Logistics industry confidence drops 12 points, Barclays and BDO research finds

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The 2022 Barclays-BDO Logistics Confidence Index has revealed that logistics industry confidence has dropped 12 points to 50.41 in 2022 – due to increased costs, economic pressures and concerns over talent shortages.

Despite these challenges, mergers and acquisitions continue to be a strategic priority for logistics companies with 45% of respondents reporting that they are likely to make an acquisition in the next 12 months, the highest figure recorded in this survey’s 10-year history. Operators appear to be seeking to achieve economies of scale and expand their service offerings, ingraining a trend for consolidation into what remains a fragmented industry.

A small majority of businesses in the sector are optimistic about the outlook for the coming year, compared to those who are pessimistic. Three out of five (60%) are expecting turnover to increase over this time frame, with only a quarter (25%) anticipating a decrease. However, high inflation and rising costs are impacting levels of profitability, as just under half (45%) of logistics companies say their margins will improve in the next 12 months, compared to 62% in October 2021. Meanwhile, almost a third (30%) are anticipating a drop in profitability, up by 11% on 2021.

Of all the challenges facing the industry, 80% say labor shortages will have a major impact on their business in the coming months. In fact, concerns over a dearth of workers have led nine in 10 firms to improve pay and conditions for their workforce. The most sought-after roles are drivers and warehouse staff, followed by office and admin staff. Competition for talent was so high that HGV drivers qualified to drive the heaviest vehicles saw advertised salaries increase by an average of 25% (Q1 2021 compared to Q1 2022). The research found that investment in environmental, social and corporate governance (ESG) frameworks is seen as another way to attract talent.

It also found that more than half (53%) of logistics businesses are focusing on employee welfare and staff wellness as their priority ESG initiative for 2023. Other recorded sustainability priorities across the industry include optimizing the fuel of existing fleets (52%), with four in 10 firms (40%) viewing the introduction or expansion of alternative fuel vehicles as a priority for the year ahead. Additionally, more than two in five (44%) plan to introduce greener lighting and power supplies to their warehouses.

Lee Collinson, head of manufacturing, transport and logistics at Barclays Corporate Banking, said, “Understandably, the circumstances of the past year have led to a drop in logistics sector confidence. Price rises, supply chain challenges, a scramble for talent, and strikes at UK and European ports have taken their toll. However, it’s encouraging to see that businesses are looking ahead at capex and finding ways to grow. Many are looking to invest in mergers and acquisitions, as well as ESG initiatives and staff welfare programs to remain competitive, and it’s clear they see investment in tech as key to managing their cost bases and improving efficiency. This spirit of determination and innovation has come to define the UK logistics industry and looks set to continue.”

Jason Whitworth, partner, mergers and acquisitions (M&A) advisory and logistics and supply chain management at Binder Dijker Otte (BDO), said, “In the last 10 years [since the launch of the Logistics Confidence Index], the sector has changed immensely, accommodating the rise in e-commerce, a seismic shift in customer expectations, the ESG agenda, and the growing role technology is playing in every aspect of the industry.

“Our latest report demonstrates that those decade-defining themes are still very much in play, now taking on greater meaning in the face of significant challenges, led by rocketing fuel and energy costs, customer pricing pressures, and a faltering economy. It’s little wonder that, as the market contends with the toughest business conditions experienced for many years, confidence is at its third lowest level since the report began. Concerns over profitability, skills, labor shortages, top-line growth, and the rising cost of doing business, are integral to that fall. However, despite this, it’s reassuring to see that the logistics sector is still keenly focused on capitalizing on strategic opportunities, with a focus on better servicing existing customers and also acquisitions the main drivers for growth.”

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