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Topic of the Month
April 2011

Financial standing for operators – another nail in the coffin of the small haulier?

With rising fuel costs and general price inflation, the new EU Regulation on Access to the Occupation of Road Transport Operator may be just what the industry does not want to hear.

The Department for Transport is currently seeking consultation on its proposals to implement Regulation 1071/2009, which comes into effect on 4 December 2011.  The Regulation includes that for standard national and standard international operators, the financial limits used to determine financial standing, will now be recalculated annually using the euro exchange rate, rather than 5 yearly.   This means that, if recent past history of the fall in the value of the pound against the euro continues, operators will see an annual rise in the amount of money that they need to show to prove financial standing.  Furthermore, operators will now have to show financial standing annually rather than at the grant of the licence and then every five years.   Operators will have to submit annual accounts, in a recognised format and certified by a properly qualified person.

There will be new rules for those who want to start a new haulage business.    They are not in the position of being able to provide annual accounts.  The Regulation allows new businesses to submit a statement, certified by a qualified person, such as an accountant, that sets out their assets and liabilities before they started trading, as proof of their financial standing for the first year.  New operators will no longer be able to show a sufficient opening bank balance and then give an undertaking that they will provide the Traffic Commissioner with further bank statements.

A further option, for those who cannot show sufficient finance by the certified opening balance, is the use of a financial guarantee.  The Department for Transport's proposals include allowing overdraft facilities, which have recently been as rare as hen's teeth, credit facilities, which allow businesses to make purchases up to a specified limit and invoice finance agreements.  Interestingly, the EU regulation also mentions insurance, including professional liability insurance, although this appears not to be proposed to be adopted in this country.

Many small operators have relied upon a statutory declaration, often from a relative, that the funds are available and that the Traffic Commissioner will be notified if that ceases to be the case.  Often these are parents who have funds on deposit with a building society.  Although the Department for Transport's proposals make reference to overdraft facilities and credit facilities to be held in the name of someone other than the licence holder, provided that it is accompanied by a statutory declaration, no mention is made of continuing to allow statutory declarations relating to money held by relatives on deposit.  This has been a life line to many a new applicant and it seems perverse to force a relative to get an overdraft facility, when that relative has the funds on deposit.