In recent months, however, IGD’s supply chain contacts have reported a persistent challenge to meeting commitments to their partners: a shortage of HGV drivers. This issue is not new – it has been developing gradually over many years, but problems have become more pressing – and quickly – in H1 2021, catching some by surprise.

Scale of shortages

The Road Haulage Association (RHA) recently published an open letter to the PM, in which they state that the UK has a shortfall of 100,000 HGV drivers. This is an increase on the RHA’s pre-COVID estimate of 60,000. Another organisation, Logistics UK, has issued a statement suggesting that the shortfall in numbers is 90,000 versus 76,000 before COVID and EU Exit.

To compare, ONS data shows that about 313,000 people in the UK worked as HGV drivers in Q4 2019 (ie: before the outbreak of COVID-19), so the driver “pool” may be a quarter under-strength. In addition to driver shortages, IGD’s contacts also report difficulty filling associated roles such as forklift drivers, warehouse operatives and mechanics.

Symptoms and signs

The estimated shortfall in HGV driver numbers is large enough to cause haulage businesses and their clients operational problems. Media coverage has drawn attention to the possibility of disrupted food supply, but other effects may be more subtle, from a shopper viewpoint:

• Higher cost – Where haulage services cannot keep pace with demand, then cost is likely to rise, at least for services sourced on the open market such as agency drivers (“in-house” haulage may be less affected). Transport providers may be expected to request higher prices from clients, raising cost for food and drink businesses. So far, there is no sign that higher cost is being passed on to shoppers, but it may yet happen.
• Consolidation – With drivers in short supply, it is sensible to ensure that vehicles are full – best practice but not always possible. Businesses may therefore choose to make fewer, larger deliveries - but this may not suit customers or stores, particularly where warehouse space is a challenge or where time or noise restrictions exist.
• Limited hours – Drivers may be reluctant to work anti-social hours (eg: evenings, weekends) – but this may not suit food and drink clients, which operate on a 24-hour basis.
• Reduced commercial flexibility – reduced ability to respond to demand spikes leading to a more cautious approach to trade-driving activity.
• Wastage – Short-life goods are most vulnerable to transport disruption and increased wastage may result.

Strategic factors

UK food and drink businesses have been aware of pressure on driver capacity for some time. Possible long-acting or “strategic” reasons include:

• Barriers to entry – Cost of market entry for an HGV driver are high – training and testing represent a barrier to recruiting new drivers.
• Demographics – According to ONS, 34% of HGV drivers in the UK were aged 55 years or older in Q4 2019 - an old population, compared with other UK workers. Many will retire shortly.
• Pay – IGD contacts suggest that wages for HGV drivers have risen in recent months due to a mismatch between supply and demand. However, it is not obvious that pay for drivers has been sufficient to interest UK-born drivers prior to this, especially given the nature of the work. Pay may have been more attractive to non-UK drivers (allowing businesses to compensate for local shortages by recruiting more widely, at least whilst “free movement” was available).
• Retail evolution – The rapid growth of online retail and food delivery have created a need for local delivery drivers, allowing those who wish to work as drivers another option. Simultaneously, grocery retail has evolved rapidly, with small stores proliferating – this means that many smaller deliveries are needed to sell the same volume of goods. A desire to reduce held inventory has led to shorter lead times and more frequent ordering in some settings.
• Tough job – Driving an HGV can be demanding; long hours, nights away, loneliness and technical complexity come with the job. Drivers report concerns that their job exposes them to personal liability (eg: fines for carrying illegal migrants). Some also complain of poor conditions generally (eg: poor facilities at depots, lack of access to toilets, aggressive micro-management).

Tactical factors

Long-acting “strategic” factors have been amplified by the emergence of new, shorter-acting “tactical” factors, which have brought problems to a head. These include:

• Demand change - COVID-19 brought a surge in grocery retail demand. Growth is now slowing, but IGD anticipates that most gains made during the pandemic will be retained, increasing the need for drivers. Rising grocery demand during the pandemic was offset by reduced demand in other areas (eg: foodservice) but, with these parts of the economy now re-opened, demand for haulage has risen still higher. Driver fatigue is widespread.
• EU Exit – In recent years, many of the UK’s HGV drivers have been EU nationals. The UK’s departure from the EU is thought to have encouraged some to depart. Some may retain the right to live and work in the UK via “Settled Status”, but it is not clear that they will wish to do so. In addition, new border conditions introduced due to EU Exit may mean unwelcome delay and difficulty for drivers, especially when crossing the border with agri-food loads.
• IR35 – This is a package of changes intended to address “tax engineering” practices. From April 2021, drivers can no longer minimise tax by acting as employees of their own companies. Commercial drivers now generally count as direct employees rather than contractors and are therefore liable for PAYE and NI. The net result is that drivers must be paid more to maintain their standard of living.
• Testing disrupted – The COVID-19 pandemic has disrupted the training and qualification of new drivers and also re-qualification of more experienced drivers (regular inspection of vehicles may also have been affected).

Remedies (government)

Government appears well-informed regarding driver shortages; there are some measures with may be taken:

• Driver hours – The UK government has relaxed regulations on working hours for HGV drivers, from 12 July to 08 August (following a precedent set during the COVID-19 crisis in 2020). The RHA has said that extending hours for drivers who are already tired is unlikely to increase capacity. RHA has published a list of 12 actions that government can take which may be more effective.
• Get testing back-on-track – The pandemic has created a backlog in HGV driver tests. 25,000 fewer candidates passed their HGV test in 2020 compared with 2019. Expediting the process by increasing testing capacity would seem like an essential part of the wider plan. To acquire a C+E (Class 1 Artic or Drawbar – Lorry with trailer) license necessary to operate a HGV, drivers must first pass a C (Class 2 – Rigid lorry) license test – this was not the case in the past and lengthens the process to qualification. Some argue a change to this sequencing is needed.
• Visa measures – Following EU Exit, immigration policy has changed, with the aim of excluding lower-skill, lower-pay workers from beyond the UK. Exemptions exist for workers with “shortage” skills or for higher-paid, higher-skill workers. At present, exemptions do not cover HGV drivers, so new entrants from outside the UK are excluded. Policy change could address this but would be politically challenging and the government has so far shown little interest in making immigration easier. Also, it is not clear that there is a large international body of skilled HGV drivers ready to move to the UK at short notice.

Remedies (employers)

Whilst there are policy actions that the government might take to mitigate driver shortage, a long-term fix is likely to be left in the hands of businesses. Responses could include:

• Better pay – The most obvious response to a shortage of a particular resource is to pay more for it, to secure access. However, paying drivers more – and competing to do so – is likely to leave the businesses with the least financial muscle excluded from the market. A competitive “seller’s-market” is also likely to result in more rapid movement of drivers between employers, creating instability and uncertainty.
• Clear career path – More stability might be achieved by offering a clear and accessible “career path” for drivers, with increasing pay and responsibility for the most capable individuals.
• Women – Women are under-represented in the HGV driver population and many businesses are focusing on attracting more female drivers to the profession.
• Better conditions – This may be the easiest “fix”. Providing better facilities for drivers serving the food and drink industry could go a long way to helping build a happier workforce.
• Back to driving – Many persons with HGV qualifications do not currently work in the field – the workforce might be expanded rapidly by bringing them back into driving, with appropriate refresher training.  

Summary

The HGV driver shortage has been getting incrementally worse for years. This is a problem that isn’t isolated to the UK but several compounding factors have transformed it from a long-term nuisance to an acute issue requiring immediate attention.

As we’ve explored, it may be possible to alleviate some of the immediate pressure through targeted action, but most agree the problem will take years to resolve. The appetite to address this problem has never been higher but the fix will require focus and action on several fronts.