Logistics operators report escalating costs as fuel prices soar

Sharp increases in fuel costs coupled with global supply chain pressures are resulting in a dramatic escalation in cost for UK logistics companies with the economy affected by the resultant impact on demand.

Logistics costs soar with rising fuel prices

In a survey carried out by Logistics UK, 71% of UK logistics companies reported an escalation in the cost of transporting goods during Q1 2022 compared to the same period a year ago with 40% of respondents saying that costs had climbed by 25% or more.  according to the results of

Surging costs are feeding through to the price charged to move goods with at least half of respondents reporting a substantial increase in freight rates for transporting goods by sea, domestic roads and rail and more than six in ten saying that both air and international road freight rates had also increased substantially.

Fuel cost increase is impacting demand

Bulk diesel prices, which constitute about 30% of the cost to operate a vehicle, have risen by 35.7% to average 129.03 pence per litre (ppl) in Q1 2022 when compared with Q1 2021 (price excludes VAT). All 241 respondents to the Logistics UK’s May 2022 Performance Tracker reported a rise in fuel costs.

The results suggest that the cost to transport goods and the broader cost of living squeeze are beginning to impact demand for goods. 35% of respondents reported a decrease in orders, while 12% said orders had fallen by at least a quarter.

Sarah Watkins, deputy director – policy information at Logistics UK comments: “The cost to transport goods is surging at an unprecedented rate amid significant increases in the cost of fuel. The sheer numbers of logistics companies reporting increases in both freight rates and the costs to move goods suggests rising prices are deeply embedded and are unlikely to subside in the coming weeks. The sector is particularly reliant on diesel, the cost of which is likely to remain elevated even as the cost of other fuels subside.

“Activity in the logistics sector is a reliable leading indicator for the broader economy and survey reveals worrying signs. More than a third of our respondents say orders are declining, likely as a result of both rising freight costs and as consumers cut back amid a broader cost of living squeeze.”