Last reviewed 3 November 2016

As we approach the latter part of 2016, it is clear that this year has been a turbulent one for UK hauliers that operate internationally. Calais has continued to cause problems, and the summer saw the UK vote in favour of exiting Europe. Vikki Woodfine, a Partner at DWF LLP, looks at where we are now on these issues and what the future may hold for UK hauliers currently operating in Europe.

Brexit — current position

In August 2014, Boris Johnson made his first Eurosceptic speech in which he argued that the complexity of the Drivers’ Hours Regulation (561/2006) demonstrated all that was wrong with the EU and the UK’s membership of it. See www.commercialmotor.com and www.standard.co.uk.

Just two years later, the UK voted to leave the EU and the Government has said that it will invoke Article 50 of the Lisbon Treaty by March 2017.

At that stage, the UK will enter into a period of negotiations that will ultimately shape the country’s future relations with the EU. During the negotiation period, the UK will remain a member of the EU and it will fully participate in its business. Once the Article 50 request to leave the Union is made, the Lisbon Treaty allows up to two years for the two sides to reach an agreement.

Other European countries such as Switzerland and Norway have their own relationships with the EU (under, for example, the European Free Trade Association (EFTA) and the European Economic Area (EEA)) that have been negotiated over a number of years and these offer example frameworks of what might, in theory, be achieved for the UK. Both these examples impose the free movement of goods and the free movement of people, and require many of the EU’s internal market rules to be respected, including those regarding competition and consumer protection.

The scheduled European Parliamentary elections in 2019 coupled with other Member States’ reluctance to include the UK in forming the new European Commission, due at the same time, should motivate and incentivise the parties to progress negotiations and come to an agreement within the two-year period. However, if an agreement cannot be reached in the two-year period, an extension can be granted only by a unanimous decision of all Member States. Failing this, the UK will be expected to leave without concluding an agreement and may find itself having to trade with its former partners under World Trade Organization (WTO) rules.

European haulage — the statistics

While those in the industry had expressed concerns over Brexit leading to a decline in the UK haulage industry, we had in fact already been seeing such decline. Statistics from the Department for Transport (DfT) released in August 2016 show a picture of decline in the UK international haulage industry pre-referendum. These statistics can be found here.

In terms of “goods lifted” (being the weight of goods carried measured in tonnes), there were significant negative changes between 2014 and 2015, as outlined below.

  • There was a 9% reduction in goods exported from the UK (3.9 million tonnes).

  • There was a 7% reduction in goods imported to the UK (4.3 million tonnes).

Which gives an overall total of 8.2 million tonnes carried in total; a reduction of 8% between 2014 and 2015.

Looking at similar statistics for the previous year (ie changes from 2013 to 2014) reveals that the amount of goods moved by road to or from the UK decreased by 9% in 2014. So, overall, the trend appears to be a downward one for the UK’s international road haulage industry.

One particular fact of concern is that the total amount of goods lifted by UK-registered heavy goods vehicles (HGVs) travelling to or from the UK was 48% lower than at its peak in 1999 of 15.9 million tonnes.

These figures are noted in the context of discussing borders because the DfT report acknowledges that: “decreases seen in 2014 and 2015 may be due in part to the disruptions seen at key freight interchanges eg disruption at Dover-Calais”.

The figures in the DfT report also suggests that the reduction in international haulage into/out of the UK is being felt disproportionately by UK-registered vehicles, stating that: “the number of UK-registered vehicles travelling to mainland Europe fell by 10% (313,000 to 283,000) while the number of foreign-registered vehicles rose by 4% (1.9 million to 2.0 million)” and further that “since the turn of the century, the total number of goods vehicles travelling to mainland Europe from the UK has increased by 29%; foreign-registered vehicles have increased by 89% while the number of UK-registered vehicles has decreased by 48%”.

Trade and the single market

The great majority (90%) of UK trade is handled through seaports and we continue to import and export vast amounts of goods from the EU, the UK’s biggest trading partner.

Following the EU referendum, access to the EU single market has been the subject of considerable argument between leading members of the UK Government. Prime Minister Theresa May, delivering a speech to the Conservative Party conference in October 2016, said she wants the agreement with the EU to “involve free trade, in goods and services”. She further added “I want to give British companies the maximum freedom to trade with and operate within the single market — and let European businesses do the same here”. This is seen as the ideal outcome for the UK by many leading business groups including particularly the CBI which sees maintaining those trade links as being of vital importance to many industries and to the wider economy.

However, Ms May also said “We are going, once more, to have the freedom to make our own decisions on a whole host of different matters, from how we label our food to the way in which we choose to control immigration.” Furthermore, she went on to say: “We are not leaving the European Union only to give up control of immigration again. And we are not leaving only to return to the jurisdiction of the European Court of Justice.” And there lies the rub, because a range of European leaders, not least the President of the European Council Donald Tusk, have made it clear that the UK cannot have its cake and eat it: it cannot have free trade without the free movement of labour.

In comments to a group of German business leaders, Prime Minister Angela Merkel said that allowing the UK to restrict movement of people but having continued access to free trade across the EU’s borders would be a free-for-all. She also stated “if we don’t say that full access to the internal market is linked to full acceptance of the four fundamental freedoms, a process will spread in Europe in which everyone does what they want”. The tone is very much one of concern that any agreement reached between the EU and the UK will be used as a precedent for other countries seeking their own exit from the EU in the future. This could mean that the EU takes a tougher approach with the UK during the negotiation process, to avoid setting a precedent and risking other countries seeking to follow the same path.

The four fundamental freedoms that Mrs Merkel alluded to (the free movement of goods, services, persons (including workers) and of capital) are the pillars of the European single market and it will be difficult to negotiate an agreement where the UK benefits from the pillars it likes (goods, services and capital) but is able to reject the concept of free movement of workers.

Brexit is inevitably going to affect the way that the UK interacts in other markets, and not just directly with the EU. Member States benefit from free trade agreements (FTAs) signed by the EU and other counties. Membership of the EU has created the ability for UK businesses to interact with a wider market on a level playing field. HM Treasury estimates that membership in the EU increases trade with other Member States by between 68% and 85% and the transport industry has facilitated this increased level of trade.

The threat of losing its rights to access the single market poses obvious risks for the UK’s wider trade relationships but there are also risks that will directly affect international hauliers: tariffs and import duties may be introduced on UK trade — and UK trade may then become subject to customs clearance. Not only do both of these barriers to trade create extra costs which are ultimately passed on to the consumer, but the addition of customs clearance will put even more pressure on the UK’s borders which are already under strain. There is also the potential for separate customs checks to be required at each individual border a vehicle crosses, so a multi-stop journey across the continent will result in even further delays, increasing the pressure on UK hauliers on price, driver demands and timescales. This could, realistically, result in UK hauliers being priced out of the market.

Transport regulation

So much of the law that governs road transport emanates from Europe which leaves a significant amount of uncertainty over how the UK will be affected when it exits the EU. Will the same laws still apply or will the Government seek to change them? Will UK international operators end up having to comply with two systems?

It is important to stress that the UK remains a member of the EU for the foreseeable future, possibly up until March 2019 or even longer, and the same regimes will still apply until that point. Once our membership of the EU is terminated, the present laws will remain in place unless the UK Government repeals them or takes any steps to amend them. The Goods Vehicles (Licensing of Operators) Act 1995 is a domestic piece of legislation that underpins the law for HGV operators in the UK and while current rules on drivers’ hours emanate from Europe through EU Regulation 561/2006, the UK adopted these regulations within the Transport Act 1968 which is also domestic legislation.

The law in this area is already complex and it will be vital for the Government to consider whether furthering two legal systems (the domestic and the EU system) will put additional compliance pressures on operators that still seek to operate internationally, adding to their costs and risking non-compliance. Clearly, the UK already has a domestic hours system, but this is limited to certain defined circumstances of operators and driving. What some industry leaders have called for since the Brexit vote has been a complete move over to the domestic rules for all UK operators. It is hoped that any significant proposed changes to the current legislation would be discussed and considered with the industry. International hauliers’ compliance with the EU regulations will still be required when driving on the continent whatever happens to the UK domestic rules. Therefore, the outlook for UK international hauliers is potentially a future of confused and complicated compliance regimes to ensure that they do not fall foul of either UK or EU rules.

Cabotage

Since 2010, the UK has allowed EU commercial vehicle operators to undertake a maximum of three paid jobs in a maximum period of seven days between entering and leaving the country.

Cabotage only accounts for 1% of road freight activity in the UK; the major participants being from Poland, the Netherlands and Ireland. Cabotage is a controversial EU rule that is said by some to enable EU operators to undercut domestic hauliers, due to their access to cheaper fuel and a cheaper workforce. The environmental impact and efficiency of cabotage has also been called into question by the Road Haulage Association (RHA) which states that the environmental benefits have been overstated by Brussels.

If the UK opted out of the EU cabotage rules, internal journeys in the UK that are currently carried out by vehicles utilising the rules will have to be done by domestic operators, thereby increasing available work for UK hauliers. However, UK international hauliers may similarly lose their rights to carry out multiple paid jobs while they are operating abroad, thereby causing further issues for the viability/profitability of their journeys.

Driver shortages

As previously mentioned, free movement of workers is one of the four freedoms that EU citizens enjoy, and despite this freedom often being hindered by national requirements to entry in certain professions, this has not been a problem for the population of EU drivers who have been able to work in the UK haulage industry. The requirement to have the Driver Certificate of Professional Competence (DCPC) is an EU initiative and is implemented across all Member States as the entry requirements to the industry and the EU standard, allowing the UK haulage industry to easily access foreign labour to undertake driving work.

Some drivers state that the influx of foreign drivers into the UK has held down their wages, but UK hauliers are already put at a disadvantage when competing for work against EU operators. With one of the highest National Minimum Wages in the EU, UK hauliers struggle to compete with hauliers from other Member States who benefit from the availability of cheaper labour and cheaper fuel, and this inevitably has a knock-on effect on the wages that UK hauliers are able to pay their own drivers, whether migrant workers are used or not.

Despite the concerns of domestic drivers, the RHA estimates that there are currently 60,000 EU drivers working in the UK, the majority originating from Poland and other eastern European countries. They also estimate that by next year the UK will lose 40,000 drivers due to retirement. Migrant workers play a vital role in the UK economy, especially in the logistics industry and therefore the future of Brexit and what this may look like is concerning for the industry as a whole, not just UK international hauliers.

The potential risk posed to UK hauliers operating in the UK or internationally is the threat of losing access to a pool of skilled drivers that have been filling the gap since 2004 when the door was first opened to Polish citizens. The industry’s ability to serve its customers could be compromised due to its reliance on migrant workers, and this would have a serious impact for the wider UK economy if businesses and operations are hindered by a lack of transportation services available to them.

A shortfall in the workforce will result in a huge demand for drivers and this is likely to push up driver wages. While this is a good thing for drivers on the ground, the additional cost to UK hauliers will only serve to put additional price pressures on the companies when bidding for work against operators who can offer the work at a lower cost.

If Brexit negotiations result in a so-called “Hard Brexit” where the restrictions on EU citizens would become much like the strict visa requirements imposed on migrants from the rest of the world, it is clear that the UK haulage industry is not currently prepared to ensure that sufficient drivers are available, and it remains to be seen if this would be the case by the time the country leaves the EU in a few years’ time. A further danger is that foreign drivers begin to return home before the exit if the value of the pound continues to decline and Britain enters the recession that many have forecast. Although the effects would be more gradual, the impact would probably be the same.

While the Government has gone some way to combating the issue, introducing the Nationwide Apprenticeship Scheme in a bid to attract more youngsters into the industry, there is a suggestion that the lack of interest is more deep-rooted and may not be so easily solved.

Changes to the Driver CPC (DCPC)

As the DCPC was introduced as an EU imposed requirement, the Government would be free to pull away from the concept following Brexit. DCPC sceptics would say that this could go some way to addressing the driver shortage issue with some people seeing it as a hindrance to new labour entering the haulage industry. However, many people do see the concept of standardised continual professional development for drivers as a good idea and so it may be that the DCPC is adjusted and rebranded in a UK form.

The Certificate has been adopted by many regulatory bodies, including RTITB, and we should not forget the UK’s involvement with the European Agreement Concerning the Work of Crews of Vehicles Engaged in International Road Transport (AETR) which contains DCPC requirements. The UK’s membership of AETR is not dependent on its membership of the EU and therefore continued involvement with AETR is likely to be important in terms of ensuring ongoing trade with the EU. All in all, it seems unlikely that the UK would reject its DCPC obligations.

Road tolls

The UK’s HGV road user levy is currently charged at the highest rate allowed by EU law, with operators being charged up to £1000 per vehicle per year.

This levy does not just apply to domestic vehicles. Since 2014, vehicles that are not registered in the UK that weigh more than 12 tonnes must pay the levy with amounts varying according to the vehicle’s weight, axle configuration and levy duration.

While UK-registered vehicles have to pay levy costs, they do so at the same time and in the same transaction as their vehicle excise duty (VED) with payments being collected by the Driver and Vehicle Licensing Agency (DVLA) on an annual or bi-annual basis. VED was reduced when the levy was brought in meaning that over 90% of HGVs saw no costs rise.

Clearly, if the UK exits Europe on unfavourable terms, the UK Government may seek to increase levies for non-UK vehicles once it is not bound by EU maximum level constraints. This could go some way to redress the balance in favour of UK international hauliers who appear to face all of the potential increased difficulties from Brexit as outlined above.

The Calais crisis

The migrant crisis at Calais has been a significant barrier for international haulage to and from the UK for many years, but recent months and years have seen the situation escalate. Indeed, the many news stories concerning problems near the port may have helped to shift the tide of public perception against Europe and may ultimately have contributed to the Brexit vote and the UK’s departure from the EU.

There has been a significant amount of press attention on Calais and the issue is consistently on the political agenda. However, there is a feeling among hauliers that Government reaction appears to be aimed at appeasing mass media rather than addressing the needs of an industry that is vital to the UK economy. Operators continue to face mounting issues at borders but seemingly without genuine acknowledgment by the Government as to the issues they are facing, and how those issues might be properly addressed.

For example, in September 2016, construction work was announced for a UK-funded wall in Calais, intended to be a barrier between migrants and vehicles entering the UK. Labelled the “Great Wall of Calais”, the wall is being built in an effort to prevent migrants from trying to stowaway on HGVs heading for the UK. The four-metre high wall has been received negatively by most commentators in the road transport industry; with the effort being seen as a knee-jerk reaction that is more about the Government being seen to address the issue than to actually improve the issues faced by drivers in the area.

A recent decision to introduce the French military into Calais after a long campaign has been welcomed. However, action in Calais, including the closure of the infamous Jungle camp, may mean that migrants will turn to other routes, such as the port of Zeebrugge, Belgium, or to them retreating further from Calais to gain access to vehicles en route.

The pressure on operators and their drivers coming into the UK is extreme and operators acknowledge that the situation in and around Calais and other ports is not expected to improve to any great degree for operators in the short to medium (and probably long) term future. Therefore, it remains necessary to consider the impact of the migrant crisis when considering the future international haulage operations.

Operation Stack

When considering the impact of the UK’s border problems on UK international operators, attention must be given to the recurring delays experienced by these hauliers which are most evident in the regular engagement of “Operation Stack”.

This is the system engaged by Kent Police and the Port of Dover, which involves parking HGVs on the M20 motorway when services across the English Channel are disrupted (due to, for example, industrial action in France, poor weather affecting shipping, or migrants disrupting services to Calais). The operation sees police order the “stacking” of freight traffic, turning the M20 motorway into a lorry park for up to 3000 vehicles.

Last year, the M20 motorway saw unprecedented levels of HGVs parked up as a result of strike action by workers at Calais; and with over 90% of freight travelling between the UK and Europe doing so through Kent, the delays experienced in this area have a significant effect on the ability of operators to travel effectively and profitably.

The Government has put in place plans to open a £250 million lorry park at Stanford West, which will hold some 3600 lorries during problem periods. While this will be a solution to the disruption for ordinary traffic on the roads of Kent (and the provision of services to drivers at the lorry park will be a significant improvement compared to being parked up for days at a time on the motorway), the bottleneck for HGV movement will remain; it will just be away from the eye of the general motorist/press. Operators have to accept that, for the foreseeable future at least, these regular delays are here to stay. The level of investment in this lorry park suggests that the Government foresees no easing of this issue.

Delays

Both Operation Stack and the migrant crisis on the continent generally cause the same concern for operators: very lengthy delays.

The requirement for perishable goods/food produce in particular to be transported quickly is obvious. According to recent figures released by the DfT in August 2016, food products amounted to 15% of exports and 27% of imports into the UK in 2015. Perishable goods are also most at risk of loss from contamination should migrants gain entry to consignments (discussed below); thus, the issues at borders are having a particular impact on operators transporting these items.

Put simply, if delays at UK ports become any worse than they already are, it will seriously call into question current supply chain methods in and out of the UK. The road haulage industry has built its reputation on being a key part of a fast and reliable supply chain model; however, that reputation has been harmed by recent events. Due to the delays at both sides of the Channel, customers are already looking elsewhere as to how they can transport their goods; particularly in a demanding environment where customers demand deliveries more quickly than ever.

Border barrier: migrant contamination

Due to the fear of contaminated produce, entire truckloads of perishable goods have to be destroyed when migrants are found in vehicles for fear of contaminated produce. The Freight Transport Association (FTA) estimates the cost to the industry to be £750,000 per day.

In addition to the obvious costs of destroyed goods due to migrant entry, operators are also being hit with the cost of organising alternative transit (aware that they must continue to fulfil their contractual obligations). In addition, there is the cost of increasing insurance premiums following a claim relating to the destroyed loads. Some operators are even experiencing difficulties with their insurer declining to cover the cost of lost goods; with some insurers describing the situation in Calais as an act of civil disorder which is not covered under the terms of the insurance policy.

Border barrier: threat of violence

The threat of violence and harassment facing drivers at Calais has reached unacceptable levels. Lorry drivers are being faced with the risk of being attacked with weapons and having their vehicles forcibly stopped.

Operators have a duty to protect the safety of their employees and it is difficult to think of another line of work where it would be the norm for employers to allow their employees to work in real and grave danger of serious physical abuse. Both the RHA and FTA have warned that it may only be a matter of time before a lorry driver is seriously injured while trying to restrict migrant access to his or her vehicle.

Operators risk prosecution under the Health and Safety at Work, etc Act 1974 if they fail to do everything reasonably practicable to ensure the safety of their drivers. Should a driver be injured after being sent to work on what is known to be a highly dangerous route, an operator could face a substantial fine if prosecuted by the Health and Safety Executive (HSE). New sentencing guidelines for health and safety offences, which came into force in February 2016, have seen fines imposed in safety cases rise exponentially, with fines in excess of £1 million for these cases now being seen, even in cases that involve non-fatal incidents. The potential cost of criminal proceedings is yet another factor for operators to consider when weighing up whether operating internationally remains tenable.

Another real impact of this threat of violence is an ever-decreasing pool of drivers willing to travel on international journeys for fear of the violence and intimidation that awaits them on their return to the UK. This is compounding the existing driver shortage, discussed above, and further driving up wages and supply chain costs.

Border barrier: Brexit impact on borders

Whether or not the UK is a member of the EU per se will have little impact upon the migrant issue facing operators in the Calais-Dover region; that situation is set to continue with no feasible plan in place to significantly improve current conditions for HGV drivers. Desperate migrants would still be using the same measures to attempt their crossing into the UK.

That said, should France decide to pull out of the Le Touquet agreement (the bilateral agreement allowing UK Border Force officers to conduct UK border checks in Calais), and the UK Border be moved to the UK side of the Channel, this could cause a wide range of issues; and the impact of both delays and load contamination would certainly intensify.

Conclusion

It is difficult to say anything other than that this is a very challenging time for UK hauliers involved in international operations.

Issues for road transport operators at UK borders, particularly around Calais and Dover, are making customers question the validity of goods being transported by road. In some circumstances, customers are already beginning to seek alternative options for transporting their goods.

With official Government statistics now evidencing the road transport industry decline for UK operators (and a near-acknowledgment of the association with the border crisis), it is critical that the Government listens to the industry and takes significant action to address border concerns to at least alleviate one of the key issues being faced by international hauliers.

The terms agreed during the UK’s exit from the EU will be carefully watched by businesses nationwide, and this is particularly the case for those currently undertaking international haulage work.

While it is difficult to predict the future of international haulage for UK operators when Brexit is factored in, what is already clear is that the picture is unlikely to be overwhelmingly positive. The overall picture of decline in recent years for international haulage, together with the general apathy to this situation on the political agenda, makes it increasingly likely that wherever possible UK operators will continue to look to other domestic opportunities for loads as opposed to turning to other countries. The statistics referred to above contained in this year’s DfT report (stating that since the turn of the century when looking at goods vehicles travelling from the UK to Europe, foreign-registered vehicles have increased by 89% while the number of UK-registered vehicles has decreased by 48%) will only be exacerbated with that gap continuing to widen as operators are discouraged from seeking international carriage contracts.

Now is a critical time for UK international hauliers and their trade associations to lobby the Government and work with it to try to achieve the best possible outcome for their sector; not only in the terms of the UK’s exit from the EU but also in terms of transport legislation moving forward once the UK transport laws are not governed by the EU.