Brexit, which is one of the most discussed topics this year, other than the pandemic, has had yet another unexpected impact. With the increase in border control and the free movement of people being restricted, one sector was deeply impacted: the logistics sector.
It should not be difficult to imagine the severe repercussions of a shortage of HGV drivers, since if there are no drivers, goods will not go from one location to another, shelves will start to go empty and the public will start to panic. This being the main reason why the UK government’s hand was forced and they had to intervene.
Breakdown of the HGV drivers shortage
Here is a breakdown of the factors that led to the current situation:
- The pandemic
The pandemic led a large number of HGV drivers to return to the EU in 2020.
- The lockdowns
The multiple lockdowns put a stop to HGV driving tests leading to 30,000 applicants who have yet to take the test. The DVSA only has a testing capacity of 3,000 tests per week, a number that has been increased by the government from 2,000 tests per week. As a result, there is a large number of potential HGV drivers who are not legally allowed to aid in this shortage.
Brexit made it impossible for the HGV drivers who chose to return to the EU in 2020 to be eligible to work in the UK, as this type of job was not part of the Home Office’s Skills Shortage Occupation List.
- The introduction of a new IR35 tax rule
This new tax rule meant self-employed hauliers working via agencies would now be categorised as employed if they worked for a large company and did not own their own vehicle. The use of the PAYE tax model placed significant financial pressure on the companies employing these drivers, resulting in raised prices on key routes.
Is the situation really that severe?
When discussing this shortage, the Haulage Association stated it had the potential to be worse than COVID-19 and Tesco stated over 48 tonnes of food had gone to waste in a week due to delays within the supply chain.
Furthermore, with the easing of restrictions, there will be an inevitable increase in demand for all types of goods. It has become rather important for companies and institutions, such as schools and hospitals to start preparing for the worst-case scenario.
So, what has changed?
One of the first steps the government took when faced with the built-up of pressure from unions and companies, was to extend the drivers’ hours rules from the 12th of July thus enabling HGV drivers to have the option to make longer journeys if necessary. This led to some mixed emotions, however, with some questioning whether this would put the drivers’ health at risk and some stating this was just what was needed.
In addition to this one-hour extension, the government also permitted drivers to have two 11-hour shifts per week.
The government wasn’t the only one that made changes, however. Tesco, one of the UK’s largest supermarket chains, has increased delivery prices in the face of this HGV shortage. Tesco’s decision to do this is a bold move with the potential to have deeply significant implications for other supermarkets and consumers since it sets a precedent.
This price increase was not a complete surprise as shipping costs have increased exponentially from $2,500 to $20,000 per container and the prices of packaging, fuel and food commodities are at historic highs. This, in conjunction with the shortage of HGV drivers, created the perfect storm.
The UK government has been heavily criticised and the situation is still not under control. The tension continues to rise as over 3,000 hauliers are now planning a one-day nationwide strike on the 23rd of August. This seemingly short strike does have the potential to take the industry over the edge.