The history of RECESSIONS in the taxi industry and why the next one might not be like others
If you’re working in the taxi industry there’s no hiding from feeling the pinch when it comes to fuel prices and general cost of living expenses.
Many licensing authorities have raised the tariffs in their region to help cabbies continue to carry out their work. The increases were also assisting in the attempt to attract more drivers into the industry following the shortage caused by the pandemic.
However, whilst fuel pump prices have now stabilised, all eyes have been on the ongoing energy crisis which may force a UK recession according to some experts.
Gas and electric prices have shot through the roof, but thankfully there will be some support through Government intervention who are set to cap bills for the next six months.
Since Spring this year, households have seen energy prices jump 54 percent. The Bank of England were anticipating further increases up to 40 percent this Autumn, taking the average domestic energy bill through the £2,800 a year barrier. However, earlier this month the Government announced energy bills would be capped at £2,500 from 1 October 2022 for the next two winters for a typical household.
What has happened to the taxi industry during a recession in the past?
If a recession does materialise, spending by individuals and businesses will slow down. Especially on non-fixed costs like entertainment and leisure.
For decades economists have used the taxi industry as a barometer to the national and regional economic state. A busy and vibrant taxi industry indicates a strong economy where people are spending.
Historically the taxi trade has been hit hard by recessions. In 2008, the industry experienced the ‘Great Recession’ lasting FIVE QUARTERS and the deepest felt in the UK since the Second World War. The turning point for many taxi drivers was when global financial institute Lehman Brothers Holding went bankrupt after many thinking they were ‘too big to fail’. Businesses and individuals restricted spending as the global market reacted to the subprime mortgage crisis unfolding.
The last recession in 2020, was a completely different experience to many before given the nature of its cause: the coronavirus pandemic. This recession lasted just two quarters, during the first lockdown period when many cabbies were simply not working.
Firms across the UK will try and save cash during a recession, which inevitably has a knock-on impact on jobs and the economy. In 2008 the recession pushed unemployment levels to 10 percent at its highest.
Will this recession be different for the taxi industry?
Quite possibly. Before the pandemic the explosion of new private hire drivers servicing new app based hailing platforms saturated the market leaving supply higher than the demand. Post-pandemic the landscape has changed dramatically whereby demand for taxis now significantly outweighs the current supply. That is a good thing heading into any recession!
It is also worth noting that not all financial experts are predicting an ‘official’ recession. The Office for Budget Responsibility (OBR) has forecasted predicted UK growth at 3.8 percent for this year. It’s a similar prediction from the International Monetary Fund, who predicts annual growth at 3.7 percent.
A weak pound has seen tourists arriving into the UK freely spending and employment remains high.
However, it is the level of inflation, currently sitting at 10.1 percent and likely to continue for some time, that will inevitably ply pressure on businesses and households to enforce cutbacks.
Rising interest rates will affect mortgages and businesses and high prices for goods that we buy abroad will continue to play a big part.
What might not be an ‘official’ recession... will certainly feel like one for many.
