Disaster warning from RHA chief
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HAULIERS' costs are going up with "every turn of a lorry wheel," according to Road Haulage Association vice-chairman John Silbermann — but hauliers are not charging enough for their services.
Speaking at the East Anglian Centre of the Institute of Traffic Administration, he warned: "We are in an economic situation that requires us to dismantle our businesses instead of allowing the normal instincts of enterprise to build."
Mr Silbermann said hauliers must create out of profits the capital to replace vehicles. "It is in this area that disaster stares hauliers starkly in the face," he added.
During the four-year life of the average vehicle, the operator should have earned enough to cover the cost of depreciation.
This should mean that he has the original £10,000 outlay to replace the vehicle — but the replacement cost has been forced up to £20,000 by inflation.
"It is highly improbable that any operator could have accumulated enough to cover the new capital required, and something like 60 per cent of the original capital of £10,000 would have been required as net taxable profit," said Mr Silbermann.
"The proprietors must surely be entitled to retain in their business for future purposes or to withdraw by way of dividend at least a pitiful five per cent annually free of tax.
"Hauliers must wake up and understand the terrible alternatives that face them within the life cycles of two successive new vehicles. I suggest there is a similar duty on our customers to accept a complete revision of their ideas of haulage rates."
He warned that the alternatives were either to get deeper into debt or reduce the vehicle fleet by half every four years.
"Trade and industry cannot escape from this situation either. If they rely on hauliers they may find no vehicles available one of these days.
"If they are own-account operators, the investors in their firms will soon become vociferous in questioning the wisdom of putting money into fleets of pretty lorries which do not earn their keep," said Mr Silbermann.
He told operators that suppliers were unlikely to allow the same period of grace for payment as many of their customers expected, but they would be expected to settle their bills promptly.
Therefore, it was in his own vital interest to make sure that enough money was coming in to meet his future as well as his current costs.