The AA has blamed a “pothole epidemic” caused by the “beast from the east” and low road maintenance spending for a drop in half-year profits, after it was forced to deal with the highest number of vehicle breakdown callouts in 15 years.
The roadside vehicle recovery firm said core earnings fell 17% to £161m in the six months to the end of July, owing to the increased expenditure and higher costs needed to use third-party garages to house the much higher number of vehicles that had broken down.
The number of breakdowns rose by 8% to 1.91m in the six-month period.
This contributed to a 65% decline in pre-tax profit, from £80m to £28m. Investors were spooked, with AA shares down about 12% at 105p by lunchtime on Wednesday, the biggest fall on the FTSE 250.
Simon Breakwell, the AA chief executive, said: “We’ve had a 15-year high in breakdowns, we had the worst winter back to back with the hottest summer; all of which causes everyone to drive their cars – and more cars on the road generally means more breakdowns.
“Sometimes you have a rubbish winter and sometimes you have a really hot summer but it’s rare that you have a rubbish winter back to back with the hottest summer.”
Chris Grayling, the transport secretary, said in May that the winter had been “particularly bad” for local roads and that some had twice as many potholes as last year.
Councils received an additional £100m to fix potholes since the winter but he told the Times: “We probably haven’t spent enough on roads in this country since the 1980s.”
A survey published by the AA in May showed nearly nine out of 10 drivers said roads were worse compared with a decade ago while two-thirds said they had “considerably deteriorated” in that period.
More than half of motorists in Scotland said residential streets were poor and a third of main roads in the east Midlands were considered to be in a bad condition.
One in 10 drivers in the north-east said their motorways were riddled with potholes, although motorways were generally rated the roads in the best overall condition, while local roads were the worst affected, with less spending per mile.
Despite the “pothole epidemic”, the AA stuck to its full-year forecast of £335m and £345m for core earnings, before interest, tax, depreciation and amortisation.
According to the Annual Local Authority Road Maintenance (Alarm) survey 2018, £9.3bn needed to be spent to bring roads back into reasonable condition in England and Wales. Councils were fixing a pothole every 21 seconds but it would still take more than a decade to clear the repair backlog on local roads, according to the Local Government Association.
After decades of underspending, the government’s austerity programme following the financial crisis made things worse. Councils have had their real spending power – government funding plus council tax – reduced by 29% between the financial years 2010-11 and 2017-18.
Local authorities have reported an increase in average highway maintenance budgets to £20.6m this year from £17.1m in 2017, although budgets have barely kept in line with inflation over the past decade, according to the Alarm survey. This year’s figures also hid a wide disparity, with some councils spending £100m and others less than £1m.
Between the financial years 2010-11 and 2016-17, spending on local roads declined by 13%, whereas spending on motorways and major A roads maintained by Highways England went up by 5.5%, according to the Department for Transport.
The AA was formed by a group of motoring enthusiasts in 1905 and provides roadside help as well as motor insurance policies.
It has been investing heavily in its roadside business to increase the number of company-owned patrols and improve its mobile-app-based services for car breakdowns under Breakwell, who took over the top job last year.