One of the most significant budget items for many businesses is that of road transportation. Whether it is the cost of moving goods between locations or staff between places, the expense of running a vehicle has spiralled by 14% over the last 12 months according to the RAC, and the ever-rising price of fuel is a major part of that increase.
Insurance firm, Staveley Head providers of courier insurance and other commercial policies, have been monitoring the rise over several years and have produced their informative Global Petrol Price Index, which shows that the UK’s petrol prices have reached their highest-ever level, and that they are consistently amongst the most expensive in the world.
Businesses which rely on large vehicles for transportation have been especially badly hit, with increased diesel prices and reduced fuel account payment terms, meaning hauliers are having to pay their sizeable fuel bills in as little as 3 days, yet are having to wait for up to 2 months to be paid by the firms for which they are carrying goods. Such an imbalance creates a real difficulty in cash-flow for transportation businesses and will cause some of them to fold.
The effect of the increased cost of road fuel is being reflected in price rises for both raw materials and consumer goods, which has a knock-on effect across the whole economy and leads to a reduction in demand, and therefore of production, sales and turnover in an ever-decreasing spiral.
It is not just big businesses who suffer from the high cost of road fuel prices. Smaller firms are just as vulnerable, often more so, as they may not have the credit facilities of the larger ones, and are more reliant on paying instantly the varying, but ever-increasing, pump price for petrol and diesel.
Businesses in rural areas are being badly hit too, not just in the cost of running a delivery vehicle, but also where employees use cars to travel to work in areas where public transport is not an option. Some employers have reported that staff have left, saying it is no longer economical for them to drive to work, so companies lose qualified staff which impacts on the business itself and may lead to increased unemployment in some areas.
Rising fuel costs affect everyone, even those people who do not own a vehicle, as everything that companies buy and sell is moved about the country, from place of manufacture to place of storage and then of sale. They affect the provision of services too: all of the utility companies’ fleets cost more to run, and the emergency services’ vehicles which are paid for by taxation via local and central government. Bus services are paying more for their fuel, which results in increases in passenger fares, often adversely impacting those travelling to work. Leisure activities, such as days out and shopping, are being curtailed, which has a substantial impact on the tourism and retail industries, resulting in lower visitor numbers and the closure of some shops and attractions which have become unsustainable.