Why hauliers with full trucks are going under

The hauliers most at risk aren't the ones running out of work. They're the ones who don't know what their work costs.

Read any trade press coverage of UK road haulage at the moment and you will see the same handful of statistics. Operating costs for a 44-tonne artic up 6% this year on top of a10% jump the year before. Industry-wide margins hovering around two per cent. Insolvencies running at around 400 a year, well above pre-2020 norms, and the Barclays-BDO Logistics Confidence Index at its lowest level in 14 years. The standard reading of all this is that the sector is being squeezed by costs it cannot pass on, and the obvious response is to talk about route optimisation, fuel efficiency, EV transition grants and the like.

That reading is not wrong, but it misses the more uncomfortable point. The hauliers going under are not, on the whole, the ones running empty. They are the ones who do not know, in any meaningful detail, what their work actually costs them and what their customers are really worth. In a market with a two per cent margin, the absence of that information is no longer a forgivable gap in the management accounts. It is the difference between a business that survives the cycle and one that does not.

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Why does cost-to-serve matter more in haulage than in almost any other sector?

Most owner-managed businesses operate with some degree of fuzziness around customer-level profitability. A manufacturer may not know precisely what each SKU contributes once overheads are absorbed. A food and beverage business may run a few products at near-cost because they bring footfall. In most sectors this fuzziness is survivable because the gross margins are wide enough to absorb the mistakes.

Haulage does not have that luxury. The economics of the sector are unforgiving in a way that few outsiders appreciate. A typical 44-tonne artic on UK and continental work might generate£180,000 to £220,000 of revenue a year. After driver wages, fuel, finance or lease payments, insurance, road tax, the HGV levy, tyres, maintenance, depot costs and a share of central overhead, the contribution that vehicle makes to profit is often a few thousand pounds. The RHA's cost index suggests the total cost of operating a 44-tonner has risen by roughly 16% over two years. Customer rate increases have, in most cases, not kept up. The maths is brutal and arithmetic, and there is no margin within which to be approximately right.

This means the operator who is winging it on customer profitability is not just running a sloppy business. They are running a business in which a handful of unprofitable customers, kept on out of habit or relationship, can wipe out the contribution of the rest of the book. And in a sector where many hauliers still set rates by reference to "what we charged last year plus a bit" or by undercutting a competitor they heard about at the truck stop, the unprofitable customer is rarely a hypothetical.

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What does properly costing a haulage operation actually involve?

The honest answer is that it involves more work than most operators have historically been willing to do, and a degree of financial discipline that the sector has not, on the whole, prized. But the components are not mysterious.

At the most basic level, every vehicle needs to carry a properly calculated standing cost. That is the cost of having the truck on the road regardless of whether it moves. Finance or lease, insurance, road tax, levy, O-licence costs, depot share, driver basic wages, and a realistic allocation of management and back office time. Most operators have a number for this, but it is often a year or two out of date and it almost always understates overhead because central costs are notoriously difficult to allocate honestly.

On top of that sits the variable cost per mile, which is dominated by fuel but also includes tyres, AdBlue, maintenance, driver overtime, and a sensible provision for unplanned downtime. Fuel is the easiest of these to monitor and the one most operators track in detail. The others get less attention than they deserve, and maintenance in particular is often treated as a lumpy cost to be absorbed when it happens, rather than a per-mile provision to be built into rates.

The real work, and the part that distinguishes the operators who survive from those who do not, is then taking those numbers and applying them at the level of the individual lane, customer and load. What does it actually cost to run that Birmingham to Bristol trunk five nights a week for that particular customer, with that particular dwell time at the RDC, with that particular pattern of empty running on the back leg? What is the customer paying, net of detention claims that never actually get paid, and net of the cost of capital tied up in 75 days of debtor days because their accounts payable team is uncooperative? When you put those two numbers next to each other for every customer in the book, the answer is almost always uncomfortable. There is invariably a tier of customers who, on a fully loaded basis, are losing the operator money. There is sometimes a tier who are funding everyone else.

Why don't more operators do this already?

Partly it is cultural. UK haulage is still, in its bones, a sector built by people who came up through the cab and into the office. The instinct is operational rather than financial, and there is a deep suspicion of analysis that does not translate immediately into something you can do tomorrow morning. Spreadsheets do not move pallets.

Partly it is the difficulty of getting the data. Telematics has improved enormously, and most operators now have decent visibility of fuel use, idle time, and route adherence at vehicle level. But linking that operational data to financial data at customer level still requires either an integrated transport management system that has been properly configured, or a finance function willing to do the work in Excel. Both are investments that look discretionary when cash is tight, which is precisely when they are most needed.

And partly it is the awkward truth that the analysis, once done, tends to produce conclusions that nobody wants to act on. The biggest customer is often the least profitable. The long-standing relationship that the founder built thirty years ago turns out to be the one quietly eating the margin. The trunk that everyone is proud of, because it runs like clockwork, has a back-leg empty running problem that mean sit is barely washing its face. Acting on these findings means uncomfortable conversations, and in a market where every operator is afraid of losing volume, the temptation to leave the numbers in the drawer and hope for a fuel price drop is very real.

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What would a more disciplined approach look like in practice?

It would start with the boring step that almost no one wants to take, which is to rebuild the standing and variable cost model from the ground up, using current numbers rather than last year's. Most operators are quietly running on cost assumptions that pre-date the most recent insurance renewal, the most recent driver pay round, and in some cases the most recent fuel rise. Updating them is a few days' work and it almost always reveals that headline rates need to be ten or fifteen per cent higher than they currently are simply to stand still.

It would then involve a customer-by-customer profitability review, with a defensible methodology for allocating overhead and a willingness to look at the cost of capital tied up in receivables. The output should not be a single number per customer but a contribution analysis that shows where the money is being made and where it is being lost, and which can be defended in a conversation with the customer in question.

The hardest part is what comes next, which is the willingness to use that analysis. That might mean re-pricing a contract at renewal, with a clear-eyed view of what walking away would mean. It might mean restructuring how a customer is served, by combining loads, changing trunk patterns, or charging properly for the detention and waiting time that is currently being absorbed. In some cases it means letting a customer go. The operators who are weathering the current squeeze are, almost without exception, the ones who have been willing to have these conversations. The ones going into administration are, almost without exception, the ones who have not.

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Where does this leave the sector?

The consolidation that is now visibly underway in UK haulage is not, despite the way it is sometimes reported, a story about big firms eating small ones. It is a story about operators who understand their economics buying or absorbing the customer books of operators who did not. The buyers are not paying full multiples for going concerns. They are picking up O-licences, contracts and depot footprints from administrators at a fraction of what those assets would have been worth if their previous owners had priced their work properly.

There is nothing inevitable about being on the wrong side of that trade. The information needed to price haulage work properly is, for the most part, sitting in operators' existing systems. What is needed is the discipline to extract it, the analytical capacity to make sense of it, and the willingness to act on what it shows. None of that is glamorous, and none of it sells trucks at the RTX. But in a sector where the difference between surviving and not is measured in single percentage points, it is the work that matters most.

The hauliers who come out of this period stronger will be the ones who treated cost-to-serve analysis not as a finance department exercise but as a board-level discipline. They will know which of their customers are paying their way, which are not, and what they intend to do about it. And they will be the ones in a position to buy, rather than be bought, when the next phase of the cycle arrives.

This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.

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