In the late 2000s, the biggest shock since the Great Depression rocked the global economy. The impact of this was far-reaching, affecting everything from international trade down to the weekly shop. Things were no different when it came to driving tuition, with the number of learners shrinking as the financial crisis bit.
With these events now over a decade in our rear-view mirror, it’s time for us to look back. We’ll be examining the extent to which people stopped learning to drive in the wake of the financial crisis, as well as taking a look at the impact on the wider driving tuition industry.
The broader context
Though its roots lay in the US mortgage market, the financial crisis engulfed economies across the globe in the late 2000s. Here in the UK, the first signs of trouble came in 2007 with the collapse of Northern Rock. After this, the British economy shrank continuously for most of 2008 and in the first half of 2009. Though the recession ended at this point, growth remained sluggish for years to come.
It’s easy to focus on the effects of the financial crisis on the banking sector—but its ramifications affected us all. According to calculations from the Institute for Fiscal Studies, GDP per capita in 2009/10 was down almost 7% on pre-crisis figures, and did not return to previous levels until 2015. Had the crisis not taken place, the IFS estimate that, based on pre-crisis trends, we’d each be better off today to the tune of £3,497 per year.
With so many taking a serious financial hit, it comes as little surprise to learn that consumer confidence was poor. In fact, according to Trading Economics, it sat at its lowest level ever in July 2008. This was borne out in the new car market. Numbers of new registrations had already been sliding somewhat from record levels in 2003. However, the market contracted much more sharply from 2008, as seen below.
By 2009, the number of new car registrations was below 2 million—well below the 2.4 million in 2007. The market only recovered to pre-crisis levels in 2014—representing seven years of lost growth.
It’s clear from these figures that the financial crisis affected the extent to which consumers bought cars. What we haven’t discussed yet, however, is whether it put people off learning to drive in the first place.
Driving tests and the financial crisis: before and after
The pool of potential learner drivers is constantly refreshed as young people reach their seventeenth birthday. However, the extent to which this group of people actually take the opportunity to learn varies over time. Those who came of age around the time of the financial crisis faced a particularly bleak set of factors.
Firstly, youth unemployment rocketed in the wake of the crisis, rising above 40% for 16- and 17-year-olds during parts of the recession. This robbed young people of the funds they needed to finance driving lessons themselves. Meanwhile, the Bank of Mum and Dad found itself with less to lend as wage freezes took their toll.
Combined, these issues created the perfect storm for a fall in those learning to drive. A look at the figures from the DfT confirms this: the number of driving tests taken in Great Britain slumped from 1.76 million in 2007/08 to just 1.44 million in 2012/13. That’s a drop of 18.5%. When you compare this to relative GDP figures over the same time period, a pattern emerges.
As the financial crisis took hold, fewer learners started taking tests. The two lines on our graph don’t map to one another exactly—the number of tests hit its nadir a couple of years later than the economy. However, both charts show a dip and slow recovery, with levels now somewhere around where they were pre-crisis. More recent partial figures from April to June 2019 indicate a possible new dip on the horizon.
The Department for Transport themselves acknowledged the likely effect of the financial crisis, noting that “the prevailing economic conditions experienced since 2008” were a key reason for the fall in number of tests conducted. But with fewer young people learning to drive, was there a knock-on impact on instructors?
Did the financial crisis affect the number of driving instructors?
When examining the driving tuition industry, it’s all too easy to focus exclusively on learner drivers. But, as the saying goes, it takes two to tango—or, in this case, to get behind the wheel. Learning to drive wouldn’t be possible without someone there to teach you, after all. So, just as night follows day, any developments which affect the number of learners will have an impact on instructors, too.
The simplest way to examine the impact on instructors is to take a look at the ADI register. For the unfamiliar, this is a database of all instructors in the UK who have the DVSA’s seal of approval. Gaining this includes passing the ADI test and any subsequent standards checks. In the chart below, we’ve tracked how this number has changed since 2000.
Initially, the driving tuition industry appeared to weather the financial crisis well; the number of ADIs continued to grow by over 1,000 per year until 2010/11. It’s possible, however, that this simply reflected the number of people who’d lost their existing jobs as a result of the downturn, and who, enticed by heavy ad campaigns from major driving schools, decided to try their luck at becoming an instructor.
Soon enough, though, the bubble burst. With the number of new students falling, there simply wasn’t enough work to go around for all those instructors. The struggles faced by ADIs came to the fore in 2010, when one of the country’s largest driving schools, RED, went into administration. Not long after, the number of instructors began falling rapidly.
To see the link between falling student numbers and a decrease in those becoming ADIs, we compared the number of driving tests conducted to ADI part 3 tests. This is the final part of the process of becoming a driving instructor, and reflects how many were still seeking to join the register during the financial crisis.
As we can see, the number of part 3 tests dropped from a 2007/08 high of over 12,000 to under 4,000 by 2014/15. Despite the number of driving tests rebounding in recent years, however, there are still far fewer ADI tests conducted today than in the pre-crisis years.
How does the situation look now?
While the financial crisis may now be in the rear view mirror, its effects remain to this day. As noted, the number of new ADIs joining the register remains stubbornly low, despite pupil numbers recovering. In the graph below, we estimated the number of ADIs there’d be on the road today based on pre-crisis trends. We’ve compared this to the actual figures, revealing some stark differences.
Though it’s difficult to imagine how things would have turned out in a world where the financial crisis didn’t happen, our estimates suggest there would be around 67,000 ADIs today. That’s a huge increase on the actual figures of 39,408.
With the number of learner drivers back on the up, you might expect a corresponding rise in instructors. So far, however, that hasn’t been the case, and ADIs remain in short supply. As a result, there’s been a noticeable increase in lesson prices in recent years. Back in 2010, the average cost for a one-hour lesson was £22.30. However, PassMeFast conducted research in early 2019 showing that driving lesson rates now stood at £26.01 per hour.
Nonetheless, it appears that there are still plenty of hopeful drivers who remain undeterred. In an article in the Guardian, the chief executive of the Driving Instructors Association noted that the market was “really buoyant”. Indeed, this year, well over 1.5 million will take their test, with hundreds of thousands getting their licence. It’s clear that, regardless of the economy, driving remains a ticket to freedom for millions across the UK.