When 5 per cent. Equals 500 per cent.
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I T is anticipated in railway circles that the 5 per cent. increase in tariffs, imposed at the commencement of last month, will result in a very considerable improvement in the revenues of the railway companies and a more than proportionate increment in their net profits. Sceptics in our own industry have questioned this, and expressed the opinion that a 5 per cent, increase in charges is too small to have any appreciable effect on the position. It may be well to point out the error of those who do not share the optimistic views of the railway experts ; in so doing hauliers may be persuaded to take a similar and very overdue step.
Let us assume, in order to simplify our, argument, that the effect of an increase of 5 per cent. on the charges of any transport concern is an addition of 5 per cent, to the gross revenue. Let us also assume,as is, unfortunately, well within the bounds of possibility, that, prior to the increase in rates, the net profit on turnover was 1 per cent. per annum. The extra 5 per cent, will increase that net profit to a fraction over 6 per cent., so that the increment of net profit is in excess of 500 per cent.
Now consider a similar subject of more sinister aspect. It is likely that the operating costs of commercial motor• vehicles will, in the course of the next 12 months, run to a figure in excess of 10 per cent. more than they were a little while ago. Vehicle-operating costs account for 75 per • cent. of the turnover of the majority of road transport concerns, so that this increase of 10 per cent. is approximately equal to 71. per cent. on turnover, sufficient to swallow up the net profits of a considerable number of haulage companies. A minimum increase of I per cent on road haulage rates is thus justified.
In some districts a 5 per cent. increase has been imposed, and accepted with almost a complete absence of argument by customers. Needless to state, those districts are where hauliers have really got together, agreed upon basic rates and, having agreed, are abiding by that agreement. The moral, we think, is obvious.