Why collaboration must be at the heart of every small business’s operating model

By James Gordon, Editor

After months of meticulous planning the government’s T-charge has finally come into force.

For the many thousands of commercial freelance owner operators, belonging to freight exchange platforms, the toxin tax, a £10 charge levied on all pre-Euro 4/IV diesel and petrol vehicles which enter London’s congestion zone, could have a crippling effect on margins, which for most courier companies, are already stretched.

Indeed, with many operators already paying the congestion charge, the minimum daily amount to enter the red zone for some van drivers, whose petrol or diesel vehicles carry a pre-2006 licence plate, is £20.

While most believe that congestion and emissions reduction initiatives are urgently needed to tackle the growing health crisis caused largely by heavily polluting vehicles, some remain unconvinced that Transport for London’s (TfLs) T-Charge goes far enough. Indeed, many green campaigners want a total ban on diesel vehicles.

Central London Emission charge- freight sector

Small businesses will have to pay more…

However, with the electrification in the light vehicle sector still some way off, and Euro 6 diesel van retrofits not always possible or cost-effective, many small operators simply cannot afford the cost of a new compliant vehicle.

And with no government-funded diesel scrappage scheme in sight Denise Beedell, from the Federation of Small Businesses (FSB), thinks “that many of them will have little choice but to pay the toxicity charge”.

Beedell, who as the FSB’s Development Manager, is tasked with ensuring that small businesses have a voice at local level, says while her organisation is not necessarily against the government’s plans to curb emissions, she is concerned that bearing the burden of a raft of new emissions taxes, including the ULEZ charge which comes into force on 08, April, 2019, “might make London’s small owner operators less competitive in the long run”.

Denise Beedell, Development Manager at FSB

Denise Beedell, Development Manager at FSB

ULEZ timetable change will affect small operators…

Beedell is particularly concerned that Mayor Khan’s decision to introduce the ULEZ 17-months earlier than originally planned, does not give owner-operators enough time to comply with the stringent emission regulations.

Beedell explains, “Many freelancers lease their vehicles, and it may be that the contracts they have signed are pegged to the Mayor’s earlier announcement of September, 2020. With many now needing a Euro 6 compliant vehicle much earlier than expected, they may be financially penalised for ending their existing contracts earlier. Many simply won’t be able to afford to do so, meaning that they will have little choice but to pay the charge.”

And according to a recent study, which focused on the challenges faced by small fleets, TfL’s decision to bring forward the scheme, will hit many members in the pocket.

“Our research revealed that 54 per cent of FSB members owning three vehicles or more expect them not to meet ULEZ emission standards in 2019.When you consider that 67 per cent of our members operate up to three vans, there will be a lot of non-compliant vehicles travelling in the ULEZ in April 2019. That will significantly add to their operating costs at a time when the cost of doing business in the capital is increasing more rapidly than ever.”

But does she think that they could send some courier firms, and the small businesses they serve, out of business altogether?

Beedell says, “It is the cumulative burden of increasing costs rather than any one single charge that today’s business owners find most difficult to cope with. That said, if a small operator makes daily deliveries inside the T-charge zone, the emissions taxes incurred could add up to over £2,500 of additional costs per annum affecting a significant number of courier firms who serve the capital in the future.”

The role of collaborative logistics…

freight exchange platform

Beedell believes that it is important too to remember that owner operators are just one part of a delicate and complex ecosystem, which also includes the small businesses that they deliver to.

She says, “They are being squeezed too. And this is impacting on their ability to financially manage and plan for the future. The spiraling cost of operating in London has led 30 per cent of small businesses to seriously consider moving out of the capital within the next five years.”

So could collaborative logistics platforms, which deliver real-world freight consolidation benefits, make a difference?

“While they cannot be considered to be the magic bullet that solves London’s emission problems, I think that in the future, those freight exchange platforms, that look beyond the freight operators that they serve, and also factor in the very nuanced and varied needs of small businesses are likely to prosper much more so than those consolidation platforms that choose to adopt “a one-size fits all” approach.”

Continues Beedell, “For example, whilst there is broad support for government-led ‘freight re-timing” initiatives, which encourage businesses to receive out of hours’ deliveries, this is often more easily managed by large businesses, who have the staff to receive late night consignments. It is not practical for all small and micro business to operate in the same way, as it is often the business owner, who has to wait for the delivery, and this can turn an eight-hour shift into a 12-hour day or longer. Therefore, in the future, freight exchange platforms, which are heavily focused on the end-customer too, are likely to benefit.”

And for logistics hubs serving the small business community, Beedell who has worked for the FSB in London for three years, is also keen to emphasise the importance of maintaining a customer focus-orientated approach.

Beedell explains, “As many small enterprises operate on notoriously tight margins, they value agility and outstanding service delivered by compliant and highly reliable freight logistics operators. If collaborative logistics platforms are able to consistently meet these high standards, the courier and haulage operators who use them, could potentially win more business from small enterprises.”