Fleet News

Experts divided on shape of UK economic recovery

The past year has been dominated by economic abbreviations which commentators suggest will define our lives for years to come, such as QE, GDP and APR.

However, over the next year the letters L, U, V, W and will be as important.

These letters represent the potential shape of the UK’s economic recovery.

After a sharp fall, the economy can either stagnate (L), bounce back sharply (V), fall again before recovering in a so-called ‘double-dip’ (W) or begin a very slow recovery before stronger growth arrives in future (U).

According to the Institute of Directors, we can expect an ‘L’, while the Government seems to be forecasting a ‘U’ and detractors say the markets should be braced for a ‘W’. Clear as mud? Now you know how George Osborne feels.

For fleet operators, the challenges are more specific, though just as difficult to plan for.

During 2010, Sewells has spoken to more than 1,000 fleet decision-makers and one of the their most important concerns was fuel costs.

According to the Sewells Fleet Strategy and Insight 2010 report, 46% of fleets had already taken action to reduce their fuel costs by the start of the year, while 49% were planning to have a strategy in place by 2011.

This view was by Britain’s biggest fleets in the Fleet200 Report published at the end of 2010.

However, it is likely that fuel and mileage strategies will need reviewing again during 2011.

Fleets have already been hit by a 1p increase in the cost of petrol when fuel duty went up at the start of this year, followed by 2.5% increase in VAT, adding around 2.5p to a litre, but that is just the start.

If you take into account the trends of the past two years, rising commodity prices, increasing demand for fuel and rising usage linked to even a mild economic recovery, pump prices could reach £1.37 a litre by the end of 2011.

This year will also see an important shift in company car tax rates, with most drivers seeing their tax rate increase.

When combined with rising fuel costs, this will continue the drive among fleets to more fuel and tax efficient lower emission vehicles.

This will include increasing use of hybrids, as these are the most abundantly available alternative to traditional petrol and diesel vehicles.

According to the latest figures from HM Revenue & Customs, there were 760,000 company cars emitting less then 160g/km on the road by 2009. Data from the FN50 suggests that more than 10,500 of these are hybrids, but that number is likely to reach 15,000 by the end of 2011.

However, some fleets will be focused on managing fleet reduction rather than new car acquisition.

The public sector is expecting tens of thousands of job losses in the next few years, which will also affect a wide range of suppliers.

Research for the Fleet200 Report identified a significant potential reduction in fleets across the public sector, along with other industries in 2011.

While this may not impact unduly on overall fleet sales, as the fall will be offset by growth in other sectors, it will leave fleets with significant challenges as they attempt to manage a fleet reduction while also keeping their remaining operations running safely and cost efficiently.

Safety is key fleet priority

Over the past two years, the sharp reduction in business mileage has led to a corresponding decrease in crashes, deaths and injuries on the UK roads.

Historic data suggests that an economic recovery, if it brings a return to significantly higher business mileage may inevitably lead to a rise in accidents.

If there is a sustained economic recovery this year – and the emphasis is on ‘if’ – then it could bring an end to the long-term fall in road deaths and injuries.

This will expose businesses to significant challenges if they are to protect themselves from a potentially worrying trend.

Many businesses have recognised this risk, with a recent survey of 350 fleet decision-makers by Sewells revealing that a focus on risk management was a key priority.

However, fleets will agree that turning strategy into action is a difficult challenge that will require all their expertise.


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