Road Haulage Association

Haulage Industry News

Bad debts lead to unfair competition

Writing this immediately before Christmas enabled me to think ahead and consider what challenges the industry and the RHA will face in 2013. One thing is clear: the economy will struggle to recover, with talk of a triple dip being all too common in the latter months of 2012. Christmas gives much of the haulage industry a welcome boost but it doesn’t help those who specialise in other sectors, particularly construction which remains sluggish.

One feature of the recession to date has been the shrinkage of the industry, with the number of O-licences, the size of the national fleet and the number of new licence applications all showing significant reductions compared with 2008. This was a natural consequence of the decline in demand seen across the economy and represented the inevitable attempts to balance supply and demand in an industry which is all too often seen as a commodity, rather than a service.

This shrinkage also put the spotlight on the consequences for individual businesses, with hundreds of firms closing – willingly or otherwise – because they have run out of cash. And we must not lose sight of the fact that those firms which fail have clearly been running at a loss for some time, all the while competing with firms which are not recording losses.

The trade press regularly reports on this firm entering into a Creditors’ Voluntary Arrangement (CVA), that firm entering into administration or another firm appointing a receiver or a liquidator. In every case debts will be unpaid – often running into hundreds of thousands of pounds – and often the money is owed to Her Majesty’s Revenue and Customs (HMRC). In other words us, the taxpayers. Such actions are always legal, with very few directors being pursued for wrongful trading, but other companies have not been able to write off large amounts of debt, but continue to trade and remain solvent.

This begs the question of what information is given to the Traffic Commissioners (TCs) about the obvious change in circumstances represented by the financial position, with a recent Transport Tribunal decision making clear that financial standing should be met continuously, not just at a given moment in time. Furthermore, the TCs will no doubt have a view on operators who have failed to notify them as soon as their financial situation made it difficult if not impossible to meet the financial standing rules.

The RHA’s position is clear. Our Articles of Association require that a membership shall cease if a company enters into any agreement with creditors, be it CVA, administration or receivership, and the Board of Directors recently confirmed there would have to be exceptional circumstances for a firm in one of those situations to be re-admitted. Limited company status extends significant protection to both directors and shareholders while imposing relatively few obligations in respect of creditors, particularly HMRC. The RHA believes financial management is as important to good repute as OCRS scores and urges the TCs to look more closely at firms that cannot pay their debts on time.

Geoff  Dunning
Chief Executive

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