Logistics crisis doesn’t knock confidence in Logistics industry
Despite the well-documented logistics crisis with staff and supply shortage issues, confidence in the UK logistics sector has risen to 62.5, the highest level since H1 2015, according to the latest Barclays-BDO Logistics Confidence Index. This is in contrast to last year’s Index, when confidence fell to its lowest level since 2012 amid heightened Brexit and Covid uncertainty. However, the strength of the recovery and optimism about the future reflects the improved clarity and visibility around navigating Brexit and Covid when compared to last year, allowing operators to make future investment plans.
High confidence is one thing however and there is so much business around that carriers can pick and choose the traffic that is most profitable for them. The real question is how are your logistics partners serving you and will they maintain their service through the crucial Q4 period.
The logistics crisis isn’t over and operators still face significant business challenges, with 96% pointing to staff shortages as their main concern and many are worried about the increased labour costs this will cause. However, the industry is addressing issues head on with 67% of companies saying they are investing more in recruitment or HR, and two thirds (66%) are working with younger people or introducing apprenticeship schemes.
Although coming from a very low base last year, more than three quarters (76%) of operators expect their turnover to increase in the next 12 months. The outlook for profitability is similarly optimistic, with almost two thirds (62%) of companies expecting to increase profits, up 13% on 2020. Three fifths (58%) of respondents cite greater use of, or investment in, technology to boost profits.
Underlining this renewed confidence, the Barclays-BDO study reveals 85% of companies are likely to make significant capital expenditure over the next 12 months, and almost two thirds (63%) expect an increase in headcount within a year. Meanwhile, over two fifths (42%) of respondents say they are likely to make acquisitions over the next 12 months, reflecting expectations for continued consolidation within the sector, driven by operators seeking to achieve economies of scale and to expand service offerings in an extremely competitive marketplace.
The research, which takes into account the views of 100 leading logistics businesses, also shows that many operators feel the acceleration in ecommerce is creating new opportunities, while those serving hospitality and leisure firms are seeing their markets revive. The logistics crisis isn’t over, but the industry is amazingly confident that they will overcome the challenges and prosper.
“It’s encouraging to see confidence across the industry return after such a turbulent period. Having dealt with the challenges posed by the pandemic, the industry is feeling more confident about navigating through pressing headwinds around staff shortages. This is a highly resilient and innovative sector with increasing opportunities for growth and the future prospects for UK logistics appear to be looking up.”
– James Lean, Head of Transport & Logistics, Barclays Corporate Banking
“The logistics industry is still operating against an extremely challenging and well-documented backdrop but the big difference this year is that operators feel they have a better sense of certainty and visibility of the issues they’re facing. In the earlier stages of Covid, and before a Brexit deal had been reached, so much was unknown. Fast forward a year, businesses feel they are able to take control and make strategic decisions about their future investments.
With renewed optimism and high demand, there is significant opportunity for deal-making in the industry. Whether businesses are looking to create scale, achieve efficiencies through technology or make acquisitions to provide value-added services, we expect to continue to see strong levels of M&A activity across the sector.”
– Jason Whitworth, Partner, M&A Advisory and Logistics & Supply Chain Management, BDO LLP