Sleepwalking towards the career scrapheap?

With instructor training more lucrative than ever, more PDIs entering the industry, and the prospect of economic gloom ahead, how safe is the lone ADI’s business? According to Chris Fanshawe, the driving instruction industry defies every logical business model and instructors may be about to pay the price

If a friend asked you if they should become a driving instructor, what would you say? There are plenty of instructors out there making a good living. You may even be busy enough to consider putting another car on and expanding your business, or even have a nice sideline in training new instructors. The temptation may be to say yes, for a multitude of logical reasons. Over the last decade the number of tests has increased year on year, by nearly a third to date. This has driven a boom in instructors which means the industry has expanded by a similar amount.
So on the face of it, business is good. But is this a true reflection of the facts? Talk to a few full-time ADIs and a different picture begins to emerge – one that requires careful consideration of some complex statistics.

To expand by more than a third, you have to consider where all these additional tests are coming from. There are certainly not that many 17-year-olds; the number has been relatively stable for the last decade. In the quest to identify these reasons, some possibilities have been discounted, for example changes in the population demographic such as urban sprawl or rural migration.

Immigration

The effects of immigration are difficult to quantify because there is insufficient information available to make an accurate judgement. The DVLA has no record of the number of new immigrants applying for provisional licences, and says it has no way of finding out. There is no question that the number of new immigrants is high and is continuing to rise, but because of the political climate, it is likely that this will ease in the next few years.

Although nearly 600,000 immigrants arrived in the UK in 2006, when you take emigration into account, net immigration is only 50,000 higher than in 1998. In addition, many of the incoming migrants are from EU countries and will not need to pass a UK test. Between 2004 and 2006 there were 427,000 from the eight former eastern block countries that joined the EU in 2004 alone. Immigrants coming from 15 other designated countries – including Australia, Canada, Japan, South Africa, Switzerland and South Korea – need only to swap their old licences for new UK licences.

Of the remaining immigrants, only a certain percentage will want to pass a UK test. Most working in the low pay sector will not have the funds for instruction. Those from the professional sectors will be more likely to be an existing driver already, only needing training to bring them to UK test standards. These existing drivers can drive on their original licences for 12 months and are exempt from L plates, supervised driving and other restrictions during this period. Obviously this offers only limited opportunities for instructors. Although overall immigration is definitely an influencing factor, it is unlikely to be significant in the high number of tests.

Car ownership

Of the factors that clearly would influence the high number tests, there is one that stands above the others. That is car ownership. The link is obvious: if you want to drive then you pass the test and buy a car. We have seen the number of cars on British roads increase dramatically from 21,000,000 in 1996 to 28,000,000 in 2006, which equates to a 33 per cent increase. The parallels are obvious, so what has been driving this increase in car ownership?

We have enjoyed a decade of unprecedented economic stability and growth, which has encouraged expenditure on cars, but there is more to it than that. Back in 1999, the Competition Commission ruled that UK drivers were paying over the odds for their cars. This resulted in a 10 per cent fall in prices over 2000 and 2001. Ever since, car prices have increased at far below the rate of inflation. Small cars are now cheaper in pound note terms than they were 10 years ago, in real terms 25 per cent cheaper, with used cars becoming cheaper as well. This has led to a lot of people who have not previously driven, buying a small car. A high percentage of these will be 17-year-olds, tempted by cheap cars and family support; others will be people who hadn’t got round to learning until tempted by the economic situation. According to the Retail Motor Industry Federation, a large proportion of these additional new cars have gone to women, as second cars. This has been reflected in the fact that now 63 per cent of women hold a full licence, compared to 29 per cent in the mid 70’s.

This situation was driven by easily available credit, low interest rates and the strength of the housing market. There was an economic confidence that is now starting to falter. Inflationary pressures are pushing interest rates up and the financial markets are offering a gloomier forecast. Added to this, there are various other pressures such as traffic congestion, spiralling fuel costs and climate change. We saw a fall of 4.3 per cent on new car registrations in 2006, which is a serious drop and won’t recover in the immediate future.

There are plenty of warning signs out there. Both the Society of Motor Manufacturers and Traders (SMMT) and the Retail Motor Industry Federation say that the peak in car sales has passed. The SMMT has predicted figures that show a slight decline in new cars sales for the next couple of years and the longer term shows no improvement. Motor industry insiders confirm that the major manufacturers are still trying to bolster the new car market with pre-registered cars, even though the practice has officially been stopped.

Population

In 2001/02 there were approximately 780,000 17-year-olds in the UK. With 528,313 driving test passes, this was equivalent to 68 per cent of them passing the test that year. This figure is unsurprising, all be it a little low, because about 72 per cent of adults hold a licence. It is not unreasonable to suppose that the two are linked. In 2006/7 there were 796,200 17-year-olds in the UK compared to 789,352 test passes. That is equivalent to 101 per cent of the 17-year-old population passing the test, and the same percentage as 2005/6. For many reasons some young people will never learn to drive. The fact that we are training numbers in excess of 100 per cent of the 17-year-old population shows that we are drawing heavily from the rest of the population for pupils.

The birth rate has declined in recent years and we are going to see a fall in the number of 17-year-olds. Although in the last decade there has been a marginal fall, over the next ten years they will fall by around 15 per cent to around 664,000. This will inevitably directly affect the number of pupils that we have to train.

Legislation

The only other factor that can be distorting the number of tests is legislation. This year we have had a great deal of publicity about changes to the test. The DfT and the Transport Select Committee have been taking a long and much publicised look at the test and the rules for new drivers. There is the strong possibility that the age you can take the test will change to 18, linked to a one-year learning period, irrespective of age. This is being considered together with a number of other measures such as mandatory professional instruction, a wider training syllabus including classroom work and mandatory Pass Plus. With the coverage in the national press, this will inevitably mean that anyone who can attempt the test before the changes take effect, will try and do so.

Some changes do offer the potential for more business. If there is the requirement for a minimum number of hours of professional instruction, this will bring in the pupils who traditionally have been taught by friends or relatives. The number of hours is obviously going to be important. This may be anything from 10 to 100 hours, but is more likely to be 30 to 40 hours. Unfortunately, mandatory instruction will be perceived as expensive and may discourage learning in the first place, or even increase the ranks of the illegal drivers as has happened with the new drivers act. If these changes do come in there will also be a period where the changeover will reduce demand for instruction.

This is all still a grey area until the DfT Cohort II study is released. This is the research that will be the basis of any changes in legislation and is due early this year, giving a better indication of what government legislation is likely to be. Any change that does come about has to be driven by the need to reduce casualties and any benefit to the instruction industry is unlikely to be a consideration.

Instructor Training

The factors that have been bolstering test numbers are diminishing and, although test figures remain high, this can only last for so long. Also, the test is the final part of a long process and is slow to reflect the condition of the market. Any normal business would have predicting these changes and started to compensate. A freeze on recruitment, changing strategies to look for new markets, voluntary and compulsory redundancies. But driving instruction is not a normal industry. The rate of expansion combined with the fact that almost all instructors are self-employed means that the training of new instructors has become a separate industry in its own right, which has never been subject to the franchise system that exists in driving instruction.

Driving instructor training is a multi-million pound industry. It depends for its profits on supplying new instructors, whether they are needed or not. What is worse is that, unlike driving instruction, it feeds off economic decline. Every factory closure or company streamlining leaves workers clutching redundancy cheques and desperate for work in a nervous economic climate. The attractions of retraining, no experience required, are obvious. We see the adverts on television and in the press offering lucrative earnings, company car and guaranteed job after qualification. Of course people are going to apply. Is it any surprise that when The Instructor College opened its first branch away from its home turf in 1997, it chose Gateshead, 300 miles away in the impoverished North East? That was branch number 3; they now have 25 branches nationwide.

These guaranteed jobs don’t really exist, they are franchises. But what happens when the franchisers fail to supply enough work? There is no comeback to the trainers because they have found them a position, so having a substantial investment to recoup, many will go independent. One of the first signs of the industry being in trouble is lots of new independent driving schools. Meanwhile the big franchisers need instructors to keep their fees coming in so they look to the training industry. The vicious circle continues. The more the economy slows and the need for instructors decrease, the more new instructors will be sucked in.

Juggernaut

Despite its size and power, the independent instructor training industry is an industry without a future. What is worse, it is a juggernaut, carried along by its own success and ready supply of willing clients attracted by promises it will no longer be able to justify. Even then it still offers potential for expansion, because it is not controlled by demand for new instructors, but rather by the demand for people to find new jobs. While this practice continues to exist, it can do nothing but harm to the driving instruction industry it supplies. In the past there has been some question as to the ethics of instructor training, but the situation is worsening. It is taking money from many who can little afford it, in exchange for a fragile dream of a new career. For most, that dream will turn to ashes and will harm both the business and reputation of driving instruction as it does so. In the eyes of the public this is one industry, not two.

The instruction industry is going to go through painful times. We will need to shed thousands of instructors over the next few years, and because everybody is independent this is not a case of redundancies. Every instructor who leaves the industry will leave because they cannot survive. Each departure will be expensive and painful, and while it happens everyone suffers. We are not simply talking about losing your job. Many instructors will be forced out by mounting debt, some of whom will have gone into debt to qualify in the first place. There has been a price war in many areas for years and this can only escalate. There is already additional price cutting with local schools now charging less than 12 months ago, simply because they cannot attract enough pupils. It is difficult to say if any instructors will remain immune from these changes because there is no historical president.

We have had ten years of feast in this industry, although many would argue. We now face ten years of famine. It will be very difficult to maintain standards under these circumstances. There is only one organisation with the power to attempt to tackle these problems, and that is the Driving Standards Agency.

Head in the sand

Unfortunately the DSA is one of the concerns. As the only real controlling influence they have their heads firmly stuck in the sand. They are not predicting any fall in the number of Part 2 and Part 3 tests and even an increase in 2010/11. Unfortunately they also have a vested interest in the instructor training industry because it is worth over £4,500,000 to their turnover and they do 42,000 Part 2 and Part 3 tests per year. What is of greater concern is that the DSA is not predicting any fall in the number of tests in the next three years, which means that despite all their resources, they have failed to assess and understand the situation.

The reasons why the test numbers are so high is becoming more and more short term. The longer this continues the more dramatic the fall in future pupils. The year with the best balance between instructors and test passes was in 2005/6, where there were just under 18 test passes for each ADI and PDI. On average every pupil takes 40 hours to pass the test (the equivalent of a working week), so you would expect that if every single instructor was fully employed the ratio would be around 45.

There are many instructors who are involved in fleet training, instructor training, are part time or have left the industry but are still on the Register. In 2005/6 there were complaints that there were too many instructors. As a result of this, the ideal ratio of instructors to passes is difficult to quantify but must be 20 to 25.

With around 664,000 17 year olds in the country in 10 years, this should equate to 500,000 test passes as a result. If the industry expands at the current rate there will also be 54,000 instructors. That is a ratio of less than 9.3. Realistically we are looking at having only enough work for 20-24 thousand instructors. Of course this won’t happen because the market will force surplus instructors out, but this will be painful and the livelihoods of many instructors will go. Meanwhile the standards and reputation of the industry are under threat.

Vital Work

The work of the driving instructor is vital, as are professional standards. There are thousands of excellent instructors out there who should be happy, confident and focused in their work. They should not have to contend with worries about business and financial problems, or even be forced onto the scrapheap to make way for the inexperienced. There are already signs that even the most experienced and well established instructors will not be immune. There are many instructors who freely admit there are not enough pupils to maintain their diaries and numerous others who are or are becoming part-time instructors.

The industry has already suffered for years with a perpetual price war and this sort of pressure on new business will only serve to intensify the problem. Market conditions have created a commercial climate where goodwill, experience and qualification seem to offer little value and where price is king. We now face the prospect of becoming a part-time industry. If this is allowed to continue, inevitably, as is the nature of this business; lives will be lost.