Ahead of the UK chancellor’s Spring Forecast 2026 today (March 3), Rob Carlisle, head of logistics at Argon & Co, reflects on why easing inflation is not translating into easier operating conditions for the UK’s logistics industry – and what policymakers should prioritize to unlock productivity and build long-term resilience.
This time last year, the UK government unveiled a hefty £625m (US$831m) workforce and infrastructure package, alongside broader capital spending and digital transformation commitments. The aim was to strengthen national supply chains, accelerate infrastructure delivery, and ease chronic labor shortages across construction and logistics.
At the time, Chancellor Rachel Reeves said the package would help tackle labor shortages in high-demand areas – via bootcamp places and foundation apprenticeships – as well as modernize transport networks. It was also complemented later in the year by another major commitment to logistics and industrial sites, as well as the creation of a national Supply Chain Centre, under the UK’s Modern Industrial Strategy 2025.
But a year on, the reality on the ground has changed very little. Inflation may be falling, dropping to 3% in January, and the recent stability in fuel prices has offered some welcome breathing space for the industry. However, the wider pressures facing the logistics, supply chain and construction industries are still in place, as many are still struggling with structurally higher operating costs. With this tough outlook, many leaders are redefining what ‘resilience’ means in practice.
Feeling the squeeze
Our recent research of more than 800 global C-suite leaders found that in the UK, operating costs are now the single biggest threat to growth. Over half (54%) of operations leaders in the UK cited pressures such as higher Employer National Insurance contributions and National Living Wage (NLW) increases as their top concern in the past year.
These pressures are especially acute in labor-intensive sectors like logistics and construction. A perennial challenge for the industry has been HGV driver availability; increases to Employer NI and the NLW, while important for raising standards, add further cost pressure when margins are already thin.
The rapid pace of technological change, too, is proving difficult for leaders to keep pace with; more than half (51%) of logistics leaders we surveyed said that artificial intelligence (AI) and automation-driven change was one of the biggest challenges their firm faced in 2025.
Many C-suite leaders are finding themselves caught between a rock and a hard place: facing growing pressure to invest in next-generation technologies and build organizations that can withstand disruption, while also maintaining profitability and performance. But what policy would genuinely help the logistics and construction industries to protect margins and build resilience?
Policy must back technology adoption
Last year’s infrastructure and workforce package and the Modern Industrial Strategy were welcome signals of intent. But the current challenges facing logistics and construction show that the next phase needs to go further: both helping businesses invest in the technologies that raise productivity and ensuring that people have the skills and confidence to use them effectively.
Policy should focus on two core priorities. Firstly, investment in productivity technologies should be made easier and faster. Our research found that 57% of logistics leaders are already using AI and automation to drive cost efficiencies. Looking ahead, another 49% believe that advanced digital tools – including AI, predictive analytics and digital twins – are the greatest opportunity to build resilience and competitiveness in manufacturing and logistics.
The common thread across these technologies is their ability to provide foresight, model scenarios and increase the speed and confidence of decision making in complex operating environments. While many firms want to scale the use of advanced technologies, capital constraints are slowing adoption. The UK government could help de-risk investment through clearer, long-term incentives for productivity-enhancing investment, particularly for SMEs. This is particularly important in logistics, where the opportunity for optimization through technology is vast, but often out of reach for smaller operators without external support. A clear roadmap for logistics innovation, backed by practical financial support, would transform productivity and resilience.
The next phase of workforce development
Secondly, working conditions, especially in logistics, should be on the agenda to attract and retain employees. Logistics work is often unattractive due to shifts, manual labor and uncertain contractual conditions. But logistics is the backbone of the UK’s commercial and infrastructure ambitions; without it, we wouldn’t be able to deliver new housing at pace, keep supermarket shelves stocked, or get vital equipment and materials to hospitals or utilities sites when they are needed.
Government policy should focus on providing more stable contracts and ensuring better working environments in warehouses and delivery operations. Investment in roadside facilities can also improve conditions for frontline drivers.
Digital skills are also increasingly important in workforce strategy. While national programs promising to boost technical skills are welcome, the burden of upskilling still sits largely on employers. Therefore, the government should expand funding for higher-level apprenticeships in digital and engineering disciplines to tackle skills shortages.
Ultimately, the Spring Forecast should provide the industry with a clearer view of what’s ahead – and whether they will start feeling the effects of lower inflation, or whether structurally higher operating costs are here for the long haul.
Whatever the outcome, logistics, construction and supply chain leaders must be adapting to a difficult balancing act: managing short-term pressures with long-term resilience building. With the right policy framework supporting technology adoption and skills development, the sector can move beyond firefighting volatility and instead build stronger, more productive and more competitive businesses for the years ahead.
Related, Rebuilding CEP margins through revenue quality and targeted cost action
