Taxi costs on the rise – will fare rises keep operators in business?

With the private taxi sector hit hard by the pandemic, operators are beginning to lobby local authorities for above-inflation increases in maximum fares to meet rising costs.

With some councils having frozen fares for several years, the industry is also dealing with the dual shock of increased operating expenses alongside a lack of drivers in areas where the demand for a cab is recovering quickly. That all comes on top of an extended period in which taxi businesses were decimated by lockdowns and bans on travel.

Rising costs in the taxi industry

Taxi operators are reporting rising costs in every aspect of the running of their business. Increasing prices for replacement parts and insurance premiums are two of the biggest areas in which firms are finding their margins squeezed.

There are many costs associated with running a taxi for an individual, many of which people can overlook, including:

  • Licence application(s)
  • Driving skills assessment
  • Knowledge test
  • Enhanced DBS certificate
  • Medical examination certificate

Then there are the costs of purchasing and running the vehicle itself. Taxi insurance premiums are more expensive than those for regular drivers because of the extended time that cabbies spend behind the wheel. Despite being some of the most experienced drivers on the roads, taxis are at a greater risk of being in an accident.

Taxi firms struggling to meet demand

As the economy continues to open up and people resume their lives to get out and about, taxi companies in some parts of the country are also reporting an inability to meet rising demand. A shortage of new drivers and staff leaving the industry, exacerbated by the Covid-19 crisis, means many firms have been left short-staffed.

Operators are also reporting that many taxi drivers have still to return to their jobs, waiting until they have been fully vaccinated or when social distancing restrictions are finally relaxed. Traditionally there have been large numbers of taxi drivers who are older in age. This cohort appears to have been more reluctant to return to their driving jobs until they deem it totally safe to do so.

Even young people who might seek to make ends meet, for example by taking a taxi job to fund a place in education, have found their entry into the industry blocked. Practical and theory tests have been significantly delayed during the pandemic and availability remains limited.

How local authorities set maximum taxi fares

There is considerable scope for local authorities to influence prices for hailing a cab. Those local councils who have responsibility for issuing taxi licenses also have a statutory power to set the maximum fares that hackney carriages can charge for a journey. There are also upper limits set for other prices such as when a taxi firm charges a client for the cost of additional cleaning.

Taxi companies can set lower fares or offer discounts if they choose but they cannot charge more than the maximum fare set by the local authority in which they operate. The maximum charges do not apply to private hire vehicles. Many private hire operators operate a meter system and use the same fare rates as hackney carriages.

Pressure on local authorities to increase rates

In the face of increased costs, falling margins, and recruitment issues, taxi companies have been calling on local authorities in their area to hike maximum fares to reflect the pressure on their businesses. Many of these local authorities have not raised the fares for a number of years.

For example, in Essex, Uttlesford District Council had not reviewed their rates for a decade. The local authority agreed to raise the maximum fare from £5.40 for a two-mile journey to £8.24. In Gloucester, the local council has consulted on a rise of around 6.5% across its maximum fares. Meanwhile, in Bolton, taxi drivers went on strike over the absence of any rise in four years.

How taxi owners can lower costs

With fares across the country rising at an ad hoc rate, dependent on local authority decision making, it makes sense for taxi operators to take a fresh look at their expenses in a bid to cut costs.

The core assets of any taxi company are simple – its people and its vehicles. It makes sense to invest in both. We all know that a newer car will be more fuel-efficient than an older model for example. Regular servicing will also ensure the vehicle is operating at its optimal performance and can help reduce maintenance bills.

If you’re a self-employed taxi driver then you should also ensure you are claiming business expenses. The expenses that a taxi driver can claim include:

  • Fuel costs
  • Repairs, MOT and servicing costs
  • Road tax costs
  • Maintenance, washing and cleaning costs
  • Registration and licence fees
  • Taxi insurance

How to save money on taxi insurance

Insurance costs can be significant for taxi operators. A taxi operator needs insurance for each vehicle in the fleet. Operator insurance policies cover taxis being used for private hire or as a hackney carriage. Alternatively, self-employed drivers will take out their own taxi insurance.

For those with multiple cars in their company, a taxi fleet insurance policy often makes sense. This covers all cars run by the business. You need to make sure the policy covers the type of work you’re doing. For example, if you run minicabs that can only be booked, you will need private hire fleet insurance. If your business includes hailable hackney carriages taxis then you will need to ensure they are included in the policy.

You can save money on your taxi insurance by ensuring you have the correct level of cover for your needs. A clean driving record and older drivers can all save money too. The most important thing is to shop around and compare taxi insurance. If you’re looking to take out a new policy or if renewal time is rolling around, for a free quote and find out how we could help you save money.