The Perfect Storm: Long-term Solutions for the HGV Driver Shortage

Today, the UK media is full of news stories regarding the lack of HGV drivers, resulting in certain retail stores reporting shortages of some food products.

We’re also seeing the temporary closure of some petrol stations and it’s also been reported that chemical producers are having difficulties delivering to water treatment plants.

As time goes on and as we approach Christmas, if the situation doesn’t improve we will start to see similar scenes to those during the early days of the Covid-19 pandemic, with people panic buying their sprouts, Christmas puddings and mince pies.

So how do we find ourselves in this position and what can we do to overcome it?

The Perfect Storm

The shortage of HGV drivers has been an issue for a number of years with the Road Haulage Association (RHA), The Chartered Institute of Logistics and Transport (CILT), United Kingdom Warehousing Association (UKWA), Logistics UK and other trade bodies all pointing to the fact that we have an aging population of HGV drivers (with an average age of 55) and, as an industry, we’re not attracting enough potential young drivers into these jobs.

In fact, more drivers are leaving the industry than are joining.

To compound the issue, since 1st January 2021, EU citizens are now covered by a new immigration system in the UK which gives priority to high-skilled roles. HGV drivers are currently not among the list of eligible skilled occupations, which means they are excluded from getting a skilled work visa.

The UK Government has suggested that employers should concentrate on investing in the domestic workforce, rather than relying on cheaper labour from abroad. However, for the logistics sector this is much more difficult - than say hospitality - due to the length of time it takes to fully train a HGV driver.

Given the current situation, I’m sure most would agree that HGV drivers should be on the skilled worker list alongside ballerinas. At the time of writing the Government has relented and will issue 5,000 temporary visas for European drivers to return to work in the UK up until Christmas Eve. It will be interesting to see how long this process will take and what the take-up will be! Many are suggesting this is far too late.

The RHA in a recent survey has pointed to a number of reasons why we have a growing shortage of HGV drivers. These are shown in the graph below.

I suggest these additional factors also play their part:

As seen in the above graph the effect of Covid on HGV driving tests (Approx. 25,000 fewer entrants in 2020/2021 according to the DVSA and a backlog at DVLA regarding licence applications) is certainly a factor as to why retiring drivers are not being replaced at the moment.

Another issue related to HGV driving tests is the vocational test pass rate which is currently at 57.4%. Interestingly, the female pass rate is 61.8% and the male pass rate is at 56.9%. Unfortunately, only 1% of HGV drivers are female.

Pay rates are certainly increasing with companies having to compete for drivers. A haulage company in the West Country said they had increased their drivers’ wages by up to 25%. A number of RHA members are seeing similar increases and the annual RHA cost tables which I produce is showing a significant increase in driver costs.

Taking 2015 as a base figure of 100, September 2021 is now at 148.05 based on the most recent survey.

As pay rates increase, however, we could see the demise of a number of transport companies as they are unable to pass those costs onto their customers in the short term.

Based on the 2020 RHA Cost tables, driver costs equated to 28% of total vehicle cost. The cost of fuel has also risen significantly recently and although many haulage contracts will have a clause allowing transport companies to increase rates in line with the fuel increase, this doesn’t normally apply to other cost increases. These normally have to wait until the anniversary of the contract.

To further put this into context the Motor Transport Top 100 survey for 2020 reported that the average profit for the UK Top 100 logistics companies was down from 2.22% to 1.41%.

This makes it much harder for hauliers to make significant investments in their companies including driver training which can cost at least £2,500 per driver plus salary for the training time. The need to “buddy up” with another driver for a number of weeks after the test is also an additional cost alongside increased insurance payments for young drivers.

In terms of driver training, there needs to be greater clarification of the support available to companies in terms of apprenticeships and assistance with training fees.

Although truck specifications and technologies have improved significantly in recent years and drivers are less likely to have to load and unload their vehicles, it is still a demanding job with, in many cases, unsocial hours. Our need for retail stores to be open 24/7 and our expectation as consumers of a 7 day a week delivery service has compounded the issue.

Drivers are also required to hold a Drivers CPC (Certificate of Professional Competence) passing four tests and undertaking at least 35 hours of training within a five-year period. Drivers of specialist vehicles such as fuel tankers are also required to undertake additional training and therefore it is not possible to overcome these shortages in the immediate future.

Including HGV drivers on the skilled worker list will go some way towards plugging the gap in time for Christmas if the process is reasonably painless, however early indications suggest that this may not be the case with anecdotal evidence suggesting that EU drivers are reluctant to come to the UK for such a short period of time.

It’s not only an issue in terms of freight transport. We are also seeing driver shortages in local authorities for waste removal and there are also staff shortages in our warehouses and fulfilment centres and this is ahead of what is likely to be a very busy Christmas period.

Local authorities will find it difficult to compete with commercial firms in terms of offering wage increases for their drivers.

Long-term solutions need to be prioritized

Very little has been mentioned about the potential long-term solutions. So, what are the answers? Certainly not short-term, temporary work visas, increased driving hours or the deployment of army personnel!

Technology can definitely play its part in this.

As we are seeing in our warehouses today, more companies are turning to automation to cope with the increasing demands of e-commerce.

The UK Government and the industry as a whole need to seriously look at investing more money into driverless vehicle research. This may be controversial in terms of loss of jobs, however with the current situation this may well be the appropriate time.

Warehouses, even with the introduction of automation, are seeing more jobs being created in certain sectors.

These vehicles can undertake long-haul journeys with local drivers employed to undertake the last-mile deliveries on smaller vehicles. There will be a requirement for transhipment centres close to Motorway junctions. These can also double up as Truckstops for those drivers who are still driving up and down motorways and those waiting for their loads to arrive. As discussed earlier, these need to have better facilities than is currently the case.

Another problem the industry faces, and can be a contributory factor to needing more drivers, is the amount of empty running that takes place on our roads. This currently stands at 31.1% and 30% for rigids and articulated vehicles respectively, up from 27.3% and 26.9% in the year 2000, according to the most recent statistics from the Department of Transport. Note these figures only apply to completely empty vehicles and doesn’t include those traveling half or quarter full.

The industry is striving for a just-in-time supply chain, however this isn’t always a positive result. I’m certain that not all customers require a next-day or even same-day service and therefore load consolidation can play its part in reducing empty running.

In order to improve empty running, we need to see increased collaboration between companies and a greater use of “back-hauling” websites - such as Haulage Exchange and returnloads.net, for example.

Retailers need to work even closer with their suppliers to coordinate deliveries ensuring full vehicles in both directions through supplier collections when returning from store deliveries and the potential use of suppliers to deliver to stores on their return from the Distribution centres.

This will necessitate a change in Operator licencing, such as replacing Restricted licences with Standard licences, to allow suppliers to make these deliveries. There will also need to be a realization that there are additional costs involved.

An innovative example of back-hauling is that of Arla Foods who use combination trailers which are able to deliver bottles of milk to retail stores and collect raw milk from farms on their return journeys.

Third-party logistics (3PL) companies also play their part in load consolidation and customers need to consider having their goods transported on the same vehicles as their competitors. A difficult concept to accept but beneficial in the long term.

According to a survey carried out by Professor Alan McKinnon, collaborating with competitors on logistical activities is still comparatively rare, getting a mean score of only two out of six in the survey. Despite the positive publicity given to some high-profile collaborations between competitors, such as that between Nestle and United Biscuits, this is still a ‘bridge too far’ for many companies.

The use of more comprehensive transport management systems with enhanced route planning will increase efficiency and reduce unnecessary travel. The introduction of SaaS in this regard has made these systems more affordable and accessible to smaller hauliers and own-account operators.

Finally, we need to see a more concerted effort to transfer goods movements onto other modes of transport such as rail and inland waterways such as the Manchester Ship Canal. Again, we need to see increased investment in rail-freight terminals and ports with companies being encouraged and incentivized to switch modes where possible.

Good examples include the Tesco rail operation at DIRFT and the rail and IWT development at Port Salford.

This move towards other modes of transport may require a change in emphasis from 'Just in Time' to more sustainable supply chains in both senses of the word, with changing modes, reducing empty running and having more efficient transport fleets also having a significant effect on the environment.

Overcoming the shortage of HGV drivers is not a quick solution. It requires a number of initiatives and a significant amount of investment on behalf of the Government and the industry as a whole.