Government inaction will lead to a wave of bankruptcies in the road transport sector

3 MinutesBy NZ Trucking magazineNovember 16, 2020

  • Government financial packages are failing road transport: the sector will collapse without targeted action

  • Road transport losses – goods and passenger – are now set to exceed US$1 trillion globally in 2020 

  • The very high default and insolvency risk identified in the sector will lead to mass bankruptcies

  • IRU members have adopted a global call to action for governments to urgently support the road transport industry

 New IRU research reveals the continuing catastrophic impact of Covid-19 on the commercial road transport industry, with a very high default and insolvency risk across the sector worldwide. 

Insolvency indicators assessed include fixed asset turnover, forecast cash flow and real revenue turning point. Ranked on a risk scale from one to 10, all regions of the world are standing at the highest levels, nine or 10. This points to a looming wave of bankruptcies in road transport, which will have a devastating effect on the global economy and its ability to recover from the pandemic.

Level of road transport business default risk

“The vast majority of the more than 3.5 million road transport companies that we represent are small and medium sized firms, and they are the glue that holds global supply chains and mobility networks together,” said IRU secretary general Umberto de Pretto. “Most of them are struggling to pay their bills. This is a huge threat to the global economy.”

The research also shows that global losses have escalated to US$679 billion for goods transport, and at least US$500 billion for passenger transport. The update is particularly disastrous for Europe, where forecast losses for goods transport operators have soared by two thirds since the summer to US$125 billion, and stand at US$94 billion for passenger transport companies. If no immediate action is taken, these losses are expected to spiral further during the second wave of the pandemic.

Government financial support measures

Meeting virtually on 12 November, IRU‘s general assembly backed an urgent call for action to governments worldwide. Help is particularly crucial in three areas: cash grants to address liquidity, insurance premium flexibility, and waiving taxes and charges.

“Without immediate government action, a shocking number of road transport operators will go bankrupt in the coming months, causing irrevocable damage to supply chains and mobility networks, and therefore devastating the global economy,” warned de Pretto.