Back in 2015, I wrote a post about the shortage of lorry drivers in the UK. Six years on and the crisis has got worse. The Road Haulage Association states that a fully functioning UK economy requires over 600,000 drivers, but we are currently 100,000 short.
The shortage of drivers is not unique to the UK. It is a global problem with the US, Germany, France and other European countries all reporting shortages of drivers. (BIFA) But, in the UK a combination of Covid and Brexit has caused the shortage of drivers to become more acute – leading to very visible supply-side problems with high profile supermarkets and food outlets being unable to supply goods.
The shortage of drivers has led to some eye-catching increases in pay with figures of up to £56,000 per year quoted. But away from the headlines, wage growth is more moderate. For the first six months of the year, lorry driver wages rose 5.7 per cent compared to 0.8 per cent for other jobs over the same period. (City AM)
Causes of shortage – summary
- Drivers retiring, burnt out by tiredness
- UK leaving EU – Costs of customs, cost of Kent Access Permit. Customs. Decline in Pound
- Covid led to decline in driver training and driver tests with 30,000 HGV tests not taking place last year due to Covid restrictions. (BBC)
- Covid led to EU nationals returning to Europe
- IR 35 tax changes effectively reducing post-tax income
- Relatively low pay rates
- Poor working conditions, unsocial hours and lack of prestige
- Only 2% of drivers women
Causes of shortage more detail
Young people not wanting to become lorry drivers
A long-term problem facing the logistics industry is young people simply do not want to be lorry drivers. The average age is 55, and being a lorry driver is not seen as attractive job. Reasons for not wanting to enter the profession include:
- – Lorry driver not seen as prestigious job.
- – Wages are not that higher compared to jobs with more sociable hours.
- – Long hours away from home.
- – Shortage of lorry drivers.
After the Covid furlough, many eastern European drivers who had been working in the UK returned home and have not returned to the UK. Brexit has exacerbated the driver shortage for three reasons.
- Brexit has brought an increase in custom regulations and regulations such as the Kent lorry permit. Brexit means every lorry has to be checked. Time delays at the border increase costs for drivers. Given there is no shortage of work on the continent, it becomes less attractive to come to UK where the driver has to deal with more paperwork.
- Since 2016 Brexit vote, the Pound has fallen in value meaning UK wages are less attractive than working in the Eurozone.
- Brexit has also seen a precipitous drop in migration levels from the EU. Before the Brexit vote, the UK was attracting 200,000+ national per year. By the time Brexit happened in 2020, this had fallen to around 50,000. ANd in the past year is now in decline. The Oxford Migration Observatory estimate a net outflow of 130,000 EU nationals per year (FT) The result is labour shortfall in many areas, not just lorry driving. But, with economy wide labour shortage it becomes even harder for the logistic industry to attract workers.
Growth in demand
The growth of internet shopping has only increased demand for long-distance lorry drivers. Everything can be bought at a click of the computer, but this requires someone to drive it to warehouses and then your house.
Will higher wages solve the shortage?
The 20% rises in wages that has been reported in some firms is a classic example of supply and demand in action. However, it is worth bearing in mind.
- Given the persistent shortages the rise in wages is relatively low. Logistic companies state that they are under great pressure to keep costs down. Profit margins are as low as 2%, meaning there is little room for big increases. Some firms like Tesco’s are concentrating on short-term bonuses (£1,000) pto attract drivers, but not guaranteeing long-term wage increases.
- Supply is wage inelastic. Due to the nature of the job, it is not clear modest wage increases will reverse the long-term decline in young people applying for the industry. Wages are only one factor and in a booming labour market, young people will need more than modest wage increases.
- The UK has a long tradition of undervaluing vocational jobs with many young people aspiring to go to university.
- Growth in demand is outstripping supply of workers.