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- New report from Bibby Financial Services highlights to what extent profitability for transport SMEs is on a knife edge.
- Challenges include the rising cost of fuel bad debt, and customers taking longer to pay for services compared to before the pandemic
As fuel prices soar, new research from Bibby Financial Services (BFS) highlights the extent to which the profitability of transport SMEs is on a knife edge.
Today, nearly half of all transport SMEs (46%) describe themselves as ‘just about breaking even’, with 12% reporting that they are operating at a loss. In addition, only 40% describe themselves as profitable.
The figures have been released as part of the company’s latest annual SME Confidence Tracker survey, which highlights key challenges for transport SMEs this year, with businesses in this sector the most concerned about rising inflation, fuel prices and staff shortages.
Exploring the views of 500 UK SME owners and decision makers in transport, manufacturing, construction, services, and wholesale industries, of which 67 are in the transport industry, the data finds that the top six challenges highlighted by transport SMEs for 2022 are:
- Inflation and rising cost of raw materials (42%)
- Conflict in Europe (37%)
- Supply chain disruptions (31%)
- Uncertainty arising from Covid-19 (31%)
- Challenges associated with Brexit (31%)
- Cashflow issues (30%)
Meanwhile, Bibby Financial Services’ proprietary Factors Index data suggests that transport is the fastest growing industry but warns this is likely a ‘calm before the storm’. The index for transport SME turnover remained relatively high and steady from March to May 2022, at an average of 130 (from a baseline of 100) over the past three months, however these figures may not reflect the true extent of fuel price rises and inflationary pressures.
Fuel rises are impacting the sector
BFS client, and specialist road haulage company JDC Haulage LTD has reported that the rising cost of fuel has become a relentless issue for his business, negatively impacting his chances of growth and investment.
Daniel Chapman, founder of Leeds based JDC Haulage LTD, said: “The 5p reduction in fuel prices announced in Rishi Sunak’s Spring Statement will provide no relief for businesses like mine – such a small reduction doesn’t even touch the sides. I’ve been working in the haulage industry for over 15 years, and the current landscape we are trying to navigate is genuinely worse than it was during the 2008 recession.”
Cashflow concerns: 25 percentage point increase in experiences of bad debt since last year for the transport sector
The report finds that the transport sector suffers the most out of all other sectors when it comes to bad debt and late payments from customers.
- 43% of transport businesses have experienced bad debt in the last 6 months, which is the highest percentage across all sectors (for example, the construction and manufacturing industries reported 32% and 24% respectively)
- This also compares to just 17% of transport businesses reporting bad debt in the 2021 iteration of the survey
- Two thirds (66%) of transport businesses also say that compared to before the pandemic, it is taking customers longer to pay them. Again, this is much higher than other sectors, with 46% reported by both the construction and manufacturing industries
However, despite increasing uncertainty from external triggers and issues of bad debt and late payments, there is a backdrop of optimism and ambition among transport SMEs – 82% of the transport sector feel confident about their business prospects in 2022. Yet, unless businesses receive additional support, this confidence may not translate into growth for many.
Derek Ryan, UK Managing Director of Bibby Financial Services, said: “UK SMEs are facing a relentless wave of difficulties, including soaring inflation, cost of raw materials and tax hikes. Although they have shown admirable resilience and determination in the last two years of volatile conditions, it is undeniable that without further support we will soon lose thousands of businesses that are a credit to the UK. The transport sector is being hit by rising fuel prices and cashflow issues, and it’s critical that policy makers step up and make much needed policy changes before it’s too late.”
Bibby Financial Services’ full SME Confidence Tracker 2022 report is available to download here.