Asda, Tesco and Sainsbury’s are asking some suppliers for extra payments to cover costs after being forced to hike wages for delivery drivers because of widespread shortages.
In a letter seen by the Guardian, Asda wrote to suppliers that use its collection service asking for a 5% rise in payments for transport costs and blaming the national HGV driver shortage.
The UK’s third largest supermarket, which was recently taken over by the billionaire owners of petrol station business EG Group and private equity firm TDR Capital, said it needed help to deal with a 12% rise in driver costs in some areas.
Asda said: “Whilst passing on any costs to suppliers is a last resort, the challenges in the logistics industry remain unresolved and as a result we are looking to work closely with our supply partners to change the rates we provide for this service.”
Asda’s request to suppliers followed Tesco’s demand for a near 18% rise in delivery costs for suppliers late last month, just over 10 percentage points of which it said was solely down to increased wages for drivers. Sainsbury’s asked some suppliers for a 2.9% increase in delivery costs from 3 October without explaining its reasons.
In a detailed letter first reported by the Grocer trade journal, Asda blamed the shortage of delivery drivers on a mix of Brexit, which has affected the rights of European drivers to work in the UK, and the Covid-19 pandemic, which has restricted cross-border travel and sent many drivers home for extended periods of lockdown, as well as tax changes and a shortage of testing facilities.
“While we continue to take on extra cost and deal with all these issues that we encounter, we need to recover some of this additional cost,” the company wrote to suppliers.
Logistics UK, which represents freight owners including supermarkets, estimated there is a shortage of 90,000 HGV drivers including about 25,000 from the EU who have gone home following Brexit. On top of that there is a backlog of 25,000 applications for lorry driving licences.
Ged Futter, founder of The Retail Mind consultancy, said the demands from supermarkets were likely to lead to increased costs for shoppers later in the year.
“This opens the door for inflation, they can’t deny it is happening,” he said. He said prices for shoppers could rise by between 5% and 10% by the end of the year.
Futter’s comments echoed those of Ian Wright, the chief executive of the Food and Drink Federation, which represents firms across the food supply chain. He said earlier this month that the “war for workers” caused by a mix of Brexit and Covid would result in food price rises in “mid single digits” by the autumn.
The government is fast-tracking HGV licensing processes to get more new drivers on the road. It has also extended legal working hours and allowed companies to deliver later at night or earlier in the morning. But road hauliers groups said those measures have not fully resolved the driver issue, which is being worsened by a rising number of Covid-19 cases and associated notifications by the NHS test and trace app for workers to isolate.
Absence rates in the logistics network are estimated to be about 8%, a significant proportion of which are down to workers self-isolating, but retailers and hauliers said the problems caused by the shortage of drivers were far worse.
James Bielby at the Federation of Wholesale Distributors said that salary costs had risen by at least 10% and up to 20% in some areas as businesses tried to attract new drivers.