New figures from the TEG Road Transport Price Index have highlighted the severe impact of road freight prices on businesses in Greater London compared to the rest of the UK.
The average price-per-mile for haulage and courier vehicles in Greater London jumped by 11.6 points from March to April 2022. Across the UK as a whole, the increase was half that, rising 5.3 points over the same period.
Plus, a recent study by NatWest revealed that strains on London’s economy caused by inflationary pressures is a sign of what is to come for the rest of the UK.
The TEG index shows that average UK haulage and courier prices are following previous years’ month-on-month trends, witnessing a fall after the usual Christmas and New Year spike and then increasing monthly.
But if we look further back, we can see substantial year-on-year increases. The average price-per-mile has increased by 16% in three years – from 100.9 points in April 2019 to 117.5 points in April 2022.
Amid post-Brexit bureaucracy, delays in checks on EU imports and predictions of 10% inflation later in the year, the UK logistics industry is facing surging costs on multiple fronts. Yet data suggests these rising costs aren’t necessarily being felt by businesses and consumers to the extent that might be expected.
Are inflated freight prices being passed on to consumers?
With the increased cost of living – notably energy price rises – many consumers are cutting back on their spending to balance household budgets. According to the Centre For Cities think tank, retail and leisure sectors in London are experiencing a lack of footfall compared to the UK city average.
Consumer confidence has been reported as hitting an all-time low and the ONS announced a 1.4% decline in retail sales in March. Even spending on food was down 6.1% in March, when compared to February. Reduced demand from consumers means reduced demand for freight, keeping freight month-on-month price rises relatively modest, despite year-on-year surges reflecting inflation.
It also seems that transport and storage businesses are acutely aware of pressures on consumers. According to ONS data, 56% of these businesses reported an increase in the price of materials, goods and services needed to run their business. Yet only 35% have passed on some or all of those increases.
Kirsten Tisdale, Director of Logistics Consultants Aricia Limited and Fellow of the Chartered Institute of Logistics & Transport, says:
“The TEG Road Transport Price Index went up again in April – no surprise there, that’s what it’s always done at this time of year, other than when the pandemic kicked off.
But the big question is whether it went up as much as one might expect, given the increase in key cost components. That it didn’t rise dramatically suggests strong downward pressure from customers with a wish to control inflation, combined with a reduction in the volume of goods being moved.”
Lyall Cresswell, CEO of Transport Exchange Group, says:
“We’re continuing to see that the TEG index is a result of many different factors, all of which affect the state of the industry. Haulage and courier businesses have to respond to fluctuations in costs and there will then be knock-on effects for the many industries that work with them.
“At the moment, demand for freight from these industries clearly isn’t quite what it was, largely due to cost of living rises. Consumers are buying less, which is keeping a lid on the price-per-mile figures, despite other factors, such as high fuel costs and Brexit red tape.
“This isn’t the case in London, however, where price rises in the last month were double the national average. What we have right now then is almost a two-speed situation, with prices in the capital soaring and relatively low rises elsewhere. What remains to be seen is whether the conditions in London drive prices around the UK up.”
