What to expect in the transport industry in 2023
08 December 2022
With the recession, rising inflation, the war in Ukraine, the continued driver shortage, increasing fuel costs and a drive to net zero, 2023 looks to be an incredibly challenging year for operators whether by road, rail, sea or air. So, what should you expect in the transport industry in 2023?
The impacts of Brexit and COVID-19 still linger across all modes of transport, with the shipping and air industries still grappling with huge backlogs which has a ripple effect downstream all the way to consumers. Whilst the pinch is usually tempered during the run up to the festive period, recessions generally result in fewer transport movements. Combine this with increasing costs (whether fuel, drivers, digital challenges or other consumables) ensuring logistics operators stay the right side of the profit line becomes a fine balancing exercise. Set out below are a summary of the legal and operational challenges for 2023.
Insurance & CMR
The Solvency II reforms continued to evolve in 2022 with the UK government publishing its response and aims in relation to seeking funds from UK institutions to assist in major government projects e.g. levelling up and the road to net zero. Legislation is likely to be implemented in 2023 although it is anticipated the shift for insurers will be gradual rather than immediate.
2022 also saw some useful guidance from the High Court on the well versed subject of wilful misconduct under the Carriage of Goods by Road Act 1965 (the ‘CMR’). In Knapfield v Cars Holdings Limited, the High Court reaffirmed that there must be more than just negligence, the driver must appreciate the risk and then either deliberately or recklessly proceed anyway. In Knapfiled, the failure by a driver to secure a car by not properly securing the front wheel straps was insufficient to cross the threshold and move away from the limits of liability under the CMR.
Financial standing & Tachograph Records
‘Cash is king’ the saying goes. Given that cash is likely to be tight in 2023 (with surveys suggesting that ‘one in five transport firms have run out of cash’), 2023 may see more public inquiries concerning financial standing or lack thereof. It is worth emphasising that the financial standing obligations require operators to have sufficient capital and reserves available throughout the lifetime of the Operator’s Licence. If operators are unable to meet this requirement, the Operator’s Licence is at risk of revocation. Operators at risk of not meeting the financial standing will have to communicate with the Traffic Commissioner, with a plan to recover the position – early advice on your options for demonstrating available funds is therefore key!
Tachograph records
In August 2020, the regulations governing drivers’ tachograph record keeping obligations were amended, which represented a significant sea-change in expectations – drivers are now required to keep a full 24-hour record of all their activities and carry with them in the cab records for at least the current day and the previous 28 calendar days. This now includes rest, annual leave and sick leave (as well as driving, other work, break and availability).
DVSA began actively enforcing these requirements from January 2022 and, whilst there has been some relaxation (in terms of enforcement) by DVSA/DfT in August 2022 (for example, activities can be recorded on one ‘block record’ in fixed weeks (Monday to Sunday) where no EU-driving takes place), the industry continues to face major challenges complying with the regulations and 2023 may well see the emergence of prosecutions and public inquiries where drivers and operators fail to comply with the rules.
IR35 & labour shortage
Reports identify that the haulage industry is still 50,000 drivers short. The shipping industry faces similar problems which is resulting in bottlenecks in the supply chain. With the Truss proposed reforms of IR35 abandoned by Chancellor Jeremy Hunt, it is likely that HMRC will continue to clamp down on personal service companies in 2023 as it looks to fill the black hole in the UK tax economy. Wrestling with the status of the arrangements has been further complicated by the Court of Appeal who handed down two major decisions in 2022 (see HMRC v Atholl House Productions Limited and Kickabout Productions v HMRC) which deviated away from historical cases which had applied equally to tax and employment status. Now, the assumption is that for tax purposes, the starting point is what is written in the contract. Both entities are deemed business for tax purposes with equal bargaining power. This is not the case in an employer/employee relationship. Mutuality of obligation remains essential for a contract of employment to be established.
The key takeaway is 2023 is likely to yield further litigation in this area. Operators who use personal service companies should review the arrangements and ensure they accurately reflect how both parties intend the relationship to work.
Dangerous Goods
Whilst the ADR Regs have always covered those involved in the picking, packing, filling, loading and unloading of dangerous goods, from 1 January 2023 consignors of dangerous goods will also need to appoint a Dangerous Goods Safety Advisor (DGSA) who will be responsible for monitoring compliance, investigating and reporting incidents to the relevant authorities. Failure to do so may result in prosecution both under the Regulations and also the Health & Safety at Work Act 1974 and the possibility of the business no longer being permitted to be involved with dangerous goods.
Trucks Cartel & Competition litigation
2022 has seen significant developments in the Competition Tribunal with the transport sector at the forefront of developing the regime. Whether trains (Guttman v First MTR South Western Trains); trucks (RHA v MAN, DAF & Others) or ships (McClaren v MOL & Others), all aspects of the transport sector are involved in the burgeoning regime. Having all been certified to proceed by the Tribunal, 2023 is likely to see a raft of appeals as the multi million (or in the case of trucks, multi billion) claims progress. Indeed, the trucks case will be heard by the Supreme Court in February 2023 on a discrete issue of litigation funding and funders involvement in bringing claims which could have a seismic impact on the regime as a whole.
Please contact Backhouse Jones’ business development team at marketing@backhouses.co.uk if you require further information.
