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Starting a haulage company

At a glance

  • Hire-or-reward companies - those carrying other people's goods - account for about two thirds of industry
  • Vast majority of businesses - 87% - operate five vehicles or fewer
  • Rising labour costs and competition from Eastern Europe hit sector hard
  • Fuel costs account for about quarter of all operating costs
  • Administrative skills and business nous are essential
Haulage

The UK economy has changed remarkably over the past 30 years.

Back in 1976, coal mining, metal bashing and car building were all massive employers. Today, almost all those industries - along with lighter manufacturing - have been exported to Eastern Europe and Asia.

But this hasn't been the death knell for companies involved in moving goods from one part of the country to another.

Thriving

Britain's desire for consumer goods has gone into overdrive, particularly since China has begun producing DVDs, clothes and cameras at prices unimaginable a decade ago.

This has meant that the amount of goods coming in through our ports and airports has rocketed. Consequently, there is a thriving industry based around moving them from arrival point to depot and from depot to shop.

Incidentally, it has not always been this way; road haulage was nationalised by the post-war Labour Government. The resulting National Freight Corporation had a virtual monopoly until the 1980s, when it was privatised by the Thatcher Government. It eventually became distribution giant Exel.

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Despite continuing competition from Eastern Europe, the UK road haulage industry carries over 80% of all domestic freight, according to the Road Haulage Association (RHA).

There are around 52,000 businesses in the industry and between them they operate around 425,000 vehicles with over 3.5 tonnes gross vehicle weight

Roughly two-thirds of this is carried by 'hire or reward' operators - the so-called 'third party' businesses which carry other companies' products around the country.

The remainder are 'own account' businesses - those corporates big enough to run their own logistics and freight divisions.

There are around 52,000 businesses in the industry and between them they operate around 425,000 vehicles with over 3.5 tonnes gross vehicle weight. There are approximately 104,000 holders of operating licences.

Although a handful of giants operate in the industry - including Exel (even bigger after its recent merger with German giant DHL) and Wincanton - this remains a sector for the smaller operator.

Small fleets

87% - the vast majority of businesses - have five or fewer vehicles, according to the RHA. Just over half (57%) have only one vehicle, while 30% have two to five. Back in 2000-2001, the average fleet size was 3.7 vehicles.

The London congestion charge is just the first of a whole series of new tolls and charges that will eventually be introduced across the country. Road user charging is likely to be the end result, which could hit firms in this sector hard.

The haulage sector has had its profits squeezed recently, as a result of increasing petrol costs and fuel duty.

Fuel costs and taxes now amount to around 25% of the running costs of a haulage business.

The other pressing issue for the industry is competition from Eastern Europe. The UK market is highly regulated, with organisations such as the RHA constantly updating their monitoring of the industry.

In contrast, companies from the EU's new member countries - who also benefit from lower fuel and labour costs - are almost entirely unregulated.

In the UK, jobs in the sector do not have a great image, and as a result many firms find it difficult to recruit staff, despite the fact that driving is not badly paid (the average salary is around £22k). The demand for qualified drivers is pushing wage costs upwards.

Warehousing and depot rental (or sale) costs are much lower than for offices or retail. They range from as little as £2 per sq ft in Wales or the North-East through to as much as £7.50 around London.

The other major factor to consider is perhaps the most obvious: vehicle-related costs. HGVs are not cheap in themselves, and insurance costs are also substantial.

Business plans in this sector also need to take into account vehicle excise duty (VED) and operators' licence fees.

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