Hauliers face harsh winter as bank credit dries up

By December 14, 2011Finance, News

Haulage firms across the North West are facing a harsh winter as they feel the impact of a financial double whammy, according to the insolvency trade body R3.

Not only are firms under pressure from rising fuel costs and the duty imposed on it, but also European regulations that require them to have access to capital to be able to operate.

 

Jeremy Oddie, North West regional chair of R3, says: “Under the rules, hauliers have to be able to demonstrate their ongoing financial viability, which in practice means they need to have significant amounts of capital in the bank and available to them. The banks’ current reluctance to grant credit is placing increasing pressure on hauliers’ operations.”

 

His view is backed by David Glover, director at specialist transport and commercial law firm Marshall Glover in Lancaster, who explains: “The last few years have almost produced the perfect storm for the regional haulage industry – not only has the cost of fuel risen dramatically, but the decline in the retail sector has meant that there have been fewer cargo loads that need transportation and hence more competition.

 

“The cherry on the top has been the availability of finance from the banks becoming far less flexible. Hauliers need to have access to £4,500 for each vehicle they run, as well as a further £8,100 for overall expenses, so any cash that might have been set aside for investment in the company or its fleet has generally been swallowed up elsewhere.”

 

He warns that smaller independent firms simply cannot match the charges from larger businesses which benefit from economies of scale and should instead focus on doing solely what they do best, making best use of the capital that they do have available and maximising their commercial returns as far as they can.

 

Jeremy Oddie adds: “The industry is suffering from the highest level of fuel duty in the EU with firms struggling to remain competitive and solvent during a period of recession and then slow economic growth. The Chancellor has postponed a rise in fuel duty of 3p per litre from January 2012 to June 2012 and this may allow firms a short respite.

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