 2021, the Chair Aodhon Connolly urged the UK government to ‘get a handle on the supply chain crisis’, with Logistics UK calling for the issuing of 10,000 temporary visas to EU HGV drivers. This was seen as essential, since efforts to stimulate domestic recruitment will take some considerable time to feed through into new drivers entering the logistics industry (6). Logistics UK takes the view the ‘backlog of HGV drivers waiting to take their test will not be cleared by the Driver and Vehicle Standards Agency (DVSA) until 2022’ (3).
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What has been the impact of Brexit on the HGV driver shortage? According to the BBC Fact Check service, while ‘there is evidence of HGV driver shortages across Europe…the UK has been among the hardest hit by the problem.’ This is a result of many European drivers returning home or deciding to work elsewhere. It was highlighted how ‘when the UK was part of the single market, they used to be able to come and go as they pleased. But the additional border bureaucracy after Brexit meant it was too much hassle for many of them to drive into and out of the UK.’ In addition, since ‘many drivers are paid by the mile or kilometre rather than by the hour…delays cost them money.’ The ‘decline in the value of the pound against the euro since the Brexit vote’ has also meant employment in the UK is less attractive to EU27 drivers (7). Breaking down the shortfall, analysis from the BBC highlights how there can be no doubt there is a real shortfall in HGV drivers, with the Office of National Statistics (ONS) putting the decline in the number of HGV drivers in 2020 at 16% (-47,000 drivers), with this being made up of the 25,000 fewer UK nationals who were unable to qualify in 2020 due to the Covid-19 linked closure of testing centres and a net loss of 19,000 EU27 HGV drivers (8). |
The UK government however is reluctant to grant such temporary visas for HGV drivers, insisting ‘the UK must “stand on its own two feet” and not rely on EU drivers’ (4). Transport secretary Grant Shapps, denied the driver shortage was attributable to Brexit, setting it in the context of the global shortage of HGV drivers in in the US, Poland and Germany and the impact of the Covid-19 pandemic on HGV driver training programmes.
Addressing the Brexit issue head on a government spokesperson declared ‘the British people repeatedly voted to end free movement and take back control of our immigration system and employers should invest in our domestic workforce instead of relying on labour from abroad’ (6).
In terms of the government response a package of measure shas been announced ‘including plans to streamline the process for new drivers to gain their HGV licence and to increase the number of tests able to be conducted’ (6).
| Comment and Analysis The HGV driver shortage in the UK raises important issues linked to the contractual payment arrangements for the delivery of ACP food and drink products to the UK, with these being particularly acute for short shelf-life products.Given the rising costs of road transportation in the UK, and the efforts of supermarkets to minimise the extent to which these cost increases are passed on to consumers, it seems likely supermarkets will seek to insulate consumers by passing the burden of increased costs and value losses resulting from delivery delays to their suppliers, including suppliers from ACP countries.Against this background there is a need for ACP exporters to, wherever possible, ensure they are paid for deliveries at the first point of landing in the UK, so as to avoid earnings losses, as a result of the worsening situation in regard to the HGV driver demand and supply balance.At a minimum, ACP exporters should ensure the increased road haulage costs and value losses arising from delivery delays are taken up and addressed within a burden sharing approach, so as to avoid being left carrying the whole of the burden of increased costs and value losses. Previous road freight disruptions in the EU (e.g., during the ‘Yellow Vest’ protests in France) saw ACP exporters bearing the whole of the commercial burden arising from road transport disruptions (see companion 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). These issues need to be taken up in the Incoterms of the supply contracts concluded by ACP exporters. However, there are real limitations on the negotiating power of most ACP exporters when it comes to this issue, with this depending on the market circumstances faced. Efforts to alter the point of payment in contractual arrangements, so as to sidestep new Brexit related cost increases could simply result in a reduction of orders, as supermarkets seek out other partners willing to take full responsibility for the costs of cross border and inland delivery to the final point of sale. This needs to be seen in a context where to date in response to wider Brexit related cost increasing effects, many major UK supermarkets have insisted their suppliers must continue delivering goods on a Delivered Duty Paid (DDP) basis, with the suppliers therefore having to bear the additional costs of new customs clearance arrangements, additional delivery costs to retail outlets and any tariffs which may now be applicable following Brexit. Nevertheless, ACP exporters should seek to open the possibility of alternative Incoterms which seek to distribute the new haulage related costs increases and value losses more equitably (a broader exploration of these issues can be found in epamonitoring.net ‘HGV Driver Crisis Raises Contractual Issues for ACP Fresh Produce Exporters’, 8 July 2021. |
Sources:
(1) The Guardian, ‘UK economic recovery stalled in July amid worker shortages’, 10 September 2021
https://www.theguardian.com/business/2021/sep/10/uk-economic-recovery-stalled-july-worker-shortages-gdp-covid-supply-chain-crisis
(2) aptean.com, ‘HGV Driver Shortage Threatens UK Food Businesses with Major Disruption’, 5 August 2021
https://www.aptean.com/nl-BE/insights/blog/driver-shortage-threatens-UK-food-supply-chain
(3) The Guardian, ‘Government urged to get a handle on supply chain crisis’, 2 September 2021
https://www.theguardian.com/uk-news/2021/sep/02/government-urged-to-get-a-handle-on-supply-chain-crisis
(4) BBC, ‘Morrisons warns driver shortage will raise prices’, 10 September 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/morrisons-warns-driver-shortage-will-raise-prices
(5) BBC News, ‘Wetherspoons runs low on some beer amid driver shortage’, 2 September 2021
https://www.bbc.com/news/business-58395401
(6) Politics Home, ‘Public strongly support relaxing immigration rules to tackle lorry driver shortage’, 25 August 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/public-strongly-support-relaxing-immigration-rules-to-tackle-lorry-driver-shortage
(7) BBC Fact Check, ‘How serious is the shortage of lorry drivers?’, 9 September 2021
https://www.bbc.com/news/57810729
(8) BBC ‘More or Less: Covid, HGV driver shortages and protest costs’, 1 September 2021
https://www.bbc.co.uk/sounds/play/m000z6cd