Sunday, October 17, 2010

Truck Groups Face Disaster After Freight Tonnages And Rates Fall

Medium Sized UK Hauliers Face a Winter of Discontent
Shipping News Feature

UK – As expected the number of haulage companies struggling in the current climate appear to be rising, the situation however is perhaps a little more complex than many analysts would have us believe. Despite the fact that half a dozen or more well known trucking firms have entered into receivership this month the situation may well be just a reflection of trading conditions some months ago rather than an immediate barometer of cargo levels.

So far in the past few weeks mid sized operators have been dropping like flies, mostly in the North of England with some, like Weldon Plant, hauliers for the building industry, claiming the bank (RBS) had cut their overdraft making trading impossible, despite healthy order books for this year.

The fallen include such well known names as TM Logistics, taken over by Bibby Distribution and Boyes Conning who, in addition to container haulage, once dominated much of the Southampton groupage and part load market emanating from freight forwarders. Theirs is a case where an unpleasant side of the whole business reveals itself. Boyes Conning failed, only to see the pieces picked up by Northern Ireland haulier Tinnelly Transport; the irony being not only that were Tinnelly a sub contractor of the Hampshire company but that their own company rose from the ashes of the failed Tinnelly International Transport whose directors benefited from a pre pack administration in February last year.

Pre packs of course are coming increasingly under the spotlight as more firms duck their responsibilities and set up in business, often with virtually the same trading names, whilst leaving others to suffer the losses. Both the haulage representative associations and competitors have spoken recently to call for a halt to the practice and even prosecutions in the worst cases.

Tinnelly directors for example set up a new company Tynan Contractor’s, three months in advance of the firm’s demise then picked up the assets and switched the company name within a week of the more established company going under. Now the ‘new ‘Tinnelly has picked up the goodwill of Boyes Conning in a deal reportedly worth around £20,000 thus establishing a presence on England’s South coast.

Nobody can be surprised at the actions of operators placed in desperate circumstances whilst the current rules on pre packs remain and the subject will doubtless be high on the agenda if Transport Minister Mike Penning fulfils his pledge to revive the Road Haulage Forum.

Meanwhile the larger haulage groups have seen the writing on the wall and most have diversified in an effort to distance themselves a little from their core business and open new income streams, the Eddie Stobart example is a good one with the haulier merging with a property fund (Westbury) in 2007 and extending into projects like the purchase of Southend airport.

This diversification itself leads to other potentially lucrative, or at least financially contributive, avenues. Stobart are developing a new rail station at Rochford within the airport boundary (which they have assured us will not be an excuse for a multimodal hub) and just last week the group stepped in with an offer to support Ireland’s third biggest airline, Aer Arrann, who are currently staring into the financial abyss. This partnership, if it comes off will mean more revenue for the airport i.e. Stobart with two new revenue streams.

So whilst the small hauliers keep their heads down and fill niche market contracts as usual, and the large groups diversify, consolidate, acquire cheaply, downsize and/or rationalise, it is likely to be the mid sized operators who bear the brunt of the problems as diesel and other costs rise and rates continue to be under pressure. It is to be hoped that now overall trade seems to have settled down, admittedly at a reduced level than previously in some sectors, the worst of the problems besetting the road freight industry have now worked their way through the system.

With the entire country holding its breath for next weeks Government spending plans, and the anticipated shrinkage of the public sector, plus the advance of the railfreight sector, now is still however liable not to be a comfortable time in the road transport side of the shipping industry.

Photo:- Stobart Biomass truck courtesy the Stobart Group.