Driver Require – established in 2000 and featured two years running in the Recruiter Fast 50, Driver Require is recognised as one of the industry’s leading providers in the temporary Driving sector. Focusing on providing HGV drivers from Staffordshire down to the South Coast. Driver Require has delivered growth consecutively since its inception and as we enter 2021, agencies in the driving sector are facing some of their more difficult times yet. This thought piece will investigate the reasons why the years ahead will be difficult to navigate for any agencies in the sector.
Ongoing Covid effect – quite rightly, drivers were classed as essential workers during the pandemic, helping to maintain delivery of essential products. During lockdown Driver Require was fortunate to service the supermarket and grocery chains, which saw a huge demand for key workers, but wider demand for drivers slumped due to non-essential businesses sitting dormant and rendering demand for their drivers largely redundant.
The lasting effects of Covid 19 on the supply of drivers could be telling, in the UK alone there are c.300,000 agency and full-time drivers. Historically, 40,000 new drivers enter this pool via training schools each year, however these companies providing tuition have not been able to open during Lockdowns, exacerbating the shortage issues. There is also a large number of EU drivers who have chosen to accelerate their departure from the UK because of the threat of Covid and the inevitability of Brexit. This could be exacerbated by the new points-based immigration system and IR35 reforms coming into force in April.
When will the existing driver shortage problem be addressed? – Even with many years of campaigns by the industry body - Logistics UK, I believe this will start to become problematic during our economic recovery beyond 2021. Last year there were 20,500 fewer HGV drivers in circulation, a reduction of 6.7% year on year – 14,275 of which were EU nationals. *1
In recent years, a labour stream from the EU has previously offset the UK driver drop-off, however given the assumption that many EU nationals will not or cannot return, there may be cracks about to show.
IR35 – following a delay - due to come into effect from 6th April 2021.
A government anti-tax avoidance legislation aimed at reducing the number of people who work as full-time employees but operate under a limited company paying reduced Income Tax and NIC.
For many years hauliers have ramped up their use of driver agencies because they’ve been able to benefit from the flexibility temporary staff can offer, but importantly, at a similar hourly rate to the cost full-time employees, courtesy of the tax breaks offered to Ltd Company workers. The IR35 reforms in April will force many of the c.70% of agency LGV drivers who currently operate as Ltd Companies to convert to PAYE, increasing their cost of employment by around 25%, causing a ripple effect for Operators & Temp driving agencies. The cost will need to be burdened by someone, and the agencies would argue that a margin squeeze could make it unviable to continue. It is expected that larger operators may bring a proportion of their outsourced drivers back in-house but will always require seasonal flexibility for upticks in demand, forcing agencies to refocus on their original purpose of primarily covering variable requirements.
If driver agency fees are capped by the hauliers and Ltd company workers transfer to PAYE, net pay would reduce overall (many of these drivers were highlighted as heroes during the peak of the pandemic, now they’re faced with reductions in total take home). One would presume that this impact will only increase the migration of European drivers back to the continent.
Simply put, the inflow and outflow of driver supply follows a cyclical pattern mirroring demand - drivers retire, but new ones are brought in through the training schemes, when you add the additional supply of European drivers it goes some way to balancing the requirement. Technological advancements in transport planning and fleet efficiency has revolutionised the transport industry and the way journeys are routed, fleet optimisation has been counteracting the shortfall in supply of drivers by removing some of the journeys that aren’t required.
With demand typically ramping up past the halfway point in every year, alongside the hopeful signs of an economic recovery, we could see the above points play further disruption. For agencies that are poised to capitalise on the requirement for drivers, they may enter a period where demand clearly outweighs supply and margin improvements could be executed. Driver Require’s CEO, Kieran Smith, certainly thinks so and is well positioned to offer a suit of agency drivers to operators that will see increases in volumes over the coming months.
Smith’s view is that the move away from large scale volume contracts to a predominance of lower volume variable requirements, will play to Driver Require’s strengths as an agile and responsive specialist driver recruitment agency. Driver Require has developed robust systems and processes to be able to provide a “high value added” service to its clients, while positioning itself as a thought leader in its sector and promoting its brand to key decision makers across the haulage industry.
Furthermore, to endorse its quality and compliance credentials, Driver Require has secured the Driver Agency Excellence certification from Logistics UK, recently become a FCSA Supply Chain Partner and has just achieved the REC Audited gold standard accreditation after stringent review. They are the only UK driving agency to hold all three accolades. An achievement which offers them a platform to compete with the country’s largest agencies and to accelerate their long-term growth rate of 30% per annum.
*1 (Logistics UK’s Skills and Employment Report 2020)