The 2022 edition of the BDO & Barclays Logistics Confidence Index presents the results of our survey of the views and insights of 100 senior decision makers, to assess confidence and expectations, as well as the latest hot topics and longer term trends, in the UK logistics sector.
- Confidence among businesses in the logistics sector has dropped 12 points in the last year
- The figure now stands at 50.4, with a small majority confident they can weather high inflation, rising fuel and energy costs and labour shortages
- Despite the challenges facing the sector, three out of five businesses expect their turnover to increase in the coming year
- Almost half of logistics operators say they are likely to make an acquisition in the next 12 months as they look to expand operations and become more competitive
Ten years after the launch of our Logistics Confidence Index, this year’s overall result has slipped to 50.4 from last year’s highly optimistic score of 62.5, reflecting a sense of realism in the sector as it readjusts to the challenges of high inflation, soaring energy prices and a more uncertain economic landscape.
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 ever recorded in this survey’s 10-year history. Operators are seeking to achieve economies of scale and expand their service offering, ingraining a trend for consolidation into what remains a fragmented industry.
Somewhat surprisingly perhaps, against a gloomy economic outlook, 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. The appetite for capital expenditure also remains positive, if slightly down on last year, with four-fifths of companies (81%) anticipating making significant expenditure over the next 12 months.
On the flipside, 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% this time last year. 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 labour 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 ten 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.
Investment in ESG frameworks is seen as another way to attract talent. More than half (53%) of logistics businesses are focusing on employee welfare and staff wellness as their priority ESG initiative for the coming year.
Other sustainability priorities across the industry include optimising the fuel of existing fleets (52%), with four in ten firms (40%) viewing the introduction or expansion of alternative fuel vehicles as a priority for the year ahead. More than two in five (44%) plan to introduce greener lighting and power supplies to their warehouses.
Jason Whitworth, Partner, M&A Advisory and Logistics & Supply Chain Management at BDO LLP, said: “In the last 10 years, the sector has changed immensely, accommodating the rise in ecommerce, 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, labour 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 capitalising on strategic opportunities, with a focus on better servicing existing customers and also acquisitions the main drivers for growth.”
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WEBINAR: LAUNCH OF THE 2022 UK LOGISTICS CONFIDENCE INDEX
Watch our webinar for the launch of the latest edition of the BDO-Barclays Logistics Confidence Index 2022, with speakers from BDO, Barclays and industry guests from PC Howard, Simarco and Clipper.
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