Rising fuel prices spell trouble for transport firms

It's widely reported that rising petrol prices have been weighing heavily on the wallets of ordinary motorists. But what about businesses?

A new survey by SFP Group has revealed the true impact that higher fuel costs are having on companies, particularly those within the transport sector.

Indeed, while rising fuel prices affect all businesses, it is those that rely heavily on transportation, such as haulage firms, couriers and airlines, that suffer the most, especially when they have little choice but to absorb the costs themselves.

SFP Group's latest analysis shows that more than three in four firms seeking insolvency advice in the transport and haulage industries think fuel prices have been a major contributor to their downfall.

Simon Plant, partner at the organisation, said businesses in this sector are taking a "huge hit" from the increasing cost of petrol and diesel at the moment.

"With petrol now over £1.35 a litre on average, those businesses with narrow profit margins are being squeezed harder than ever, and some to the point of insolvency," he remarked.

"A transporter or haulier simply cannot avoid being affected, unless perhaps they have managed to stockpile large quantities of fuel which had been purchased when rates were low."

According to recent research carried out by the Freight Transport Association, road freight operators had to find an additional £1.3 billion between July 2010 and July 2011 to cover the higher cost of fuel.

The group calculated that the 11 pence rise in the average price of diesel, from 99.29 pence per litre to 111.21 pence over 12 months, had led to a £5,700 increase in the cost of fuelling just one 44-tonne truck for a year.

It pointed out that with a three pence per litre fuel duty hike planned for January 2012, the future for the transport sector is looking uncertain.

"Times are very tough right now, with rising oil costs and limited cash flow conspiring to make survival rather than growth the number one priority for many businesses operating trucks," said FTA spokesman James Hookham.

"Many companies in the logistics sector are approaching a tipping point and simply cannot afford to absorb the high fuel costs that they are facing."

Some have already been tipped over the edge recently, with rising fuel costs playing a major part. These include Yellow Star Travel, a Suffolk-based bus and coach company, and FG Foster Haulage, a road haulage firm from Staffordshire.

SFP Group's Simon Plant offered some advice to companies struggling with higher fuel prices, insisting that the first step should be to eliminate any waste or unnecessary usage from the business.

Cutting orders could also help to reduce costs, while seeking quotes from alternative fuel suppliers could result in a better deal.

"It may be that as a new customer you could be privy to a special introductory rate," Mr Plant explained. "Alternatively you may be able to negotiate a reduction in the increase by your current supplier."

Where passing on higher fuel costs to customers is unavoidable, this should be clearly communicated and explained, as loyal customers may be happy to support a business through the tough times if they are kept in the loop.

Finally, Mr Plant urged companies to keep an eye on their cash flow and to seek professional advice at the first signs of trouble.

"Problems can often be avoided if help is sought before the issue becomes threatening to the business," he remarked.