The decrease reflects the challenges facing the transport and distribution industry as a direct result of the slow down in high street spending.

As the tough conditions bite, hire specialists are bearing more than their fair share of the pain and it's a situation that, quite frankly, is becoming untenable, says Andy Mitchell, managing director of Hill Hire plc, part of HBOS.

"Although it's tough for the haulage and distribution industry, operators continue to become more and more demanding. The simple fact is, of course, that rental companies can't carry on doing more for less. Rental prices are decreasing, inflation is running at around 3%, yet we are seeing no corresponding reduction in costs."

"On the contrary, for a national player like Hill Hire, we still need to invest in our fleet, our people and our workshops. Indeed, we've invested £70 million this year in new fleet and will invest a similar amount in 2007."

"Our operational costs remain the same at all of our 17 branches whatever the price we charge for our service and it's not difficult to see that running a business like ours involves high fixed costs. That's why we took the decision to introduce a price increase for our short term rental products from September. We felt that the time had come for the rental industry, as a whole, to be honest and just not reduce prices any further."

"Is there an alternative? I don't think so. The long term consequence of further rate reductions is more casualties in our sector. We are already seeing some of our competitors almost disappear off the map and, unless we all show some backbone, more rental companies will simply go out of business."

"Falling rates might seem attractive to operators in the short term, but ultimately it will mean fewer providers, with less supply, less choice and higher short term hire prices. The answer, as always in business, is for long term common sense to prevail over short term gain. That way everyone has a sustainable position,' stressed Andy Mitchell.

Hill Hire is however extending the national apprentice scheme it launched last year. Such has been the success of the scheme that the Bradford based business is planning to take a further two intakes of students onto the training programme.

Although major truck manufacturers run apprentice schemes, Hill Hire reckon they are the only rental company to have developed such a programme which represents a £200,000 investment.

Minimising Fleet Risk

Alongside periods spent in one of Hill Hire's 11 workshops, apprentices undertake external block release periods at college and with major truck and trailer manufacturers to ensure they gain first hand knowledge of the equipment on the 23,000 strong Hill Hire fleet.

Road Haulage operators who are looking to expand their fleet, but are nervous about making the investment are turning to truck manufacturers for financial advice to alleviate fleet management risks, says Mercedes-Benz CharterWay.

Steve Durrant managing director of the international commercial vehicle, financial services, contact hire and fleet management arm of DaimlerChrysler reckons that companies are increasingly discovering the advantages to be had from working with their fleet's manufacturer to ensure the most relevant package is sourced.

"Nowadays, it is just as important for operators to ensure they have researched and chosen the right finance option for their particular needs as finding the best vehicle for the job when they are looking to build or update their fleet,' he said.

"When considering options, you should take into account the nature of your business, how often your vehicles will need servicing, what kind of funds you have available upfront and the degree to which you expect your fleet will need to expand."

"You may also want to consider whether you want the hassle of eventually disposing the vehicle and how you will be able to respond to unforeseen breakdowns or accidents without being put significantly out of pocket.'

CharterWay's range of finance options includes hire purchase or hire purchase with a balloon payment which allow a nominal deposit to be paid while the remaining cost, plus interest, is repaid through regular monthly payments with fixed or variable interest rates.

The hire purchase with a balloon payment option allows for a large payment at the end of the agreement, thereby reducing monthly repayments.

Another method of financing acquisition is with CharterWay's contract purchase, which also features low monthly repayments by agreeing on a guaranteed future value lump sum payment at the end of the term.

But for some companies, leasing their commercial vehicles is a more economical and realistic option, so CharterWay offers a finance lease or operating lease. With the former, the vehicle is hired for a fixed period with a percentage of sale proceeds returned at the end of the contract. On an operating lease, monthly rentals are based on the difference between the price of the vehicle at the start of the agreement and its projected residual value, plus finance charges. This avoids any large initial outlay and reduces the average monthly rental.

"For convenience many customers choose contract hire packages, which combine a leasing arrangement with repair and maintenance and support all included in one fixed monthly payment,' Steve Durrant reveals. 'This means you know in advance precisely what your costs will be on a month-by-month basis. There are no hidden surprises or cash flow disrupting peaks and troughs.'