UK bus users face “significant” price rises in 2023 since operators expect to lock in fuel purchases for next year at high rates, a senior executive at one of the largest companies has warned, a move that would add to the cost of living squeeze for millions who rely on the transport.
Diesel and petrol have risen close to £2 per litre since March following Russia’s invasion of Ukraine, pushing the cost of filling an average car tank to more than £100.
Early signs are that bus use has increased since March, as some commuters switch away from car travel.
Large bus companies have so far avoided passing on higher fuel prices because they buy diesel in advance.
However, Go Ahead’s Phil Southall, a senior bus director, said that it, and other operators, typically buy fuel in bulk in advance to shelter themselves from price fluctuations.
So far, only half of the company’s fuel for 2023 had been secured, meaning that it may be forced to increase fares if it locks in higher rates in the months ahead.
“If things don’t stabilise there is a cliff edge where we may have to increase fares significantly,” he told the Financial Times.
Go Ahead, which operates 6,000 buses in the UK, usually secures half of its supply a year in advance, a quarter three years out and the final quarter four years early.
The strategy means that it will be locking in prices for 2023 fuel later this year.
“That’s when it will hit us, when you come to negotiate the price, then the only option is to pass that on to customers,” he said.
“It will be at least a 10 per cent increase in fares, because you have no other option.”
Around two-thirds of a bus operator’s costs are drivers, while fuel typically accounts for 15 per cent of operating expenditure, making it hard for businesses to absorb high increases.
“Any significant increase in that would have to be passed on to customers,” said Southall.
“If you are hedged at a lower price, then you are not getting the hit this year, but when it comes to hedging fuel for next year, you might pay twice the price,” he added. “All we can say at this point is it is a risk on the horizon.”
Estimates from the Transport Focus watchdog indicate that more than 1mn additional passengers have started using buses since the beginning of March, while Go Ahead said it had also seen a sharper increase in travel in the past three months.
Rising transport costs are already filtering through into higher food and goods prices, as haulage companies pass on costs of refuelling. The cost of running a single long-distance lorry has increased by £20,000 a year, haulage group Freight Link Europe warned last week.
Source: Economy - ft.com
