Despite the well-known staff and supply chain shortages, the UK logistics sector has risen to 62.5 - the highest since H1 2015 - according to Barclays and BDO’s Logistics Confidence Index. This is a significant boost for the sector which fell to its lowest level since 2012 last year during the height of BREXIT and COVID-19 uncertainty.
The two companies state that the strength of the sector’s recovery and the optimism about the future reflects the improved clarity and visibility when it comes to BREXIT and COVID-19 compared to 2020, allowing organisations to make future investment plans.
“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,” said James Lean, Head of Transport & Logistics at Barclays Corporate Banking.
However, operators still face significant business challenges. 96% in the industry indicate staff shortages as the main concern, with many worried about increased labour costs. To combat this 67% of the industry is investing more in recruitment or HR, with 66% working with younger people or introducing apprenticeship schemes.
While coming from a very low base, 76% of operators expect their turnover to increase in the next 12 months. The industry is also optimistic in profitability, with 62% expecting an increase in profit which is up 13% compared to 2020. 58% will also increase their use of investment in technology to boost profit.
Other key findings included 85% of companies being likely to make significant capital expenditure over the next 12 months; 63% expect an increase in their headcount in a year; and 42% are likely to make acquisitions over the next 12 months.
“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,” said Jason Whitworth, Partner, M&A Advisory and Logistics & Supply Chain Management at BDO LLP.
“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.