Dan Parry, Managing Director of leading delivery quote comparison site, Delivery Quote Compare, contemplates what this year has in store for self-employed drivers.
Much has been written in recent days about the demise of City Link and whilst redundancy is a bitter blow to all, of particular concern is the impact it will have on the 1,000 strong army of self-employed owner drivers classed as “unsecured creditors” by Ernst & Young and therefore not entitled to any form of redundancy payment.
Self-employed owner drivers, or “Service Delivery Partners” to use the City Link vernacular form an integral part of the UK parcel delivery market which has experienced exponential growth due to the explosion in online retail sales over the last 5 years. A recent analysis by PWC reported that weekly online retail sales have increased from £264.58m per week in 2008 to over £637.60m in 2013. The report highlights that the UK B2C parcel market is due to grow by an estimated 4.8% per year with a predicted 1 billion parcels expected to be delivered annually by 2018.
This suggests that the problems experienced by City Link are therefore not due to falling demands but increased competition within the UK parcel sector due to the constant downward pressure on parcel carriers competing for a slice of the £7bn parcel market.
So what does the future hold for owner-drivers?
A 2013 report by the Office for National Statistics reported that Britain has the highest rate of online shopping in Europe with over 72% of British adults purchasing online in 2013 compared with 53% in 2008. The bottom line is that these goods need to be delivered and if not by City Link then by other carriers.
John Lewis, Mothercare and other former clients of City Link have all reported that they have shifted their delivery requirements to alternative carriers, so although there are cost implications for self-employed owner drivers similar opportunities exist with alternative carriers such as Yodel who admitted they had been forced to suspend collections from retailers as they struggled to clear a backlog after frantic spending on Black Friday at the end of November.
For a self-employed owner driver, moving from one carrier to another is not without cost. Vehicles will have to be re-signed, plus there will be uniform and other costs, however the priority for most owner drivers is to keep their asset (their van) working and this will be the most likely option for most.
Alternatives to the large parcel carriers
The problem with working as a self-employed owner driver for a large parcel carrier is the inherent risk of being self-employed with effectively just one customer, however the growth in online shopping and the subsequent demand for home deliveries is not unique to the parcel sector; indeed there are many online consumer purchases which are entirely unsuitable for the parcel network such as furniture, appliances and consumer electrical items.
Such items are either delivered by a retailers’ own fleet or for smaller independents contracted out to self-employed owner drivers. And then there is the growing second hand market fueled by online marketplaces such as eBay, Gumtree and Preloved to name but a few. Indeed the second hand goods market is now reportedly worth over £2bn per year in the UK, and as with all online purchases they need delivering.
By expanding their client base to include a variety of both consumer and business clients a self-employed driver can far better mitigate against the risks of an individual business failure than working as a self-employed driver for just one carrier.