Why EU action on subcontracting payments matters for UK Hauliers

The road transport sector is not unique in being particularly vulnerable to multiple subcontracting chains. But given the numbers of SMEs and family-run operators making up much of the industry, this longstanding issue is adding delayed payments, financial strain and legal uncertainty to operators already suffering low margins.

Therefore, it’s welcome news that subcontracting chains and the role of intermediaries in commercial road transport has recently gained political attention at EU Commission level. Discussions focus on market fairness, contractual transparency, improved working conditions and the functioning of complex subcontracting structures.

Polish operators had raised concerns about the growing number of intermediaries inserting themselves between shippers and carriers who didn’t provide any transport service themselves but took large margins from work allocated to carriers. This is an issue that will be all too familiar to UK operators.

The Commission then invited member states to provide additional information to give national context to the issue, leading to calls for a European strategy focusing on intermediaries operating without responsibility and on complex subcontracting structures.

The IRU reports that this evolving political context highlights road transport subcontracting chains as an increasingly prominent policy issue and emphasises the need to develop a clear and evidence-based IRU position so that it can contribute constructively to the Commission in the coming months.

Mirroring the situation in the UK, subcontracting is a structural feature of the EU commercial road transport sector, with over one million operators and overwhelmingly composed of SMEs.

More than 80% of these SMEs operate within subcontracting arrangements, many business models are transparent and work perfectly well for carriers and shippers, the area of concern is abusive sub-contracting and non-payment often by “phoenix” type scamming operations.

Several member states have already introduced joint liability models, whereby a haulier can claim payment from upstream parties when the intermediaries default, this system appears to be working by strengthening accountability and protecting service providers without prohibiting subcontracting itself.

Late payments are invariably interlinked with poor subcontracting practices and despite an existing EU late payment directive they remain a widespread problem. The EU estimates late payments tie up over EUR 100 billion in liquidity, which could otherwise support SME growth and investment, resulting in record levels of insolvency.
We will monitor developments closely with the IRU and update accordingly.