Espace Europe

14.04.08 Increasing fuel prices & weak £ mean hard times ahead.

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The ever-increasing cost of diesel and the ever-decreasing value of the £ against the euro has now started to have a real effect on not only our margin but on our ability to cover work at given rates.

When diesel was at £1 a litre, the roads were blocked and oil refineries targeted. Now diesel is averaging £1.15- £1.20 a litre and nothing seems to be happening. Diesel accounts for about 25% of the running cost of our agents / hauliers vehicles. We are currently paying fuel surcharges between 5.5%-15%. We re-adjusted a few customer’s rates in January by a small amount to help us with the barrage of fuel surcharges we were receiving on a daily basis. Diesel has gone up in price quite considerably since then and shows no sign of slowing down.

The other major factor affecting our day to day operations is the very low value of the Pound against the Euro. This week the £ reached an all time low at 1.24 euros = £1. A shipment which we paid £1000 to cover back in April 2007 was worth 1471 euros to our supplier. That same shipment is now worth 1240 euros to our agent / haulier, a 15.7 % drop. Our European agents and hauliers are now adjusting their rates in £ to reflect the 15% fall in the £. As the £ is so unstable, many are now requiring payment in euros which has the same knock on effect once we convert the euro rate back into £.

2007	GBP/Euro
January	1.50687
February	1.49704
March	1.47021
April	1.47111
May	1.46815
June	1.48036
July	1.48281
August	1.47588
September	1.45127
October	1.43675
November	1.41079
December	1.38419

2008
April	1.24

Many hauliers and forwarders are now adding a CAF (Currency Adjustment Factor) charge to each invoice. With an all time low £/euro rate this month and no foreseen re-evaluation of the £, we will have to now start to speak to many of our customers about this situation and try to come to a mutual compromise on rates charged.

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