Paying the price of Congestion

Viewed in isolation, the potential consequences of London Mayor Ken Livingstone's new scheme may not be so dire. However, when set against the context of forthcoming licensing costs, insurance premium increases and rises in National Insurance contributions, its impact could be very big indeed. The $64,000 question is: who's going to pay the ultimate price?

Congestion Charging in central London was heralded for some time. Following his election, Mayor Livingstone spent over 20 months consulting on (and amending the details of) the scheme in order to meet demands from businesses, residents and a plethora of related and interested groups. The decision to go ahead was made in February last year.

What is Congestion Charging?
At a meeting held in April 2002, the Mayor and his team from Transport for London delivered a slick presentation to assembled business delegates to try and explain what Congestion Charging is all about and how it will operate.

In essence, Congestion Charging is a way of ensuring that those using valuable and congested road space make a financial contribution. It encourages the use of other modes of transport, and is also intended to ensure that, for those who absolutely have to use the roads, journey times are far quicker and routes more reliable. The London scheme requires drivers to pay £5 per day if they wish to continue driving in central London during the hours of enforcement (from 7.00 am through to 6.30 pm).

It was – and still is – difficult to argue with Mayor Livingstone's rationale. London suffers from the worst traffic congestion in the UK, and is among the worst cities in Europe with respect to this problem. Drivers in central London spend 50% of their time in queues, while each weekday morning the equivalent of 25 busy motorway lanes of traffic tries to enter the central zone. It's estimated that London loses anything between £2 million and £4 million every week due to time spent in queues.

Not surprisingly, Londoners claim that congestion is one of the biggest issues facing the Capital. Surveys have shown that Londoners don't want to see congestion clogging up the roads, threatening the sustainability of all kinds of businesses and, in the longer term, damaging London's status as a thriving world city.

Research undertaken by Transport for London has shown that Congestion Charging will lead to reduced traffic levels equivalent to those currently enjoyed during designated school holidays. By law, all monies raised from Congestion Charging will be added to what's already being spent on London's transport facilities, such that it benefits everyone. And, as part of the Mayor's transport strategy, Congestion Charging will also be accompanied by a wide range of measures designed to make public transport easier, cheaper, faster and a touch more reliable.

A faster response?
So much for all the Government propaganda, but what does it all mean? To date, the measured success – or failure – of the scheme depends largely on who you talk to and what you read. Two articles published in the London Evening Standard three weeks after the Congestion Charge came into force revelled in the fact that journeys along seven of the 12 key routes into London are now slower than they were a year ago.

Another report suggested that, after the initial dip in traffic levels, volumes have now increased and so too have the delays.

Meantime, a Transport for London spokesperson has stated that it's too early for statistics to determine the extent of the scheme's initial success, adding that it will take at least six months for the true effects to be felt. We'll see.

The Congestion Charge has been positioned as though this is something that’s ultimately good for business. Maybe it is, but only up to a certain point. The security companies’ clients may see an advantage in terms of faster response times, but

Anecdotally, journey times for our officers travelling across the City to guarding assignments such as Canary Wharf, for example, have indeed improved. The London Chamber of Commerce has asked us for a report on specific routes, comparing journey times prior to the Congestion Charge being enforced, the current situation and a report of what's happening in three months' time. That will give us a real indication of whether or not matters have improved.

The Congestion Charge has been positioned as though this is something that's ultimately good for business. Maybe it is, but only up to a point. Clients may see an advantage in terms of faster response times, but to what extent? And are they prepared to pay for that?

Perversely, security officers may find it much more difficult to reach client sites if the bus, train and tube infrastructure is found wanting when asked to cope with increased passenger levels due to people being forced out of their cars. We've already seen television pictures of London Underground stations having to close due to sheer volumes of customers.

The business benefit
Let's face it. The business benefit argument doesn't cut much ice when stacked against cost (and the cost is significant). This year alone, Congestion Charging will impinge on First Security (Guards) to the tune of £45,000. The decision to be taken now is whether that is a cost that can be passed on to our clients, or a sum that we must absorb ourselves. The likelihood is the latter, but for how long can that scenario continue, and where will it end?

As stated, the current Congestion Charge is 'only' £5 per vehicle. What if this rises, or the zone is extended? Barring a miracle, Ken Livingstone will be re-appointed for a further term in office. If that happens, the charge will almost certainly increase. Instead of £5 we could be looking at £8-£10 within the next two or three years. How does a manned security business – or any service business, for that matter – bear the cost of, say, £90,000 straight off the all-important bottom line?

Who benefits, then? Those discussed thus far are merely the known costs. What about the hidden extras? The increase in administration has been considerable, ensuring that our patrol vehicles are properly paid for and that all the necessary paperwork is in order. There have been a number of issues raised that are attributed to teething problems, but again the onus has been on our shoulders to put those problems right and carry the can.

Don't think for a moment that this is a parochial issue. Other cities are watching the scheme with a keen interest, and are likely to introduce their own charges in due course. Then it wouldn't be a local issue that those watching from the wings can smile about and ignore. It could soon become a national issue, and then the bun fight will really begin.

Industry licensing will bite deep
The whole issue of Congestion Charging would not appear quite so antagonistic if it was the only extraordinary expense to face our sector in the months ahead. The fact remains that it isn't. Very soon, we're to be hit with another major cost. This time for licensing of officers under the Private Security Industry Act.

Let me make it quite clear that I believe licensing to be a good thing. It's always been a puzzle to me as to why it has taken us so long to move towards a regulated industry. Licensing will afford the private security industry much greater credibility, and is crucial to the success of security companies playing an increased role in support of the various law enforcement agencies.

When I spoke to Security Industry Authority (SIA) chair Molly Meacher at the opening of our new training facility (News, Security Management Today, February 2003, p7), it confirmed that she is committed to driving up standards within the manned guarding sector.

Exact figures have not been confirmed by the SIA as yet, but a sum of between £100 and £150 per individual officer is being discussed for the cost of a three-year licence. Taking the higher figure, and multiplying that by the number of officers currently

As a key part of that objective, licensing will almost certainly drive out the cowboys, but the cost of the whole process will also place many legitimate security businesses under ever-increasing pressure.

Exact figures have not been confirmed by the SIA as yet, but a sum of between £100 and £150 per individual officer is being discussed for the cost of a three-year licence. Taking the higher figure, and multiplying that by the number of officers currently on our books, gives a total figure of nearly £250,000. £250,000 that we are going to have to find from somewhere.

The costs don't stop there. Almost certainly, extra training will be needed for all of our officers. While a good thing, that means additional expense. Who's going to pay?

Add to this mix the further complication of the 48-hour working week – as defined by the current Working Time Directive – and the difficulties facing companies like ours become yet more obvious.

The rising cost of insurance
The third greatest challenge we're facing – and it's one that will not go away – is that of Public Liability Insurance ('Liability insurance crisis bites deep into security contractors', News Special, SMT, November 2002, pp17-18). Post-September 11, insurance costs have generally increased and premiums have risen, some by more than 100%. Clearly, this can only have a negative impact on profitability, may well impinge on investment and even affect service delivery in the longer term.

The difficulty is that there are no doubt some customers who cannot see the advantages of Public Liability Insurance. For those that do, they may not be willing to see such insurance reflected in increased fees. They will expect security companies to absorb the additional costs themselves.

The knock-on effect is that some guarding companies may look to cut corners on their insurance, which can only serve to store up problems for the future for both customers and suppliers in the event of a claim.

Like many industries operating in the service sector, the manned guarding industry is constantly under pressure to reduce costs while at the same time improving its service delivery to the end user. The better companies have budgets for these increased costs wherever possible, and succeed in finding efficiencies where efficiencies can be realised, but there's only so far that one can realistically go along that particular road.

By selling ourselves cheap, there's a very real danger that we'll do everyone involved – including our own stakeholders, clients and the industry at large – a massive disservice.

How, then, should security companies remain competitive in the face of such mounting costs? The truth of the matter is that end users are going to have to shoulder their share of the responsibility. There is no way that the industry can keep on absorbing such costs.