The transport & logistics sector accounts for around £55 billion turnover, 5% of GDP and employs over 1.7 million people in the UK. Traditionally driven mainly by manufacturing, retail is now leading demand. Recent industry research shows that confidence remains high in the sector, in line with encouraging forecasts of 2.5% growth for the UK economy. That said, operators are aware of the challenges ahead, especially in relation to price sensitivity, oil prices, wage inflation and a possible rise in interest rates.
UNLOCKING THE POWER OF DATA-DRIVEN DECISION MAKING
Transport and logistics companies must negotiate a complex cocktail of market risks to achieve stability, prosperity and growth.
In an industry where margins are being squeezed, and many SMEs face tough competition from their larger counterparts, harnessing the power of data and technology is essential in facilitating intelligent decision making.
Crucially, firms must realise that not all business is good business – identifying the most profitable opportunities and driving efficiencies within their fleet often holds the key to longevity and success.
Key challenges for the Transport and Logistics sector
Research shows this is the current key challenge for operators. Volatile fuel costs continue to wreak havoc with margins, accounting for a significant proportion of direct costs. Operators are focusing on improving profitability via greater efficiencies through the use of IT, focusing on customer retention and enhancing contract margins through value-added services, diversifying to win new business, and cost-cutting further, where possible.
It is likely that investment in technology will continue to drive productivity and improve customer service. There has been a rise in companies successfully claiming R&D tax credits for pursuing innovation. Investment for funding will be required, as 32% of operators are planning to make an acquisition soon, to diversify their offering or add scale and reach. Whilst funding is becoming more available, business valuations generally remain lower than pre-recession levels.
Over half of operators are planning to increase headcount in the next 12 months but 49% report that driver and skills shortages remain their foremost challenge, with an aging workforce adding to the problem. Further issues surround the increase in national minimum wage and increased costs attributed to pension changes.
Intense contract price competition continues to cause headaches as operators report business is being won on unsustainably low rates, especially by multi-national providers and customers operating on lower margins (especially retailers and etailers) who are seeking to share the cost reduction.
Those in the UK point to the unfair advantage of some European operators, who benefit from lower fuel prices, pay lower road tolls abroad and are burdened by less red tape when in the UK. Effective management of foreign exchange differences is also essential in helping improve margins. Any threat of the UK leaving the EU is likely to be further detrimental.
Transport and Logistics business advice services
We advise transport and logistics companies, from air and sea freight forwarders and hauliers, to domestic and international couriers. We work closely to find solutions to industry issues, utilising our expertise in everything from business strategy and corporate finance, to audit and tax advice.