Coping with a massive shortage of drivers

Until self-driving trucks become the norm and we all accept the dominance of our machine overlords, the movement of goods around the UK and across Europe still relies on human drivers. Yet, the industry is already experiencing a significant shortage of drivers for heavy goods vehicles (HGVs), also known as large goods vehicles (LGVs).

In 2018, the shortage of HGV drivers was estimated at more than 50,000, meaning there were more than 50,000 vacancies for HGV drivers in the UK. And it looks like the situation may get worse.

According to the 2018 Moore Stephens/Barclays UK Logistics Confidence Index — which registered a big decline in confidence in the industry in 2018 — one in five UK logistics companies were expecting their driver numbers to drop across the following year, as a result of older drivers retiring and drivers from the EU choosing to work elsewhere (thanks, in part, to the weaker pound).

Data from the Confederation of British Industry (CBI) shows that 14 percent of HGV/LGV drivers in the UK are EU nationals. What’s more, 60 percent of drivers in the UK logistics industry are 45 or older.

Within this landscape of an aging workforce, European drivers being less attracted to working in the UK, and an already large shortage of drivers, it’s no wonder that more than half of the companies surveyed for the UK Logistics Confidence Index said a driver shortage was their top business concern. And that’s before you factor ongoing Brexit uncertainty into the mix.

Maintaining access to workers in the logistics sector

Figures from the Freight Transport Association (FTA) in 2018, show that the UK logistics sector is heavily reliant on access to workers from Europe. The figures are pretty eye-opening:

• There are 43,000 HGV drivers from Europe working in the UK.
• There are 113,000 European warehouse workers in the UK.
• There are 22,000 van drivers from Europe working in the UK.

In an industry that’s already under intense pressure due to a shortage of drivers, there are huge concerns that Brexit will restrict access to non-UK workers. If those fears are realized, it could lead to major disruption to supply chains right across the UK, and an increase in employment costs (essentially, paying more to attract workers). Rising costs will be passed onto customers, which means increased costs for businesses that transport (and store) goods, even if you transport goods only within the UK.

So, when the UK government announced its plans to stop giving EU workers preferential access to the UK jobs market, and prioritize skilled workers from anywhere in the world earning £30,000 a year or more, the logistics industry responded harshly. (See Part 2 for more on UK–EU negotiations and what Brexit means for the free movement of people.)

The FTA’s head of skills, Sally Gilson, was quoted as saying that without easy access to non-UK workers, “schools, shops, hospitals and retailers, as well as manufacturers and homeowners, will all find it harder to access the goods they need in order to conduct their daily lives.”

Sure, in an ideal world, logistics vacancies in the UK could be easily filled by UK citizens, by attracting school and college leavers, targeting people who want a change of career, or targeting areas of high unemployment.

But in the real world, the physical location of logistics vacancies often doesn’t correspond with high-unemployment areas. And the truth is, many British workers are simply attracted to other career paths. That’s why, just as in the agriculture sector, the logistics industry has come to rely on non-UK workers, benefiting, in particular, from easy access to EU workers.

In response to the government’s immigration plan, the FTA was quick to point out that many workers coming from Europe fill positions in low-unemployment areas, where competition for workers is already high.

Relying solely on UK employees in these low-unemployment areas could spell disaster for logistics companies — because competing for a smaller pool of UK employees in a low-unemployment area invariably means having to offer higher salaries to fill positions. That’s if UK workers can even be tempted to switch careers… .

And so we come back to the government’s plan to allow unskilled workers from the EU visa-free access to the UK jobs market for a 12-month period. (Circle back to Part 2 for more on the movement of people after Brexit, and see Chapter 7 for guidance on employing EU citizens after Brexit.)

Initially, this low-skilled worker scheme was targeted specifically at agriculture and other related sectors. However, given the outcry from the logistics sector, the government may move to include transport and logistics workers in this scheme (notwithstanding the point that HGV drivers are obviously skilled, qualified workers!). What is clear is that the logistics industry is pushing hard to retain easy access to European workers.

Rising demand for warehousing

In the months leading up to the originally intended date for the UK’s departure from the EU (March 29, 2019), warehousing operators reported a surge in Brexit-related demand.

In January 2019, the UK Warehousing Association (UKWA), reported the following:

• Three-quarters of warehousing operators in the UK were operating at full capacity and unable to take on new business.
• Eighty-five percent of warehouses had received warehousing enquiries that were related to Brexit concerns.
• Storage costs had shot up by 25 percent in just three months.

In effect, businesses across the country were seeking additional storage so that they could stockpile goods and spare parts wherever possible, in the event of a no-deal Brexit and delays at British ports. Companies as diverse as Bentley, GlaxoSmithKline and Premier Foods (which includes Mr Kipling’s cakes) all confirmed they were planning to stockpile goods in the run-up to Brexit.

This will no doubt come as a relief to generations of Brits who have been raised on Mr Kipling’s Battenberg, Cherry Bakewells, and Viennese Whirls. Even if we can’t have our figurative Brexit cake and eat it, too, we can at least continue to have our literal cake and eat it!

This capacity crisis, according to the UKWA, was exacerbated by the fact that few developers were building new warehouse space, as well as a labor shortage in warehousing (again, because of EU workers choosing to return home or work in another EU country). The UKWA chief executive, Peter Ward, described it as “a perfect storm in the warehousing and logistics industry.”

Spotting the opportunities for the UK logistics sector

If this all sounds a bit doom and gloom, there are some bright spots emerging from the logistics industry. For example, many transport firms are investing in new technology like big data analytics and artificial intelligence to help them plan more efficient routes, maintain a more efficient fleet of vehicles, and ensure that vehicles are operating at maximum capacity.

The hope is that this approach will help to reduce transportation costs for logistics companies and the businesses they serve. Unfortunately, those companies that are unwilling or unable to invest in new technologies may experience trading difficulties, become uncompetitive, and risk being left behind.

In addition, Brexit may result in reduced competition from EU-based transport and logistics companies, opening up new market opportunities for British firms.

Assessing the timeline for change

If the UK government agrees on a withdrawal deal, which includes a transition period, then it’ll be business as usual in terms of the flow of goods for the duration of the transition period, while the longer-term arrangement is negotiated.

However, if no withdrawal deal is agreed upon and the UK crashes out of the EU with no transition period, then — literally overnight — the process for border checks would, in theory, have to change as soon as the UK exits the EU.

Being ready for increased border checks

Even if the UK authorities are able to agree on a withdrawal agreement, and secure a free-trade agreement with their EU counterparts in the long term, it’s still likely that border controls may change in one way or another.

For goods entering and exiting the UK, moving to and from Europe, this may mean increased paperwork, potentially new customs duties, and stricter checks on the goods being transported. Circle back to Chapter 5 to read more about the paperwork and customs payments side of things (including the potential impact on value-added tax [VAT]).

This situation is likely to lead to delays at borders as officials check that goods entering the EU from the UK (and vice versa) have the correct paperwork. The government has pledged that, in the event of a no-deal Brexit, it would minimize customs checks on goods arriving from Europe at the UK border as much as possible. But it has no control over how the EU decides to apply border checks. (See the section “Factoring in potential delays at the border and en route” coming up next.)

On certain cross-channel routes between France, Belgium, and the UK (such as the Eurotunnel route between Folkestone and Calais, and the ferry routes among Dover and Calais and Dunkirk), juxtaposed border controls apply. This system allows the participating countries to conduct their border control checks before vehicles board the ferry or train (as opposed to when they disembark on the other side, as in normal border controls). In layman’s terms, this means that UK officials are able to conduct border controls in, say, Calais before vehicles reach the UK, and French officials can conduct their customs checks in, say, Folkestone, before vehicles arrive in mainland Europe. This system has worked perfectly well, and it ensures a smooth passage of vehicles and minimal delays.

So, will this system continue after Brexit? We don’t know, and it potentially depends upon what’s agreed on in future trade negotiations (see Chapter 4). However, it’s worth noting that the Netherlands is likely to join the juxtaposed control system, to cover direct train journeys between the UK and the Netherlands. In other words, the system looks like it’s set to expand, so it makes little sense to scrap it altogether.

Factoring in potential delays at the border and en route

Any introduction of increased checks on paperwork and goods at borders will probably mean delays for goods entering and exiting the UK.

What about goods crossing the land border between Northern Ireland and the Republic of Ireland?

We know that the Northern Ireland “backstop” — and in general the need to avoid a hard border between Northern Ireland and the Republic of Ireland — was a huge bone of contention during the UK–EU withdrawal negotiations (see Part 2).

The effect of Brexit on the peace process across Northern Ireland and the Republic of Ireland is beyond the scope of this chapter, although it’s obviously a major concern for all parties — Northern Ireland, the rest of the UK, the Republic of Ireland, and the EU. Let’s look instead at what may change for goods crossing the border between the two countries.

If a withdrawal agreement, including a transition period, is agreed, then in the short term nothing will change. Goods and people will still be able to move freely across the border without any kind of checks. Any longer-term arrangement will have to be agreed upon by both parties as part of ongoing trade negotiations. (See Chapter 3 for more on the “backstop” and the Northern Ireland border.)

In the less likely event of a no-deal Brexit, things get much stickier. After the withdrawal agreement was rejected by Parliament for a second time in March 2019 (see Chapter 3), the UK government released a plan to manage the border in the event of a no-deal Brexit. According to this plan, for a temporary period, there would be no new checks or controls at the border, and goods arriving into Northern Ireland from Ireland wouldn’t be subject to new tariffs. But this is only temporary, and a permanent solution would still need to be negotiated with the EU.

The government has also proposed that a technologically advanced, nonphysical border could be implemented to track the flow of goods — which, theoretically could involve using satellites to monitor border crossings and a computer system to allow goods to be declared before they leave warehouses. Unfortunately, at the moment, the technology doesn’t really exist to do this, meaning it could only ever be considered as a very long-term, highly theoretical solution.

And let’s remember that the UK government’s plan is only half the story; EU rules would obviously apply for goods flowing in the reverse direction, from Northern Ireland (part of the UK) into Ireland (part of the EU). One big concern is that, without border checks, goods could illegally enter the EU via Northern Ireland. So, in theory, Ireland would need to check goods arriving from the UK, which would involve some form of border presence. At the time of writing, it’s unclear how this will play out in practice.

Coping with higher transport and storage costs

Given all that I outline in this chapter, it’s likely that the costs associated with transporting and storing goods will increase due to factors such as the following:

• The existing shortage of haulage drivers is already putting a strain on transportation companies, forcing many to increase prices.
• Difficulties in recruiting labor going forward may mean logistics companies have to pay more to attract staff — a cost that’ll be passed on to customers.
• Fuel expenses and journey times will increase for transportation companies if their vehicles sit idle in traffic lines at ports.
• Additional customs paperwork (see Chapter 5) will create an extra administrative burden for logistics companies and their clients, which will invariably mean higher costs.

Any increase in costs will impact a business’s bottom line, so it’s important that companies manage their costs carefully (which may mean looking for new suppliers), maximize cash flow wherever possible, and plan for future increases in costs as early as possible.

Being ready for potential delays

Be sure to update your website, terms and conditions, and service contracts in line with changes in anticipated delivery times. If you know it’s going to take longer to deliver items to your end customers, you must communicate that clearly.

And if unexpected, one-off delays arise on a particular delivery, be sure to communicate openly and clearly with your customers on what’s happening, what you’re doing to resolve the situation, and when you expect it to be resolved.

If you bring stock in from the EU, be prepared to work to longer lead times than you may be used to. Wherever possible, you may choose to stockpile items to help counter supply chain delays.

Communicating with your logistics suppliers

In the run-up to and aftermath of Brexit, companies must keep an open line of communication with their logistics suppliers (and vice versa — logistics companies need to keep their clients up to date on the latest events and what it means for their services).

Turn to Chapter 10 for helpful ideas on how to protect your business against Brexit uncertainty, including communicating with your suppliers and customers.