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More than 60% of logistics companies say business conditions have become more challenging in the past year.
The Moore Stephens/Barclays annual UK Logistics Confidence Index registered the biggest decline in confidence since 2015 – although overall, the index remains in positive territory, at 52.6 points.
The biggest concern is driver shortages, with one in five logistics operators saying they expect a decreased headcount in the next 12 months, as EU-native drivers leave and older drivers retire. More than half the 102 top logistics companies surveyed, which have an annual combined revenue of more than £18bn, say a driver and skills shortage is their primary concern.
CBI data shows that 14% of LGV drivers in the UK are EU nationals, while estimates suggest that 60% of drivers are aged 45 or older. Some 22% of companies are trying to attract younger people, but it’s a “major challenge” notes the study.
“It’s disheartening to see that lack of drivers remains the industry’s top concern, as it has done for some years,” said Richard Smith, head of transport & logistics at Barclays Corporate Banking.
“The reality is that there is simply not enough new talent coming into the sector early enough to counter an ageing workforce. One of the main challenges in attracting recruits has been the perception that the industry lacks significant career opportunities.
“The shortage of drivers needs immediate attention if the logistics sector is to continue to thrive, and it’s encouraging to see that businesses are already looking to invest in tech to improve fleet management systems.”
While uncertainty over Brexit is clearly a cause of falling confidence, two-thirds of respondents to the Logistics Confidence Survey claim to have taken no ‘formal’ measures in post-Brexit planning. Nearly half, however, were more pessimistic for the outlook than they were in 2016. But companies did have a view on how they wanted Brexit handled (see chart below).
“With the potentially serious impact of poor Brexit negotiations and poor performance across the retail sector in the last year, many companies seem much less optimistic about the prospect of a positive 2019,” said Philip Bird, partner at Moore Stephens.
“The momentum of M&A activity that has gained pace through 2018 is likely to slow down, with just a third of companies looking to make acquisitions in the next year. Operators spoke of tightening margins and increased competitiveness as clients look to find savings through switching suppliers. ”
The smaller the company, the greater the pressure, reveals the survey. One in five smaller businesses expect to see turnover fall next year.
But there are some signs of hope. Three-quarters of operators are planning significant capital expenditure in the next year and companies say value-added services are the biggest driver in new contract wins.
The greatest likely impact is investment in technology, with one-quarter of companies expecting it to influence the next three years. Half of the respondents engaging in e-commerce are planning to improve their technology, and they are eyeing big data analytics, blockchain and cloud services.
The report says: “Brexit is likely to bring reduced competition from EU companies and the potential benefits of technology could suggest there are still possibilities to win new business and improve revenue.”
You can see the full Logistics Confidence Index results here.