Last reviewed 21 June 2016

Richard Smith examines the growth in van registrations and the possible consequences for HGV operators and for licensing.

Introduction

According to figures recently published by the Society of Motor Manufacturers and Traders (SMMT), the number of vans on British roads at the end of the first quarter of 2016 was the highest ever at just over 4 million. This is obviously good news for the economy and comfortably outpaces the rest of Europe. Registrations of heavier vehicles also showed a strong increase of 25% on the previous year though this was partly due to a relatively poor 2014 following regulatory changes that affected renewal patterns. For details, see the Transport News Brief website.

The strong performance in the van sector — particularly at the heavier end — may well prompt questions as to whether this represents a commercial threat to operators of HGVs. At the same time another report by SMMT that many vans are being dangerously overloaded, (see the SMMT website) may also lead to suggestions that sub-3.5t goods vehicles should be brought into the Operator Licensing (O-licensing) regime.

Why are vans not subject to O-licensing?

The obvious answer is that the EU Regulations governing access to the road haulage market do not require them to be, and neither did the UK legislation that preceded them. To understand the reason for this we need to be aware that these regulations are conceived as part of the EU economic policy. A sufficient supply of goods transport (particularly by road) is recognised as essential for economic development and it is now universally acknowledged that the best way to ensure this is to allow relatively free access to the market by intending operators so that competition leads to improved service quality and lower prices. At the same time it is important to maintain the famous “level playing field” so that unscrupulous operators cannot undercut their competitors by running unsafe operations. The answer to satisfying both these requirements is the system of quality regulation embodied in Regulations 1071/2009/EC and 1072/2009/EC but also, long before that, in the UK’s Transport Act 1968.

We must also remember that the European Commission is only concerned with interstate competition and not with purely domestic operations — except to guarantee that goods and services may be provided by nationals from any Member State. What the EU calls “the internal market” means internal to the whole EU, not internal to any particular Member State. So while there may be estimates of a total payload volume of all the vans in the UK at 26.2 million cubic metres, this comes in such small quantities that — despite lower costs — they cannot possibly influence the market for international transport. Since there can be no effective competition, there is no need for regulation.

What about the domestic market?

Regulation 1071/2009 does allow Member States to lower the limit above which O-licensing applies but the UK has so far not taken advantage of this provision. The reason may be found in a consideration of the nature of different types of transport operation.

A great many vans — particularly the smaller ones — will be used by tradespeople in the course of their own business to carry their tools and equipment, etc. Many will also be used for own-account operations. All these — probably the greater proportion — will not have any impact on the hire and reward transport market.

Even with general transport, it is very clear that long distance trunking in the small payload quantities provided by vans is always going to be uneconomic, however low the individual vehicle operating cost. Equally, we are never likely to see our online order delivered to our house in a 44-tonne artic so, at the extremes, there are clearly two entirely separate markets that do not impinge on one another. However, there must be a point at which the economics dictate a switch from one form of transport to the other and around that point there may be the possibility of competition that will be weighted towards the van. This will be particularly so if the load factor for the HGV journey is low. A conclusion that this may be occurring is strengthened by a consideration of the detail of recent van registrations.

According to the SMMT figures, the 2016 year-to-date registrations are 3.3% up on the equivalent period last year but this overall figure disguises a marked variation between classes of light commercial vehicle. Registrations of 4x4 vehicles, vans up to 2t and vans between 2 and 2.5t all fell considerably by 28.1%, 11.1% and 16.6% respectively. However, registrations of pick-ups rose by 10.4% and of vans over 2.5t up to 3.5t rose by 13%. This increase in the higher capacity vehicles may well indicate some increased competition in the margins of the switch-over point between light and heavy vehicles.

Van overloading

While the economics are unlikely to prompt the Government to lower the threshold for O-licensing, the issue of road safety might make a difference. Of the 2381 vans weighed by Driver and Vehicle Standards Agency (DVSA) last year, 88.5% were found to be overloaded — an increase of 4% on the previous year. Overloading is not only inherently dangerous but also compromises all the improvements in safety achieved through the advanced safety technology now commonly fitted to vans and SMMT is concerned that such appalling statistics could lead to a call for regulation of vans through O-licensing.

The rules on overloading are the same for everybody, whether in a truck, van or even a private car. The Road Traffic Act 1988 and the Road Vehicles (Construction and Use) Regulations 1986 require all vehicle users to ensure that their vehicles are correctly loaded. “Vehicle users” includes both the driver and the vehicle owner and both may be liable to a fine of up to £5000 for each overloading offence. Additionally, employers may be in breach of their duty of care under the Health and Safety at Work Act 1999. Vehicles may also be prohibited from moving until the load is adjusted.

So far as the above is concerned, the playing field is level but where it develops a slope to rival that of the Lord’s wicket is in what comes next. Whereas for the van operator the penalty is limited to a fine; for the HGV operator there are further sanctions through the Traffic Commissioner that can quickly result in the loss of his or her personal good repute and the undertaking’s O-licence.

Furthermore, roadside inspections of HGVs will be carried out in a targeted fashion on the basis of the Operator Compliance Risk Score (OCRS) but no such targeting is available for vans and checks will be conducted at random — though a hit rate of 88% indicates that DVSA examiners will hardly be wasting much time checking compliant vans, even on a random basis. The pain for the HGV operator does not end there however, because such a failed encounter will result in an increase in the compliance risk score and his or her vehicles will then be targeted for a period thereafter until the risk score falls again after a number of successful encounters.

Conclusion

While the large number of vans now on the road will not have any impact on the majority of HGV operators, it is possible that the increase in higher capacity ones might have some effect around the lower threshold of economic viability for HGV operation. Evidence of prevalent overloading of vans might also suggest that their operators are seeking to exploit their freedom from O-licensing even further by encroaching into the load capacity legally available only to O-licensed vehicles.

While it must remain unlikely that the O-licensing threshold will be reduced, van operators will need to put their house in order to avoid such suggestions.