The London private-hire car industry, comprising 2,400 predominantly family-run businesses, is under mounting financial pressure that could lead to multiple collapses as a result of the change in the Transport for London (TfL) licensing regime.
Read Upside - Autumn 2018
In September 2017, TfL approved increases that will see five-year licensing fees for some private-hire car operators in London leap from being less than £3,000 to £700,000 in some instances.1
At a judicial review, the Licensed Private Hire Car Association (LPHCA) was seeking an injunction to halt the fee increases and force TfL back to the negotiating table. As part of the case, it has presented evidence based on TfL’s own figures that some 40 operators have already collapsed. The LPHCA lost the case in May 2018, and so the new licensing regime is now expected to be implemented.
For many family-run businesses, the new regime could add considerable stress to cash flow as the cost of licensing rises. Whilst many operate on a cash-in-hand basis, a considerable number will have corporate accounts that are settled at the end of the financial month, with invoice finance facilities utilized to support firms’ cash flow requirements prior to accounts being settled. Many invoice finance providers supporting these businesses may now be questioning the financial viability of their clients in this sector.
The charges, which last rose in 2013, are based on the number of cars run by any one specific firm. For example, those operating between 101 and 500 cars will see their license fees leap from £2,826 to £150,000; the amount rises to £700,000 for operators with 1,001 to 10,000 cars.
Invoice finance is a key way that many businesses in this sector fund their working capital requirements. But, what happens when markets change—such as the imposition of a new licensing regime, one that will hit the sector in unforeseen ways? There is no doubt that this will impact the cash flow and underlying viability of many private-hire car operators.