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London Rate-cutters Pt

20th July 1956, Page 44
20th July 1956
Page 44
Page 45
Page 44, 20th July 1956 — London Rate-cutters Pt
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Which of the following most accurately describes the problem?


RANKCASE Alansazith

Debasement of Charges by the Few Hampers Reputable Hauliers' Efforts to Advance Prices Adequately to Cover Costs : Greater Competition from B.R.S. and Railways Coming

ARECESSION in traffic available to London area hauliers has mocked the 5-per-cent. increase in rates recommended by the Road Haulage Association in April. Not more than one in 10 hauliers has, I understand, advanced his charges. Most have made no addition, and many are reducing their prices in desperate efforts to obtain loads.

A manufacturer who pays £5 a ton for his 10-ton loads to Glasgow has been quoted £3 15s. by a haulier keen to grab the traffic. To Kilmarnock the quotation was £3 10s. A substantial, well-backed organization born out of denationalization, I was told, carved 13s. a ton off the rate from Dundee, and even then found a sub-contractor.

Five-tonners are available for hire at Ifs. 6d. an hour and 10-tonners for only a few shillings more. Among examples of miserable clearing-house payments, I was shown a cheque for £6 Os. 5d. for the carriage of 41 tons of goods picked up from three different places in the Midlands for delivery to as many points in the capital. Even so, some hauliers are approaching customers directly for employment, offering prices below Clearing-house rates.

"Back to 1920s"

Conflicting views were expressed to me about the extnt of the present spate of rate-cutting. The traffic manager of a manufacturing company distributing nationally said: "Things are getting back to the 1920s. It's not a case of road versus rail, but road versus road. I get telephone calls all day from hauliers wanting work, and they're all cutting each other's throats.

"They even write to me quoting lists of prices and saying: P.S. If the above charges are not deemed satisfactory to your good selves, certain reductions might he negotiated at your convenience.' "

A haulier took a less extreme view. "There is some rate-cutting about, but it's greatly exaggerated. The kind of operator who works for a song can't do much damage. He usually has no more than a few lorries, and even if he obtained the traffic he couldn't take much business away from the established people like us. In any case, no one can go on for long working at a loss."

Other opinions varied between these two. My evaluation is that although rate-cutting is more prevalent now than at any time during the past five years—because of a decline in trade generally and a corresponding surplus of transport capacity—its extent appears greater by the number of operators who are practising it than by the volume of traffic being carried at uneconomic prices.

Nevertheless, any amount of ratecutting has effects beyond its own terms, just as a few specks of grit can do much damage if dropped into a crankcase. A more serious aspect of the whole rate situation is the inability of hauliers to raise their charges to anything higher than a marginally profitable level. Ratecutters cripple the progress of prices instep with climbing costs.

A traffic manager told me: "One of the hauliers I regularly employ asked me for the 5-per-cent. increase in rates, and I was perfectly prepared to pay him. In my own company costs have soared and I considered that he, for his part, was being reasonable. But what was I to make of it when another operator, to whom I was paying much the same prices, offered a cut of 10 per cent.?"

Criticism of the R.H.A. came from a haulier who thought the recommended rise too modest. "The Association seem to advise increases only when fuel or wages go up," he asserted. "But there are also higher costs in other directions. A 5-tonner to-day costs £1,200, whereas immediately after the war it was £800. Tyres cost more, and then there's one's overheads—electricity, staff salaries and bank interest."

The recognized rate in his area for the hire of a 5-tonner was 14s. 6d. an hour, this figure including the 5-per-cent. increase. He thought it could reasonably be 16s.

Nearly every haulier to whom I spoke told me how each vehicle's fuel-consumption rate was closely watched. A drop of 2 m.p.g. could make a difference between profit and loss on a long journey. Is there any other important industry in which the profit margin is so critical?

An important aggravating factor is the sale of several hundred spare B.R.S. vehicles with special A licences. Rate competition is greatest with certain routes and traffics. The Midland car-industry depression does not seem so far to have reacted on London hauliers: the routes on which price-cutting is most rife are to Lancashire and Scotland. ' v_ These were the most profitable services. Drivers could work full days on them, whereas runs to the Midlands could be done comfortably within the normal working day, entailing possible waste of hours for which drivers were paid.

A certainty is that consignors of valuable goods—such as foodstuffs and other consumer commodities— are not attracted by offers of low rates. To them service is allimportant and they are unanimously —so far as I could judge—willing to continue paying suitably for it.

Naturally, theirs is the traffic the rate. cutter covets.

This accounts for the opposing views I quoted. The traffic manager with profitable work to offer, and continually bombarded with low quotations from eager carriers, was led to liken the situation to that of 30 years ago. The established, steadfast haulier, maintaining his business even though others sought to crop, for example, 14s. a ton off his rate to Manchester, was not perturbed by price-cutters, because the wisdom of his customers prevailed.

Different Story

For low-value traffics—flour, cattle food, prefabricated concrete units, hardboard, plasterboard, sand, cement and other building materials —the story is different. Some consignors continue to pay for service, but many succumb to cut-rate offers, perhaps excusably because the cost of conveying a load a fair distance may be a substantial proportion of the worth of the products.

Hauliers hard pressed for loads scramble for these traffics, most of which are easily loaded, not susceptible to pilferage and may be covered, if at all, by modest insurances.

Who are these hauliers? Newcomers? Owner-drivers? Allegations of irresponsibility were made against such operators, coupled with assertions that they did not know their true costs and therefore were deluded about their earnings.

Substance to these suggestiens is given by a recent rash Of bankruptcies. /Any may have been caused by small men buying exB.R.S. vehicles in poor condition and exhausting their funds on repairs as their new assets stood idle.

But names of big undertakings were also mentioned to me as cu!. prits, together with allegations that they were seeking to squeeze out competitors, at the cost of a temporary drain on their reserves, later to be able to monopolize the traffic. I found no proof of these assertions. Indeed, a large operator who many told me was a notorious rate-cutter was one of the few who had applied the R.H.A. recommendation.

Damage being done by ratecutters, whoever they may be, is, however, offset by the stability of B.R.S. This was widely, if reluct antly, conceded in confidences such as: "I'm all for private enterprise: every time, you understand. But if it weren't for B.R.S., hauliers like myself, with reputable businesses of moderate size, would be in great difficulties."

B.R.S. Rates Down

B.R.S. rates have, I was told, come down 10 per cent. in a year, and may further reduce with reorganization of the undertaking. Within a year, I predict, having seen plans not generally revealed, free-enterprise hauliers will face formidable competition from B.R.S. and maybe views about them will not then be as charitable as they are now.

The consensus of realistic opinion is that B.R.S. rates were too high during nationalization, but they have come down in competition with private operators. They are still, on average, slightly higher than those of private hauliers, but are maintained through service to customers.

The volume of traffic passing through B.R.S., who are important sub-contractors, is a rock not to be undermined by those out to work on the cheap. Many free-enterprise hauliers, with approved standards, work profitably wholly on subcontracts from the State undertaking, and for others the occasional jobs for B.R.S. are plums.

If fewer hard words are spoken

about B.R.S. than during the-days of the 25-mile limit, there is still much revilement by hauliers of clearing houses. An unhappy aspect is that whereas if one haulier in 10 conducts his business -rapaciously, no stigma attaches to the other nine, if one clearing house behaves sharply it is commonly assumed that all others are tarred with the same brush.

This is, of. course, untrue. The better clearing houses are doing much to keep rates from sinking, but as with rate-cutting hauliers, large concerns, as well as mushroom, onetelephone outfits, were named as offenders.

London is in an exceptional position in this connection. The capital's enormous consumption of commodi ties means that more goods come into the city than go out (except on the route to the south-west peninsula). Hence the recognized LondonLiverpool rate, for instance, is some 10s. a ton less than from LiverpoolLondon, because of the competition for northbound loads. (It often needs to be painstakingly explained to customers why a higher price is charged for inward loads than for outward traffic.) In London, probably because of the thousands of small industrial concerns each without special staffs for handling traffic, there are many more clearing houses proportionately than in other areas. Small companies find it convenient to pass all their transport worries to them.

Because of the capital's consumption of goods brought in, the clearing houses have ample transport capacity for placing outward traffic. And more significantly there is the timeless willingness of those hauliers with return-load capacity available to fill it at low cost.

Many clearing houses throughout the country have been black-listed by London hauliers after experiences such as drivers calling to take a load, asking the rate and being told: "You needn't worry about that. It'll be all right for your guv'nor." The average driver is no businessman. When the guv'nor eventually receives payment it perhaps does not even cover wages. One haulier told me that he eschewed clearing houses completely and could not understand why other operators did not do likewise. His drivers always obtained return loads from provincial hauliers.

A greater spirit of co-operation among hauliers (who are not too closely based to be local competitors) exists today than before, particularly among those who were former colleagues within B.R.S. I learned of one or two understandings between local operators, but these were usually gentlemen's agreements not to debase rates.

I asked a haulier who complained bitterly about clearing houses why he used them. "Because it's unwise to fall out with them," he said. "When things are slack, as in the winter, we're grateful for what they can offer." He also complained of the prevailing marginally profitable rates, but admitted he had not adopted the 5-per-cent. increase.

"For one thing," he explained, "there's no cohesion in this industry, and therefore no guarantee that if we make a move forward our competitors will follow.. For another, 5 per cent. means an extra £1 on £20. The driver has 15s. of that, on overtime, and what's the good of the five bob that's left?"

Better Rail Service

A development of which few hauliers are aware is the marked improvement in rail services in the past few months. Consignors I met all confirmed this development. Among hauliers, however, the idea— at least 20 years old—of converting railways into roads is often heard.

With forthcoming railway modernization, this attitude is dangerously ostrich-like. Many operators hold that the railways can never be run as commercially as road transport because of the less flexible nature of the railway system. Whilst this thought is comforting, traders made it clear to me that this inherent disadvantage of the railways is being increasingly offset.

Traders were, on the other hand, perturbed by the implied intention of the railways, manifested in discussions on the British Transport Commission's draft charges scheme, to be rid as far as possible of traffic in lots up to 2 tons, rates for which the railways appeared to wish to quadruple.

To the road transport industry, this is a signal of the railways' plans, and gives urgency to the need for closing the ranks. The fate of the R.H.A. recommendation shows how much solidarity actually exists.

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