Error parsing XSLT file: \xslt\FacebookOpenGraph.xslt Richard Schooling's blog: 16 August 2012 - Productivity trumps perk
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Richard Schooling's blog: 16 August 2012 - Productivity trumps perk

Date: 16 August 2012

Richard Schooling is chief executive of Alphabet

A few blogs ago, I mentioned the remarkable persistence of the number three million in relation to the number of company car drivers in the UK.

It's a peculiar number, since as far as anyone can tell there never were that many company car drivers - not even close to it. Even so, it still regularly crops up in print, even in the fleet press.

Anyway, HMRC has at last got round to updating its official statistics for the number of employees who pay BIK on a benefit car.

They show that, in the fiscal year 2009-10, the UK was home to 970,000 company car drivers.

That is close to a million fewer than at the perk's peak in the early 1990s. And HMRC estimates that the next update will show that a further 20,000 drivers dropped from the roster in 2010-11.

I don't suppose that many industry insiders went along with the three million figure, but it is sobering all the same to face up to the fact that we've been losing nearly 40,000 drivers a year since the middle of the last decade (and the decline before that was steeper still).

At this rate, we'll simply run out of customers over the next 25 years - although the company car industry (on the current model) would cease to exist somewhat sooner if the trend continued.

I don't expect that to happen, though. Britain's employers need to operate vehicles to stay in business. And offering the right car is still often the key to attracting the right person for a vital role.

The big question is what's driving the downward trend. It isn't simply a recessionary blip. Nor are company cars being taxed out of existence, as is sometimes alleged.

The Government's annual tax take from company car drivers fell by £220 million between 2005 and 2010. Meanwhile, drivers have been doing rather nicely from CO2-related tax.

Allowing for inflation, the average company car pilot's annual BIK has fallen by nearly £200 a year in real terms over the last seven years.

Sadly, the curtain will come down on this relatively benign scenario in 2015, when the car BIK regime will tighten noticeably on fleets and drivers whose car choices don't keep pace with falling CO2 emissions offered by the manufacturers.

However, the headwinds buffeting the traditional fleet model come from several directions. Energy costs are rising inexorably, with liquid fuels leading the way.

Many face-to-face business interactions are now done in the virtual arena: not only through teleconferencing but thanks to the ability to work collaboratively on complex projects in real time over the web.

These changes, and the squeeze on budgets has changed watchword for company cars from 'perk' to 'productivity'.

And good progress is being made. Since the UK economy is considerably larger than it was 20 years ago, we can safely assume that just under a million company car drivers are as effective today as nearly two million were in 1992.

But this process has a lot further to run. And it's not just a question of squeezing perk drivers out into the grey fleet while leaving job-need cars on the payroll.

Grey fleet doesn't have the pulling power to attract and keep people with the kind of dynamic skills that businesses will need to survive in a prolonged period with little or no economic growth, which is what all the signs point to.

Switched-on businesses (and drivers) are asking themselves, "How can we get more bangs out of every buck spent on cars and travel?"

One way to do that is to get even more out of each car. When you think about it, the word 'phone' scarcely does justice to the capabilities of a Samsung Galaxy S3 or an iPhone, but the average company car still only does more or less what it did 30 years ago.

That is now changing, thanks in particular to the advent of a Smart system that allows businesses to operate attractive cars as multi-user assets, which employees simply book out as and when they need to travel.

This solution won't suit drivers who need to be behind the wheel all day every day but for everyone else it is far more efficient than conventional alternatives.

Fans of the existing fleet model will doubtless point to its enduring strength: reasoning that 970,000 company car drivers can't be wrong. But eight years ago there were 1.2 million of them and in a couple of years there may be fewer than 900,000. The trend is remorseless.

Major shifts to a new way of doing business rarely happen overnight. But change is gathering momentum and both sides of the fleet business should be alive to its implications.

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