Business Economic Notes 2

Road Haulage

These notes are issued to Inspectors of Taxes to assist them in examining accounts. They are intended to provide a general background to the trade, with some explanation of its most important features. Business Economic Notes are not intended to provide an exhaustive or definitive picture of any particular trade or profession.

Contents

1. Introduction

2. Methods of Operation

: 2.1 General; 2.2 Costs; 2.3 Scheduling; 2.4 Utilisation; 2.5 Specific Methods of Operations

3. Management Structures

3.1 Owner Drivers

3.2 Smaller Businesses

3.3 Medium Size Companies

3.4 National Companies

4. Contracts

4.1 Types of Contract

4.2 Method of quotation

5. Vehicles

6. Cost and Profitability

6.1 Costs
6.2 Profitability

7. Regulations

7.1 Plating & Testing

7.2 Vehicle Excise Duty (VED)

7.3 Driving Licences

7.4 Duration of Licences

7.5 Driver Hours

7.6 EC RULES

7.7 Tachograph

7.8 Operators Licences

8. Acknowledgements

Appendices

1 Introduction

About four fifths of the raw materials and goods used or sold by UK business are transported by road. The industry has many different sectors, reflecting the great variety of goods it carries: food and agricultural products, bulk liquids, car transporters, container transport, express parcels, furniture removal, heavy haulage, livestock, tipping and waste disposal, to name but a few.

Many firms engaged in haulage, whether they are "own account" carriers (businesses moving their own goods in their own vehicles) or "professional" carriers (those who provide transport on a hire-or-reward basis), collect and deliver within their own region. A smaller number operate over longer distances on a national basis, often using trunk vehicles to supply a network of depots spread throughout the country.

This note is concerned with "professional" carriers although much of the information given, excluding the sections on management structure, contracting and profitability, applies generally to "own account" operators. Previously most "professional" carriers operated as general hauliers but in recent years there has been an increasing trend towards specialisation. In a large company the specialisation may be allocated to divisions within that company, enabling the operator to provide a portfolio of services covering a range of industrial sectors.

The majority of "professional" concerns are small family firms which were started to cater quite often for a particular local industry or customer. A number have expanded or specialised to the point where they are no longer completely dependent on local work. There are instances where companies have grown to hundreds of vehicles from one vehicle.

Most small vehicle operators, many of whom are owner drivers, offer a service in a particular locality. This is often based mainly on one or two regular customers, supplemented by other steady clients who supply casual work, and one-off or spot hire work. Small haulage firms and owner drivers often undertake subcontract work from larger hauliers and some act wholly as subcontractors or work wholly of one customer. Quite often this involves owning tractor units without any trailers and these operators provide what is known as a "traction" service. The smaller the firm the more likely is this situation to be found. A recent survey of the industry gave the following breakdown:

1	vehicle	18%
2-5	vehicles	47%
6-20	vehicles	29%
21-75	vehicles	5%
more than 75	vehicles	1%

In each sector of the industry the competition for work is between firms of roughly the same size in that sector although there are regional variations. A small firm with low operating costs will be able to quote lower rates than a large company for a small volume of local work. On the other hand only the large companies have the resources to deal with the national contracts now negotiated by major national retailing and production companies.

It follows that due to their size and heavy dependence on local trade, the fortunes of many "professional" hauliers can follow the commercial prosperity of their locality. This has been particularly evident during the years of recession. The liberalisation of the industry in 1969, when entry into the profession became based on quality standards rather than previous vehicle quantity requirements (need), gave rise to an increase in the total number of operators and sharpened up competition. It also gave rise to excess capacity which has depressed rates on a general basis since then.

Other changes affecting the road haulage industry have included the development of Just In Time supply chain management strategies by manufacturing industries. This has enabled stock holding to be reduced, but places greater reliance on the transport network to ensure predictable road transport journey times can be achieved.

Major companies also started to concentrate on their core manufacturing activities and transferred their distribution function to specialist transport companies or "third parties" giving rise to the term "third party distribution".

2. Methods of Operation

2.1 General

Operating methods in the haulage industry are an amalgam of observance of regulations and customer requirements modified by the technical requirements relating to the goods or freight being carried. Ideally lorries should be loaded at all times but in reality 30% of vehicle mileage may be empty running. The availability of backloads or the specialisation of vehicles often makes it impracticable to obtain a backload (a load for a return journey) back to base or loading point. However in some long distance work, in the movement of bulk liquids, in car transport, in express parcels, and in other small freight sectors, a vehicle normally follows a predetermined route of drop-off and pick-up points returning to base sometimes as well loaded as when it set off.

The average length of haul is shown in the table at Appendix 1.

Most small firms rely on a small number of established regular and casual clients, seeking new clients only when one is lost rather than searching continuously for new work. In slack periods existing clients are contacted to obtain work. New clients are sought by either telephoning round, including trade contacts, local advertising or leads picked up by drivers. Often small firms lack the financial resources or are unwilling to risk acquiring the additional carrying capacity that contracting new work would entail when existing vehicles are fully utilised.

There is little formal management training among the controlling staff in smaller firms. This probably accounts for much observed resistance to marketing and promotion.

2.2 Costs

Hauliers often quote for work on the basis of an estimate of the cost of a job plus a margin for profit. An operator's aim is to use vehicles effectively and keep costs down so that the business can make competitive quotes and still make a profit. However, where over-capacity in the market exists, the haulier often has to price at what the market will bear. While the operator will seek to cover his marginal costs (driver costs, fuel and maintenance), the charge may not fully recover total costs and contribution to transport overheads. More information is given under "Cost and Profitability" below.

2.3 Scheduling

Scheduling over regular routes is practised and is straightforward. In small firms it is based on custom and practice plus local knowledge of such things as traffic bans and roadworks. In larger organisations computer assisted scheduling is the norm. For planning purposes a vehicle is normally assumed to be available for 45 weeks in a year which allows 7 weeks for serving, repairs and other downtime including holidays where replacement drivers are not engaged. The law on drivers' hours plays an important part in scheduling and utilisation. The time that may be spent driving a vehicle and the rest periods that must be taken are fixed by law. Most goods vehicles used for commercial carriage of goods, whether laden or unladen, will be subject to the European Community rules as laid down in EC Directive 3820/85. There are exemptions to these rules but any goods vehicles excluded have to conform to UK Domestic Rules. The essential elements of the rules are:

Daily Driving Limit: a driver must not drive more than 9 hours in a day but this may be extended to 10 hours twice a week.

Daily Rest: a driver must have a minimum daily rest of 11 consecutive hours. There are special rules and variations but these would not normally affect the finance and accounts of a business.

Daily rest is reducible to 9 hours in any period of 24 hours not more than three times in any one week. Any reduction must be compensation by an equivalent period of rest being added to a daily or weekly rest before the end of the following (fixed) week.

2.4 Utilisation

The tables at Appendix 2 set out statistics for public haulage and own account.

Vehicles often run empty on either the outward or return leg of local journeys. On longer hauls it is common practice to find a "backload" in order to offset the loss caused by running empty over these longer distances. Hauliers will try to arrange "backloads" in advance but it is often not possible to do so without paying a considerable premium to the "backload" organiser. These agencies or "clearing houses" often charge commission of 10%. They can be a source of bad debts and it is not uncommon for agencies to go into receivership.

2.5 Special Methods of Operation

2.5.1 General

Firms normally keep enough vehicles to deal with their average workload and hire vehicles or use subcontractors to cope with any traffic peaks or specialist jobs.

2.5.2 Tipping Sector

This sector is composed mainly of small firms (often owner drivers) working for one client. Many are dependent upon their customer for services and finance. It is common in the tipping sector for a vehicle to shuttle back and forth between loading and delivery points before returning to base. Profits in this sector usually depend on good utilisation and making as many hauls as possible each day. "Backloads" are unlikely but some operators manage to arrange them.

2.5.3 Household Removals

These normally involve one leg of the journey running empty. "Backloads" are not normally feasible although they may be possible on long distance returns. There is little flexibility in scheduling since clients require vehicles at specific times.

2.5.4 Tankers

Operators using these vehicles tend to be large concerns whose vehicles aggregate a high yearly mileage. The movement of hazardous goods such as bulk chemicals now attracts extensive legislation and controls and is extremely complex.

2.5.5 International Haulage

This involves expenditure by the driver when abroad for fuel, subsistence, ferry and customs charges, and in some cases permits. A driver involved in international journeys would normally be paid his expenses in advance and would render an account on their return.

2.5.6 Construction Companies

Large construction and aggregates companies and also those involved in ready-mix products normally operate fleets of sub-contractor hauliers who work for them full time. The company leases a chassis cab to the haulier, usually over 5 years, and either refunds the lease payments at the end of the period or sells the vehicle to the latter for a nominal sum. The contract may include arrangements to service or finance the servicing of the vehicle.

2.5.7 Express Parcels

Firms engaged in this area often work on a franchise basis whereby they are given trading rights within an agreed area. Such systems operate on a hub and spoke basis. There are also several large national carriers who operate in the same manner but on a wholly owned basis and operate their own trunking fleets as well.

3. Management Structure

Most large firms including many of the companies operating in the third party distribution business for the major high street retailers employ full time transport and administration staff as well as a complement of fitters and ancillary staff. Smaller to medium sized firms many of which are family based tend to be run directly by their owners. The number of staff employed depends on the number of vehicles operated but most nowadays rely on the use of computers and other modern office equipment. Very small firms and owner drivers tend to be run on a day to day basis relying on the operators practical experience of the trade, and aiming to make a living as distinct from planning to achieve a commercial profit.

3.1 Owner Drivers

Typically these are ex-employees with a second-hand vehicle or two, who carry out as much as possible of their own maintenance and repair work at weekends. As often as not their partner does the accounting work and he or she may also have another job. Where an owner driver is normally a sub-contractor quite often the main contractor will handle all the administration.

3.2 Smaller Businesses

Small businesses may employ a number of drivers or driver/fitters and possibly one or two office staff. Maintenance may be undertaken in-house or passed out to a main dealer.

3.3 Medium Size Companies

Businesses in this category have a more formal manager structure and are more likely than not to specialise in one particular sector of the industry. They will employ a management staff and will maintain their own vehicles and even undertake maintenance work for other smaller firms. The standard of the management structure is likely to be less formal and even less efficient than large national companies. Many of the management staff will have on the job training but no formal qualifications or training, having been promoted from the shop floor.

3.4 National Companies

The large national companies are normally organised on the depot basis throughout the country. Their structure is formal and will have the advantage of full-time marketing, accountancy, training and sometimes legal staff, as well as the standard operational staff.

3.5 Quality Standards

Regardless of size, all operators carrying goods for hire and reward must hold a Standard or Standard international operators licence for goods vehicles used in connection with the trade or business, all applicants for operators licences (whether first time applicants or renewals) must meet certain detailed criteria. These include general fitness, maintenance arrangements, drivers' hours records and overloading, suitability of operating centre and financial resources. In addition, Standard national and international licence holders must also show that they are of good repute and have professional competence.

When considering the operators described in Sections 3.1 - 3.4, the quality standards imposed by the operators licensing system on the management control of the haulage operation must also be considered.

The Freight Transport Association's Yearbook of Road Transport Law 1995 covers the requirements in detail and extracts of the same appear courtesy of the FTA at Appendix 3.

4. Contracts

There are no standard haulage rates in the industry. The Restrictive Trade Practices Act 1976 expressly forbids collective rate agreements. In general they are seen as detrimental to competition. Each contract therefore is the outcome of negotiation between the haulier and his client. However competitors' rates may be known if only because some clients quote them in negotiations and because sometimes hauliers are relatively open about the rates they are obtaining for jobs. It should be noted however that small firms engaged in sub-contract work may have their rates dictated by their principal. An example of this is the rates schedule laid down by a quarry operator.

The basis for quotations is usually cost plus a margin for profit. There are several published tables of operating costs which can be used as a basis for quotes including those which are produced by the trade press. However because the source of their information is normally the retail market the rates quotes are often higher than those prevailing in the industry.

It has to be accepted that some hauliers are not adept at calculating costs. The key elements of costing data are:

Average days worked per annum
Average miles per annum
Average depreciation/residuals
Wages
Insurance's
Interest on Capital
Overheads, and other costs

There are also mileage costs and these are:

Fuel, lubricants, tyres
Repairs and Maintenance

Some of the larger haulage companies enhance their service by "adding value" to their contracts, i.e. by offering warehousing, undertaking delivery paperwork, order picking, or carrying advertisements for the client on their vehicles.

4.1 Types of Contract

The main forms of contract in use are as under:

4.1.1 Spot

One-off bargaining for each load carried and is common in regard to "backloads".

4.1.2 Periodically Agreed Rate

All work is charged at a specified rate which is usually negotiated at six or twelve month intervals. There is often no guarantee of either the volume or frequency of work.

This type of contract is often used by parcel or express delivery operators.

4.1.3 Formal Contracts

These can take many forms. Some of the more common include:

A fixed rate over a specified route with a guarantee of a minimum amount of work.
An agreement to carry a specified load at a given time to a particular destination.
An agreement to supply a specified number of vehicles on a daily basis, with or without drivers, to carry out work as directed by the client. The vehicle may be painted in the client's livery (third party).

Formal contracts increasingly last for several years particularly where a large purchase of vehicles is involved. The volatile price of fuel is normally accounted for within a contract where at certain thresholds being passed higher or lower rates are automatically paid.

Haulage undertaken by a third party company is generally subject to a standard Conditions of Carriage. These set out the responsibilities and liabilities of the carrier and consignor. Model conditions are produced by both the FTA and the RHA. Copies of these are reproduced at Appendices 4 and 5 respectively.

4.2 Method of quotation

There are four main methods by which rates are quoted to clients:

Price per mile
Price per hour or day
Price per tonne
Price per volume or per package

Commonly quotations will include a standing charge to cover time related and fixed costs and a mileage charge to cover running costs. In certain circumstances a demurrage charge may be payable to cover delay at loading or unloading points. Heavy loads of relatively low value, such as aggregates, are often charged by the tonne/mile. Quotations for household removals are based mainly on man hours plus a charge for the vehicle. Part loads are charged either at the full load rate or at a greater than proportionate rate.

The rate initially proposed to a client is often revised since the client's bargaining power, given the usual level of competition, is considerable. On the other hand many clients prefer to deal with one or two hauliers that they know and trust rather than put each contract out to tender. A haulier giving satisfactory service which can include speed of response, delivery on time, minimal damages and good security record, as well as a willingness to co-operate can often rely on a contract being renewed provided his final offered quote is near the perceived going rate. Quotations for one-off or new work have to beat the competition. The haulage company which can more easily fit into its existing work pattern has an advantage because the additional cost of the job may not be as great as its competitors. Many firms, especially those new to the trade, are quick to offer cut rates if the market is slack to obtain long term stable business. However this can give rise to operators extending themselves beyond their financial base and also tempt some operators into illegal operations.

5. Vehicles

Goods vehicles range in payload from small vans up to 44 tonne gross weight articulated tractor and trailer combinations. Vehicles are categorised in two main types:

Rigids: Cab plus a body on a common chassis. Where the vehicle's plated weight permits, and the driver has a suitable driving licence, this can pull a full drawbar trailer.

Artics: A tractor towing a semi-trailer the weight of which is imposed partly on the tractor unit.

Manufacturers offer vehicles in weight ranges but the customer often specifies the engine, gearbox, wheel base, drive line, and bodywork to meet his own specific operations. There is a wide variety of different body types in use. Common terms are box van, curtainside, refrigerated (often called "reefer"), flatbed, tanker, tipper.

Smaller vehicles are normally only used for local delivery work or for carrying specialised high value loads. Larger vehicles are best suited for long distance work or for transporting bulk goods. It is economical to carry low value loads such as aggregate or spoil in the largest possible vehicles.

Hauliers tend to buy the largest vehicle suitable for their particular business. The greater flexibility and economies of scale gained from a larger vehicle usually outweigh higher standing and running costs.

The average working life of a lorry is 5 to 7 years, trailers a life in excess of 10 years. Vehicle replacement may be delayed when business activity is low and profits are similarly low. Acquiring a new vehicle by purchase, leasing or hire purchase may be beyond the resources of a small firm. Consequently these smaller firms are more likely to run second-hand vehicles and to change them more often than larger firms.

Until recently a vehicle would often be retained when repairs became relatively expensive so that it could be cannibalised for spare parts. Increasingly nowadays, the vehicle is sold to a specialist scrapping vehicles for their second-hand parts.

6. Cost and Profitability

6.1 Costs

6.1.1 General

A sound understanding of its cost structure is fundamental to any successful business. In the haulage industry the larger organisations have properly established accounting systems which will identify costs accurately. Smaller family concerns and owner drivers may have only a general idea of their costs and rely on local market intelligence to compile a quotation. Increasingly many firms both large and small are using computer systems to manager their operation and their accounting procedures. Although various trade papers publish cost tables in general they are not accurate and tend to inflate the going rate. For example the forecourt pump price for diesel is rarely paid by operators except those who have no base depot or arrangement with a fuel company. Negotiating discounts for parts and supplies is routine.

The FTA do however produce a Manager's Guide To Distribution Costs, the information contained therein is based on actual operating cost details supplied by a panel of vehicle operators. The costs are based on actual prices and may include any discounts received.

In working out costs an operator should have the following information for each vehicle:

Vehicle price
Useful life in years
Average depreciation in years
Average miles per annum
Average days work per annum
Average miles per gallon
Average tyre life in miles

Costs are split into three categories. These are:

Time related fixed per annum
- Wages
- Depreciation
- Licences and Vehicle Excise Duty
- Vehicle Insurance
- Goods in Transit Insurance
- Interest on capital
- Overheads per vehicle
Additional fixed costs
- Bonuses
- Excess hours
- Subsistence

These would probably be added to costings for rates as incurred by a job.

Mileage related costs

Fuel and lubricants
Tyres
Repairs and maintenance

6.1.2 Vehicles

According to the RHA, the cost of purchasing a new vehicle outright in 1994 before discount and VAT ranged from:

£22,000	for a 7.5 tonne truck
£35,000 to £38,000	for a 17 tonne truck
£58,000 to £62,000	for a 38 tonne tractor unit
£75,000	for a specialist tractor semi-trailer combination

More recently the FTA quote replacement costs as at July 1995:

£30,000	7.5t rigid
£40,000	17t rigid
£55,000 to £60,000	38t tractor unit
£100,000 +	for a specialist tractor semi-trailer combination

Many companies lease or hire their vehicles and many smaller companies usually buy second-hand. However maintenance costs for second-hand vehicles will be considerably higher than for new ones.

6.1.3 Wages

The RHA advise that in 1994 wages represented about 25% of operating costs, the FTA consider that driver's wages costs represent between 25% to 50% of operating costs. Hourly basic rates for drivers are negotiated between employers and Trade Unions but they are not biding. The recent trend is for these negotiations to be discontinued and formal Joint Industrial Councils only exist in 7 areas nowadays. Since each region has regard to what is agreed elsewhere, and the claim put in is generally the same nation-wide, most firms' basic rates are similar, with some regional variations in additional benefits. Currently (1994) the going rate for a 32 tonne vehicle driver on a 40 hour basic week is £4 per hour. Hourly basic rates are also negotiated by industry sector as well as on a regional basis.

In addition to hours related pay and shift pay, drivers may receive a pay supplement related to the weight of the vehicle driven or the type of consignment where this requires additional driver training hazardous goods, drivers may also be paid a midday meal allowance and, where the driver is unable to return to base or home an overnight subsistence payment.

Many operators also pay a productivity element to the driver's wage. This may be based on vehicle earnings, mileage, deliveries made or tonnage carried.

At the end of the negotiating period in 1994 driver's wages for a 40 hour week varied as shown in Appendix 6.

Meal allowance is about 90 pence. Threshold levels for tax free overnight subsistence rates are agreed annually by the Inland Revenue with the RHA and FTA. The 1995 rate is £20.50 where overnight accommodation is paid for. The allowance is intended to cover the expenses of an evening meal, accommodation and breakfast. Where a sleeper-ca is used the tax free subsistence rate is £15.38 (75% of the non-sleeper cab rate).

Rates for earlier years were as follows:

Year ended 31 Dec. 1988	£14.40
1989	£15.40
1990	£16.60
1991	£18.51
1992	£19.00
1993	£19.50
1994	£19.90

6.1.4 Maintenance

In early 1994 the cost of complete tyre replacement excluding VAT and estimated tyre life were roughly:

7.5 tonne truck : £850 and 40,000 miles
17 tonne truck : £1960 and 56,000 miles
38 tonne truck : £4100 and 55,000 miles

6.2 Profitability

Profit margins in the industry are low. A recent survey by the University of Westminster for Lloyd's Bowmaker indicated that the return on capital employed in the last 5 years averaged 11.8% but with wide sectorial variations. See Appendix 7.

As a generalisation, many hauliers are prepared to accept a low gross profit rate on their more formal contracts for their main clients and hope that a steady volume of long term work will be provided to keep their vehicles used enough to cover a good part of their fixed costs. The profit margin on "casual" and "one-off" work would then be relatively higher.

7. Regulations

There is a considerable body of legislation concerning the industry. The notes following are extracted from the Road Haulage Association's Haulage Manual and give a general overview of regulations. They are of necessity concise and only reference to the detail of the relevant legislation and to case law will give an accurate position.

7.1 Plating & Testing

"Plating" is the administrative procedure which confirms the fitness of a qualifying goods vehicle to operate in the UK. "Testing" is the term applied to examinations and tests carried out by the Department of Transport annually to assess the roadworthiness of a vehicle. There are two types of "plate".

A "Manufacturer's Plate" is a metal plate which manufacturers fit to most new motor vehicles and the "Ministry" plate is a paper certificate encased in transparent plastic which is issued by the Department of Transport when a type approved goods vehicle is first registered. This plate shows the maximum axle, gross weight and train weights at which the vehicle and any trailer are allowed to operate in the UK. The weights shown on the Ministry plate must never be exceeded. A plating certificate and annual goods vehicle test certificate are issued for each vehicle. Department of Transport examiners also carry out roadside spot checks and visit haulier's premises to enforce the regulations.

7.2 Vehicle Excise Duty (VED)

A goods vehicle with a gross weight of 3,500 kgs or less can be taxed at the same rate as a car in the private and light goods vehicle category. Vehicles above the threshold pay VED on a sliding scale dependent on their gross weight and axle combination. Rigid vehicles over 12,000 kgs towing a trailer over 7,000 kgs also have to make an additional trailer duty payment.

The Department of Transport publish a leaflet (V149) which is updated when changes in rates are announced (usually in the Budget). Details of rates can be obtained on application to the Business Information Unit.

7.3 Driving Licences

The Vocational Driver Licensing system has been amended in the UK to conform to European Union categories. The table below sets out the categories and vehicles covered.

Category	Vehicle

C (until July 1996)	Goods Vehicle, maximum weight exceeding 3.5 tonnes drawing a single axle trailer of up to a maximum authorised mass of 5 tonne. After 1 July 1996 additional "E" category will be required to draw any trailer over 750kg. (See C + E below). Vehicles covered by Category C need not draw a trailer. The maximum weight of a trailer with more than one axle that can be towed on such a licence is 750kg.
C1	Goods vehicle 3.5 tonnes - 7.5 tonnes maximum weight with trailer not exceeding 750kg maximum weight.
C + E	Category C vehicle with a trailer exceeding 750kg maximum weight.
C1 + E	Category C1 vehicle with a trailer, where the combination does not exceed 8.25 tonnes maximum authorised mass.

A comparative table of old categories is shown below:

UK HGV	EC LGV

1	C and C + E
2	C and C + E but limited to drawbar combinations.
3	As for 2 above.

7.4 Duration of Licences

Initial LGV licences are valid until a driver's 45 birthday unless the driver is over 40 when it is first granted, in which case it will last for 5 years. After the age of 45, LGV licences are valid for 5 years. If, however, the driver is over 61 on the first grant, it will be valid until age 66. From age 65 onwards licences are subject to annual renewal.

7.5 Driver Hours

The time that may be spent driving a goods vehicle and the rest periods that must be taken are fixed by law. Most goods vehicles used for the commercial carriage of goods, whether laden or unladen, will be subject to European Union rules as laid down in EC Directive 3820/85. There are exemptions to these rules but any goods vehicle excluded has to conform to UK Domestic Rules.

There is a specific requirement in the EC Directive that employers make periodic checks to ensure that the drivers hours' rules are observed. They must take appropriate action if breaches of the law are discovered. Employers must also organise drivers' work in such a way that the requirement of the regulations are not broken.

7.6 ED RULES

7.6.1 Daily Driving Limit

A driver must not drive for more than 9 hours in a day, but this may be extended to 10 hours twice a week. The daily driving limit means the period that is spent at the wheel between any two daily rest periods or between the daily rest period and weekly rest period. Driving off the public road counts as other work.

7.6.2 Continuous Driving Limits and Breaks

After 4.5 hours driving, whether continuous or accumulate, a driver must take a break of at least 45 minutes, unless he begins a daily or weekly rest period. This break may be replaced by breaks of at least 15 minutes each distributed over the driving period or immediately after this period. A driving period starts when a driver begins to "drive".

For break purposes waiting time and time not devoted to driving spent in a vehicle in motion, at ferry, or a train, shall not be regarded as "other work". During a break a driver must not drive or do other work. Breaks may not be regarded as daily rest periods.

7.6.3 Daily Rest

A drive must have a minimum daily rest of 11 consecutive hours. This may be reduced to 9 hours not more than 3 times a week, as long as the reduction is compensated by an equivalent rest before the end of the following week. Alternatively, 12 hours daily rest may be taken in two or three periods, one of which must be at least 8 hours, and all of which must be at least one hour. The daily rest period may be taken in a vehicle, as long as it is fitted with a bunk and is stationary.

In vehicles continuously manned by two drivers each driver shall have a rest period of not less than 8 consecutive hours during each period of 30 hours. In such a double manned vehicle, one driver may take a break (not a rest period) on the moving vehicle whilst the other is driving.

7.6.4 Weekly Driving Limit

There is no weekly driving limit as such, but a weekly rest period must be taken after no more than 6 Daily Driving Periods. The weekly rest period may be postponed until the end of the sixth day if the total driving time over the six days does not exceed the maximum corresponding to six daily periods.

7.6.5 Fortnightly Driving Limit

The total period of driving in any one fortnight shall not exceed 90 hours.

7.6.6 Minimum Weekly Rest

A driver must have minimum weekly rest of 45 consecutive hours, reducible to 36 hours at base or 24 hours elsewhere. Each reduction shall be compensated by an equivalent rest taken "en bloc" before the end of the third week following the week concerned.

A weekly rest period which begins in one week and continues into the following week may be attached to either of these weeks.

7.7 Tachograph

Drivers subject to the EC hours rules must use tachographs to record their hours of driving, other work and rest periods. Drivers of vehicles exempt from EC drivers hours rules are also exempt from using tachographs, but they are required to keep written records of their driving under UK Domestic Rules. There is a full list of exemptions to the rules and these can be obtained from the Department of Transport.

Record keeping requirements are summarised below:

Vehicle Category	Records

Goods Vehicles not exceeding 3.5 tonnes	No Records

Goods Vehicles over 3.5 tonnes (including any qualifying trailer) operating within EC Rules	Tachograph records

Goods Vehicles over 3.5 tonnes exempt from EC Rules	Written records

Goods Vehicles over exempt from EC and Domestic Rules	No records

A tachograph is basically a 24 hour clock combined with the vehicle's speedometer. It records:

The speed at which the vehicle is travelling.
The time spent driving it.
The distance covered.
The length of the driver's rest periods.
The length of other non-driving periods (e.g. "waiting time", loading).

The driver inserts and removes the disc at the beginning and end of each period of use, and indicates the various "modes" of use (driving/rest/other periods) by setting a "switch mode" on the tachograph.

He or she must also complete the centre of the disc in writing to show:

His or her name.
The milometer readings.
Places the driver started and finished driving.
Dates his or her use of the vehicle began and ended.
The vehicle registration number.
The distance covered in use.

Where two drivers are on a job together a vehicle must be fitted with a two man tachograph and both drivers must use it to produce records.

A tachograph disc is a driver's personal record of the use of the vehicle. They must hand it to the employer within 21 days of the date it was completed., The employer (or owner driver) must hold it for 12 months after complete for inspection, when required, by the Department of Transport examiners or the police.

7.8 Operators Licences

Hauliers using vehicles over 3.5 tonnes Gross Vehicle Weight (GVW) must hold an operator's licence ("O" Licence) for each Traffic Area in which the haulier has a base for operations. There are eight Traffic Areas, each administered by its own Licensing Authority, plus Northern Ireland where the Department of Transport is the Licensing Authority.

A licence is issued for a period up to five years currently but legislation going through Parliament in 1994 is likely to permit continuous licensing. However a Licensing Authority's view of an operator's suitability will still be reviewed periodically.

There are three types of "O" licence:

Restricted	This allows own account operations only, in the UK and abroad.
Standard (National)	This allows "own account" operations within the UK and abroad and also "haulier" operations in the UK.
Standard (International)	This allows "own account" and "haulier" operations in the UK and abroad.

A haulage concern may hold any type of licence it chooses, provided it is able to satisfy the Licensing Authority that it:

is a reputable concern, fit to hold a licence,
will properly maintain the vehicles the business uses,
has suitable arrangements to ensure that the vehicles are never overloaded,
will comply with the laws relating to drivers' hours and records,
has an environmentally suitable base for vehicle operations.

Additionally, for "Standard" licences, the concern must show that it:

has sufficient financial resources to back the business,
holds a suitable qualified part time or self-employed transport manager or a full-time competent person specified on an "O" licence to manage vehicle operations within the UK and abroad if applying for a Standard or Standard (International) licence.

An "O" licence will specify the maximum number of vehicles which may be used at any one time. The haulier must supply the Licensing Authority with details of the vehicle sin use, e.g. registration numbers, makes and types etc. The Licensing Authority issues a licence disc for each vehicle in use for display next to the road tax disc.

Various bodies (police, local authorities, certain bodies in industry, residents living near a proposed operating centre) may object to an application or extension to an existing licence. The Licensing Authority may revoke or curtail an "O" licence if the haulier fails to comply with the requirements. The most common infringements, which may lead to loss of a licence are unsatisfactory maintenance, poor driver's records and overloading.

Many operators continue to hold an "O" licence during periods when they are not active in the trade.

In Northern Ireland, "own account" operations do not require to be licensed. Licences are valid for a maximum of five years and specify Northern Ireland only or Northern Ireland and International operations.

8. Acknowledgements

Thanks are due in particular to the Road Haulage Association and the Freight Transport Association for their assistance in the preparation of this note.

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