No quick fix: the driver shortage and the UK fuel crisis

The global driver shortage is a deep structural problem that has built up over many years and now we are seeing the impact.

Zita Zigan, Director, Global Vehicle Forecasting

01 October 2021

Dramatic images of fuel pumps running dry and drivers queueing for hours in a rush of panic-buying in the UK have focused public attention on the acute shortage of HGV drivers. Unlike the global semiconductor and auto materials shortages, which have arisen as a result of pandemic-related disruption, the global driver shortage is a deep structural problem that has built up over many years and whose disruptive potential was recognised by industry participants long before COVID-19 struck. Neither is it a UK-specific problem, although, post-Brexit, the UK has been uniquely vulnerable, due to the end of free movement of labour to and from Europe.

As freight demand has continued to recover, the supply of labour has tightened around the world. Longer-term demographic trends, along with the short-term surge in coronavirus cases, have combined to weigh on the industry. As freight carriers compete to recruit and retain drivers, the cost of labour has skyrocketed, with operators in the US and Europe reporting 30-40% wage increases and significant signing-on bonuses as the crisis has escalated.

Various surveys – the findings of some of which are summarised in the table below – have investigated how markets around the world have been impacted. Regional emphasis varies somewhat between these assessments, though Europe clearly emerges as one of the worst-affected regions, closely followed by the US. Within Europe, the UK is particularly badly affected, with the shortfall in qualified drivers now estimated to be between 60,000 and 76,000, and possibly as high as 100,000, according to the latest Road Haulage Association survey. This would imply a vacancy rate of around 3.6% and around 1,100 vacancies per million people. The situation in the Netherlands appears to be similarly severe, based on Eurostat data, with a reported vacancy rate of 3.8% and around 1,300 truck driving vacancies per million population. A number that has been widely bandied about is a reported shortfall of some 124,000 drivers in Poland (Transport Intelligence research paper), though this does not appear to be borne out by the Eurostat statistics, which suggest a vacancy rate in line with the European average.

In America, meanwhile, the driver shortage is exerting immense pressure on prices: with driver availability contracting and transport demand continuing to rise, labour costs have risen, and this is putting upward pressure on freight rates as carriers pass on the increase in costs to shippers and consumers. Spot rates are reportedly incurring a premium of 50%, while contract rates have seen increases of 10-15%. Although vehicle orders remain high, with supply running behind, lead times and costs are showing no signs of coming down any time soon.

The driver shortage is set to remain a top challenge for years, due to demographic factors and the difficulty of eradicating the underlying causes. The average age of drivers (45+ years in many places) is rising as older drivers retire and the industry is failing to attract younger drivers in sufficient numbers to replenish the profession. The untapped potential of the female labour market (women make up only 2% of HGV drivers globally) has long been recognised, but, so far, the industry is failing to tap it.

Beyond demographic factors, unattractive working conditions and inadequate infrastructure – such as parking and rest facilities – are deterring drivers from entertaining a career in trucking.

Alleviating the shortage will require policymakers to address these long-term structural causes. Short-term measures (such as visas for foreign drivers) may help to reduce some of the immediate pressures, but they will not solve the underlying problem.

In the meantime, from a truck market perspective, the driver shortage remains a key stimulus for demand. Competition among trucking companies to attract and retain drivers is fuelling demand for top-notch equipment. But shortages on the supply side are driving bubble behaviour on the demand side, with customers – aware of lengthening lead times and tight inventories – placing even more orders in a bid to secure build slots. There is, then, a risk that the bubble may burst, with a wave of cancellations once supply normalises. The driver shortage may then disappear from view for a while, but it will continue to bedevil the industry for years to come.

Red numbers: LMCA estimates/calculations Black numbers: Reported by the organisations named above.

Notes:
(1) Source: Freightwaves
(2) Source: Transport Intelligence
(3) Source: International Road Transport Union
(4) Source: Eurostat, LMCA
(5) Source: Eurostat, LMCA
(6) Source: Eurostat (US: Worldometers)
(7) Source: U.S. Bureau of Transportation Statistics
(8) Source: U.S. Bureau of Labor Statistics
Note (8): Heavy and Tractor-Trailer Truck Drivers / Sub-group Truck Transportation
(9) Source: American Trucking Associations (ATA)
Note (9): 2019: 60,000; 2023: 100,000 shortfall predicted
(10) Source: Road Haulage Association