The UK Logistics Confidence Index 2019 - Barclays€¦ · have been compiled to create the UK...

The UK Logistics Confidence Index 2019Investing in the future despite tough conditions

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Contents

3 Executivesummary

5 Currentstateofthemarket

7 Businessoutlook

9 Talentshortageremainsakeyissue

11 Brexitputtingdecisionsonhold

13 UKExportFinance

14 Opportunitiestoaddvalue

16 Greenmeasuresseenasgoodforbusiness

18 Consolidationsettocontinue

19 Growinginterestinautomation

22 Industryinsight:CygniaLogisticsLtd

24 Industryinsight:AgilityLogisticsLtd

26 Keytakeaways

27 Aboutthereport

28 Abouttheauthors

29 Additionalsources


Executive summary

Barclays and BDO, in conjunction with specialist sector research agency Analytiqa, have undertaken the latest in our series of surveys to assess confidence and expectations in the UK logistics sector.

Morethan100seniordecision-makers–includingchiefexecutiveofficers,managingdirectorsandchieffinancialofficers–providedtheirviewsandinsightsforthissurvey,conductedduringAprilandMay2019.TheirresponseshavebeencompiledtocreatetheUKLogisticsConfidenceIndex2019.

Confidenceatlowest-everlevel

OuroverallConfidenceIndexhasfallenfrom52.6in2018,to49.7thisyear.ThiscontinuesthedownwardtrendwehaveseeninrecentyearsandtakestheIndextoitslowestlevelsinceoursurveybeganin2012.ThisisthefirsttimeourIndexhasfallenbelowthe50mark,indicatingthat,overall,thesectorisnowmorepessimisticthanoptimisticaboutthestateofthemarket.

Almost60%oflogisticscompaniessaytradinghasgottougherinthepastyear.Closeto15%gosofarastosaymarketconditionsaremuchmoredifficult–thehighestsuchresultsincethesecondhalfof2012.

However,logisticsisastrongandresilientsectorandremainsvitaltotheUKeconomy–totalrevenueforour100+surveyrespondentsis£17.2bn–andmorethanhalf(55%)saytheystillexpecttoincreaseprofitsoverthenext12months.

Globalslow-downaddstoBrexituncertainty

GreaterpessimismamongoperatorsisnotsurprisinggiventhelackofresolutiontotheBrexitconundrumandtheoutlookforweakUKeconomicgrowth.Thesefactorshavebeenexacerbatedbythedownturnintheglobaleconomicoutlook,withtheongoingtradewarbetweentheUSandChinaexpectedtocontinuetoslowworldwideeconomicactivity.

ThreeyearsaftertheEUreferendum,ourfindingsshowthatBrexithasalreadyimpactedbusinessesquitedifferentlyinthelogisticssector,withjustasmanycompaniesreportingthatBrexit-relatedissueshavebroughtanincreaseincustomerdemandasthosethatreportadecrease.

OursurveyrevealsnearlyhalfofoperatorshavecommittedtolowerlevelsofinvestmentorputinvestmentplansonholdbecauseofBrexit.Amajority(62.4%)ofcompanieswithEUcustomersfearthatano-dealBrexitwillresultinlessbusiness.WhilethesectorwouldgenerallypreferanagreeddealbetweentheUKandtheEU,viewsonthepreferredtypeoffuturetradingarrangementsvarywidely.

WhateverthefinalBrexitoutcome,thesectorappearstobepreparingitselfwithgreatercontingencyplanning,includingeffortstoworkmorecloselywithcustomerstoaddressfuturecross-borderchallenges.

AsidefromBrexit,theshortageofskillsanddriverscontinuestobethemostimportantissueforlogisticsfirms.Perhapsbecauseofthelackofrecruitswiththerightskills,orbecauseofaneedtocutcostsindifficulteconomicconditions,onlyathirdofoursurveyrespondentssaytheyexpecttoincreaseheadcountoverthenext12months,down13.9%on2018andanotherall-timelowforoursurvey.

Investingintechnologyandsustainability

Despitethedropinconfidence,closetothreequartersoflogisticsoperatorsfeelpositiveenoughtosaytheyarelikelyorverylikelytomakesignificantcapitalexpenditureoverthenext12months.

ThisclearlysuggeststhatmoststillseeopportunitiesintheUKlogisticssector,especiallywithsomanycustomerswillingtoswitchtheirlogisticssupplier.Morethanhalfoursurveyrespondents(54.5%)saythataddingvaluetoexistingservicesandbuildingpersonalrelationshipswithcustomersarevitaltowinningnewbusiness.Atthesametime,theimportanceofpriceincontractwinsisatitslowest-everlevel.

Respondentsseemostpotentialinthecontinuinggrowthofe-commerceandinthefoodandbeveragessectorbut,asever,it’sthemoreagilelogisticsoperatorsthataremost


likelytobenefitfromchangingmarketconditions.

Thesectorclearlyrecognisestheneedtoinvestinnewtechnologies,withmostoperatorsfocusingonupgradingorreplacingexistingsystems.Butthereisalsoincreasedinterestamongoperatorsinautomationtosolveworkforceshortages.

Finally,anewquestioninoursurveythisyearrevealsthatmorethantwothirds(71.6%)ofbusinesseswillbeinvestinginsustainable,environmentalor‘green’projectsinthenext12months.Thisappearstobeprimarilydowntothecommercialrationaleforsuchmeasures,withoperatorsanticipatingthebenefitsofcuttingfuelusageandcontinuedaccesstotheincreasingnumberofUKcitiesintroducingCleanAirZones.

Wetrustthatyouwillfindthisreportinformativeandhelpful.

Richard SmithHeadofTransport&LogisticsCorporateBanking,Barclays

Philip BirdTransportandLogisticsPartnerCorporateFinance,BDOLLP

Jason WhitworthCorporateFinanceAdvisoryPartnerBDOLLP


57.252.2

60.3

74.971.4

69.2

61.9

51.853.0

56.7

H1, 2012 H2, 2012 H1, 2013 H2, 2013 H2, 2014 H1, 2015 H2, 2015 H1, 2016 H2, 2016 2017

52.6

2018 2019

49.7

Forthefirsttimesinceoursurveybeganin2012,theLogisticsConfidenceIndexhasslippedinto‘negativeterritory’below50,to49.7,reflectinganoverallmorepessimisticmoodinthesector.

Thisfallfrom52.6inourlastsurveyin2018isacontinuationofadownwardtrendthatbeganin2017.

ItisperhapstobeexpectedagainstthebackdropofcontinuinguncertaintyaroundBrexitnegotiations–andadownturnintheglobaloutlook,withtheongoingtradewarbetweentheUSandChinacontributingtoaforecastthatworldwideeconomicgrowthwillslowto2.6%in2019,beforeinchingupto2.7%in2020.1

AlthoughtheUKeconomyisstillexperiencingsomegrowth,GDPincreasedbyjust0.5%inthefirstquarterof20192andtherehassincebeenarecordfallinretailspending3andjoblossesintheautomotivesector.4

Thisyear’ssurveyresultsarealsoinlinewiththelatestIHSMarkit/CIPSUKManufacturingPMI,whichfellto49.4inMay2019from53.1.5

Oursurveyshowsacleargeographicaldividewhenitcomestoconfidence.ResponsesfromcompaniesbasedintheMidlandsandNorthofEngland,ScotlandandWalesproducedanIndexlevelof52.9–stillinpositiveterritoryandsignificantlyhigherthanthecombinedfigureof45.9fromcompaniesheadquarteredintheEast,SouthEast,SouthWestandLondon.

Tougherbusinessconditions

Morethanhalf(58%)ofoursurveyrespondentssaycurrentbusinessconditionshavebecometougherinthepast12months.

Theshareofsurveyrespondentswhobelievecurrentmarketconditionsaremuchmoredifficultthaninthepast12monthsis14.9%–thehighestresultsincethesecondhalfof2012andariseof4.1%comparedto2018.Incontrast,just13.9%ofrespondentssaythatconditionsarebetter.

Oursurveyrevealsthatthemarkethasbeenslightlytougherforlargercompanies(definedasthosewithrevenuesof£50millionormore).Almosttwothirds(63%)oflargercompaniessaybusinessconditionsaretougherthantheywere12monthsago,comparedto55%ofsmallercompanies.

Current state of the market

Our Logistics Confidence Index has fallen to 49.7, its lowest-ever level.

LogisticsConfidenceIndex


“Thesectorisclearlychallengedonboththesupplysideanddemandside,butcompetitionremainsfierceinwhatisamaturemarketwithhistoricallylowbarrierstoentry.Aspressurebuildsandmarginsaredenuded,thereisaninevitableclamourtoretainexistingbusinesssometimesattheexpenseofcommerciallogic.”

Respondent comment

The same27.7%

Much morefavourable

1.0%

Much moredifficult14.9%

Somewhat morefavourable

12.9%

Somewhatmore difficult

43.6%

Howdoyouviewcurrentbusinessconditionsversusthelast12months?


WhenaskedabouttheoutlookfortheUKlogisticssectoroverthenext12months,62.4%ofsurveyrespondentsthinkbusinessconditionswillgettougher.

Aroundtwothirds(63.4%)ofoperatorsstillsaytheyexpecttoincreaseturnover.However,thatnumberisdown5.9%whencomparedto2018andisthelowestnumbersinceoursurveyinthesecondhalfof2012.

Theoutlookforprofitabilityislessoptimistic–justoverhalf(55%)saytheyexpectanincreaseinprofitsoverthenext12months,althoughthenumberwhoseeadecreaseinprofitsisdown4.8%comparedto2018.

Anencouragingshareofrespondents(20%)expectprofitstoincreaseby10%ormore.Givenjust12.9%ofoperatorspredictasimilarincreaseinturnover,itseemslikelymanyoperatorsareplanningtoboostprofitsthroughcostcontrolmeasuresandreducedheadcount,ratherthanbygrowingrevenue.

Thisisperhapsbackedupbythefactthatcustomerpricepressurecontinuestobeaconcernforlogisticsoperators,with25.3%ofsurveyrespondentsidentifyingitasthemostimportantissuefacingtheirbusinessinthenext12months.

Investmentandopportunity

Closetothreequartersoflogisticsoperators(73.2%)feelconfidentenoughtosaytheyarelikelyorverylikelytomakesignificantcapitalexpenditureoverthenext12months,althoughthisis2%fewerthanin2018.

Business outlook

Operators still see opportunities and are ready to invest despite a tougher outlook for the sector.


Respondentsclearlystillseeopportunitiestowinbusinessfromrivalsthroughadded-valueservicesandbyinvestinginnewtechnologiesandsustainabilitymeasures.Inparticular,theyseepotentialinthecontinuinggrowthine-commerceandinthefoodandbeveragessector.Asever,it’sthelogisticsoperatorsthatcanrespondquickesttochangingmarketconditionsthataremostlikelytobenefit.

Oursurveyalsohighlightssomedifferenceinopinionbetweensmallerandlargeroperators,withtheformer–oftenatthesharpendofcompetitivepressureonpricingandmargins–generallymorepessimisticaboutthefuturebusinessoutlook.

Forexample,69%oflargercompaniespredictanincreaseinprofitsoverthenext12months,whilethefigureisjust44%forsmalleroperators.And32%ofsmalleroperatorssaytheyareunlikelytomakeasignificantcapitalexpenditureoverthenext12months,comparedto20%oflargercompanies.

“Themainchallengeisgettingtheindustryto‘sell’thevalueoftheirservicestocustomersatanincreasedmargin,whichdeliverssustainablegrowthandre-investmentindrivers,technology,environmentalandsocialinitiatives.”

Dean Atwell, Managing Director, Oakland International

0Much more

difficultSomewhat

more difficultThe same Somewhat

morefavourable

Much morefavourable

Larger companies

Smaller companies

10%

20%

30%

40%

50%

60%

0

10%

20%

30%

40%

50%

60%

The same26.7%

Much morefavourable

0%

Much moredifficult11.9%

Somewhat morefavourable

10.9%

Somewhatmore difficult

50.5%

Unlikely26.8%

Very likely36.6%

Likely36.6%

Howdoyouforeseebusinessconditionstobeoverthenext12monthsbycompanysize?

Howdoyouforeseebusinessconditionstobeoverthenext12months?

Howlikelyisitthatyourcompanywillmakesignificantcapitalexpenditureoverthenext

12months?


Theshortageofskillsanddriverscontinuestobethemostimportantissueforlogisticsfirms,accordingto43.2%ofoursurveyrespondents.

Theoverwhelmingmajorityrankthelackofdriversashavingthemostimpactontheirbusiness.ThisisnotsurprisinggiventhecontinuingchallengetoattractyoungerpeopletoreplaceanagingworkforceofdriversandthenegativeimpactofBrexitonEUnationalsworkingintheUK.Arecent

reportfromtheFreightTransportAssociationfound15%ofcurrentHGVdrivervacancieswon’tbefilledthisyear.6

Logisticsoperatorsarealsostrugglingtofillleadershiprolesateverylevelofmanagement,whilefindingwarehousestaffandITtalentisalsoaconcern.

Toaddresstheseskillsshortages,oursurveyfoundthatthemostpopularmeasuretakenbyrespondentsinthelast12monthshasbeenofferingimprovedpayandconditions.

Thiswasfollowedbythosewhosaytheyhaveworkedwithyoungerpeopleorintroducedanapprenticeshipschemeandthosewhohaveenhancedthevolumeandquantityoftraining.

Anumberofrespondentshighlightperceivedlowpayandpoorworkingconditionsasanongoingobstacletoattractingpeopletoadriver’sjob.Oneresponsesaysthatalthoughthereareinitiativesdesignedtohome-growtalent,thiscanbealengthyprocess.Highertrainingcostsandpressurefromminimumwageandlivingwagerises,andabove-inflationpayincreases,arealsowidelycitedaschallenges.

“Accessingresourcesinthefuturewillbeakeychallenge.OurEasternEuropeanworkersmaynolongerfeelwelcomeintheUK,andlabourshortagesinEuropemeantheywillbeabletoatleastmaintain,ifnotimprove,theirearningsinotherpartsofEU.”

Dominic Edmonds, Senior Vice President Contract Logistics – EMEA, Kuehne + Nagel

Talent shortage remains a key issue

The sector is still struggling to fill driver vacancies and bridge the skills gap.


Whilemostofthesefindingsareconsistentwithresultsfromlastyear,our2019surveyalsosuggestslogisticsoperatorsarebeginningtoconsidertechnologyasaviablesolutiontorecruitmentproblems,with7.4%sayingtheyhaveusedtechnologytoaddressstaffshortages.

Oursurveyfoundthat60.8%ofrespondentsexpectupto9%oftheiroperational-basedwarehouseworkforcewillbereplacedbytechnology,automationandroboticswithinthenextfiveyears.

Lookingspecificallyatthelackofdrivers,5.4%ofsurveyrespondentssaythatdriverlesstrucksorplatooningisoneofthesupplychaintechnologyapplicationsthatwillhavethebiggestimpactontheirbusinessoverthenextthreeyears.

Headcountdown

Perhapsbecauseofthelackofrecruitswiththerightskillsortheneedtocutcosts,onlyathirdofoursurveyrespondents(34.7%)saytheyexpecttoincreaseheadcountoverthenext12months.

Thisisafallof13.9%comparedwith2018,andthelowestsinceoursurveybegan.Nearlyaquarter(23.8%),up5%on2018,saytheywillreduceheadcountoverthenext12months.However,41.6%expectnochangeinstaffnumbers,whichisalsoupon2018,by8.9%.

Whilethereisnosignificantdifferencebetweenlargerandsmallercompanies’planstoreducestaffnumbers,fewerlargercompanies(31%)saytheyexpecttoincreaseheadcountthansmallercompanies(38%)overthenext12months.

Customerprice pressure

25.3%

Driver/skillsshortage

43.2%

Other9.4%

Wagepressure

5.3%

Paymentterms2.1%

Industryconsolidation

4.2%

Shortage ofwarehouse

space6.3%

Workingcapital/finance4.2%

No Change(-2 to +2%)

41.6%

Decrease 2-5%13.9%

Decrease 5-8%6.9%

Increase 8-10%1.0%

Increase 5-8%4.0%

Increase 2-5%22.8%

Decrease8-10%0.0%

Decrease10% +2.9%

Increase 10%+6.9%

0% 5% 10% 15% 20% 25%

Enhanced volume and quality of training

Improved pay and conditions

Invested more in recruitment / HR

Worked with younger people / introduced apprenticeship schemes

Worked with trade and educational organisations

Encourage greater diversity in career opportunities

Used technology to replace human talent

Utilised more temporary staff

Other

Willyoubeincreasingordecreasingheadcountoverthenext12months(excludingseasonality

impacts),andifso,byhowmuch?

Whatmeasureshaveyoutakeninthelast12monthstoaddressthetalentandskillsshortageinyourbusiness?

Whatwillbethemostimportantissuefacingyourbusinessinthenext12months?


Brexit putting decisions on hold

With Brexit negotiations still ongoing, uncertainty about the outcome is bringing mixed fortunes for logistics operators and putting investment plans on hold.

Closetohalf(47.3%)ofoursurveyrespondentssaytheirbusinesshascommittedtolowerlevelsofinvestmentorputinvestmentdecisionsplansonholdbecauseofBrexit-relatedissuessincethe2016referendum.

However,while37.4%ofbusinessessaytheyhaveseenadecreaseincustomerdemand,thesamepercentagereportsanincrease.

TheimpactofBrexitclearlydependsontheextentofanoperator’sexposuretoEUcontracts.Somecompanieshaveexperiencedanincreaseindemandastheirrisk-aversecustomersstockpilematerialsandproducts,whileothercustomersareclearlyscalingback.

SomeadditionaldemandcanalsobeattributedtologisticssuppliersofferingconsultancyservicestocustomersaroundBrexitcontingencyplanning.

AkeyissueformanyofourrespondentscontinuestobetheimpactofBrexitontheavailablelabourpoolofEUnationals.Onerespondentconfirmsinacommentthatthiswillbeachallengeinthefuture,sayingthatworkerswhoareEUnationalsmaynolongerfeelwelcomeintheUK,andmayalsobeabletoimprovetheirearningsincountriesthatremainasEUmembers.Theseconcernsareunderlinedbythefactthat16.5%ofrespondentssaytheyhavehiredmoreUKnationalssince2016.

Lower levels of investment / placed decisions on-hold

Had to make staff redundant

Seen a decrease in customer demand

Lost customer contracts

Won customer contracts

Seen an increase in customer demand

Hired more UK nationals

Higher levels of investment / placed decisions on hold

Other

0% 5% 10% 15% 20% 25%

Lower levels of investment / placed decisions on-hold

Had to make staff redundant

Seen a decrease in customer demand

Lost customer contracts

Won customer contracts

Seen an increase in customer demand

Hired more UK nationals

Higher levels of investment / placed decisions on hold

Other

0% 10% 20% 30% 40% 50%

HowhasyourbusinessbeenimpactedbyBrexit-relatedissuessincethereferendumin2016?

Shareofallresponses

Shareofrespondentsselectingeachcategory


Greatercontingencyplanning

OurfindingsthisyearalsoshowthatthelogisticssectorhasbeenmoreproactiveinpreparingforBrexit.Morethanaquarter(25.9%)ofrespondentssaytheyhavehadinformaldiscussionswithcustomers,tradeorganisationsorcross-borderoperatorsinthepast12months,while21.1%havesetupinternaldiscussionsorworkinggroupsonBrexit.

Somecompanieshavegonefurther,with10.4%engagingwithprofessionaladvisersand4.8%decidingtoemployspecialiststaffwithexpertiseininternationaltradeorcustomsprocesses.

AftersomuchspeculationaboutwhatkindofBrexitdealcanbeachieved,theincreaseincontingencyplanningrevealedbythese2019surveyresultsperhapssuggeststhatthelogisticssectorfeelsthechancesofano-dealBrexithaveincreased.

“CustomersarechangingstrategybasedonBrexit,sometomovestockoutoftheUKandsometobuildupmore.ThecontinueduncertaintyaroundBrexitmeansthedecisionsoninventorylocationandlevelsmaywellbetakenatthelastminutewithlittleornoopportunityforforwardplanning.Thiswillcreatesignificantdisruptionandincreasedworkloadinthelogisticssector.”

Andrew Sulston, Contract Logistics Director and Executive Board Member, Hellmann Worldwide Logistics Limited

SplitopinionsonBrexitoptions

It’sclearfromoursurveyandthecommentsmadebyrespondentsthatthemajoritywouldprefertheUKtoremainintheEU,butiftheUKistoleave,theypreferfuturetradingrelationshipstobeascloseaspossibletoexistingarrangements.

Nearly30%saytheirfavoured‘type’oftradingagreementismembershipoftheEuropeanEconomicArea(akintoNorway),whilethenextmostpopularchoice(24.2%)isacomprehensiveFreeTradedeallikethatagreedwithCanada(24%).Withtherestofrespondentschoosingvariousotheroptions,it’sclearthatUKlogisticsoperatorsaredividedonBrexit.

Pessimismonnodeal

Nearlytwothirds(62.4%)oflogisticscompaniesthathaveEUcustomerssaytheyexpectlessbusinessintheeventofano-dealBrexit,comparedtojust16.3%whoexpectlessbusinessifadealisagreed.

Pessimismaboutlevelsofbusinessinano-dealscenarioalsoextendstooperatorsthathavenon-EUcustomersintherestoftheworldorjustcustomersintheUK,reflectingwidespreadconcernsamongrespondentsaboutthelikelyimpactofno-dealonthewiderUKeconomy.

UnderliningthegeneralsentimentamongourrespondentsthattheywouldpreferfuturetradewiththeEUtocloselyresemblepresentarrangements,58.1%ofrespondentswithEUcustomersexpecttheretobenochangeinlevelsofbusinessiftheUKandEUfinallyshakehandsonadeal.25%

No activity

Internal action

External action

Established labour and employee initiatives

Taken steps to manage currency fluctuations

Initiated contingency planning in respect of our footprint / trade tariffs

Engaged with professional advisors to provide us with support

Employed specialist staff

Other

0% 5% 10% 15% 20%

Inthelast12months,whatactionshaveyourcompanytakeninresponsetoBrexit?


Withrepresentativesin108countriesworldwide,theDepartmentforInternationalTradehelpsUKbusinessestoacquirelocalknowledgeanddeveloprelationshipsinoverseasmarkets.WithintheUK,theirregionalnetworkofinternationaltradeadvisersandexportfinancemanagersadviseandsupportbusinessesfreeofcharge.Servicesincludeone-to-onesupport;eventsandwebinars;marketinsightresearch;andtrademissionswhichconnectUKbusinesseswithlocalpartners.

www.great.gov.uk

UKExportFinance

UKExportFinance(UKEF)aimstohelpUKbusinessessucceedinternationally.WorkingalongsidetheUK’sExportCreditAgency,UKEFhelpsUKcompaniestowinandfulfilexportcontracts.Asitentersitssecondcentury,itisrecognisedasagame-changerforUKbusinessesofallsizesandinallsectors,whowanttomakethemostofglobalexportopportunities.Findoutmoreat:

gov.uk/government/organisations/uk-export-finance.

Casestudy:MechathermInternationalLimited

MechathermInternationalLimited,aleadingproviderofequipmentforthealuminiumandothernon-ferrousindustrialsectors,exportstocountriesacrosseverycontinent,buthasfoundparticularsuccessintheMiddleEast.In2017,thecompanywasapproachedtosupplyto

supplyfurnacesandequipmentunderamulti-milliondollarcontractwithAluminiumBahrain(Alba)intheMiddleEast.

Mechathermneededsufficientworkingcapitaltoallowittofulfiltheorder,sothebuyerofferedpartofthepaymentupfront.However,thetermsoftheexportcontractrequiredMechathermtoprovideanadvancepaymentguarantee,aswellasaperformancebondfromBarclaysasreassuranceforthebuyerthatMechathermwoulddeliveronitscommitments.Inordertoissuebonds,thereisusuallyarequirementforacashdeposit,tooffsettheriskofdefaultonthebonds.Thismeantthat,duetothehighvalueofthecontract,itwasunfeasibleforMechathermtobeabletobothputupthecashforthedepositandstillretainsufficientliquiditytofulfilthecontract.

BypartneringwithUKExportFinanceBarclayswereabletohelpMechathermsecurethedealthroughtheBondSupportSchemewhichguaranteed80%ofthevalueofbothbondsbeingoffered.Thisultimatelyfreedupthecashthecompanyneededtodeliverthisimportantpieceofbusiness.Asaresult,MechathermwasabletosuccessfullysecurethecontractwithAlba,andsecureitsreputationasaqualitysupplierintheregion.Thecompanywasalsoabletoincreaseitsheadcount,andismakingpreparationstogrowitsexportingeffortsintheMiddleEast.

UK Export Finance

Global reach, local insight: How the Department for International Trade can help your business

“WithouttheUKEFguarantee,wesimplywouldn’thavehadthefinancialflexibilitytoaffordthedepositrequiredofusandwewouldhavebeenforcedtoturnthecontractdown.We’reextremelygratefulforthesupportgiventousbyBarclaysandUKEF–thefactthatwewereabletotakeonthisorderhasbeenagreatsuccessforthecompany.”

Andrew Riley, Chairman Mechatherm International Limited


Opportunities to add value

With customers seemingly very willing to change suppliers, logistics companies are looking to differentiate themselves by expanding their service offering and through personal relationships.

Ourlatestsurveyonceagainreflectsthehighlycompetitivenatureofthelogisticssector.Nearly60%ofoursurveyrespondentssaytheirmainsourceofnewbusinessinthepast12monthshasbeencustomersswitchingproviders–upveryslightlyon2018.

Combinedwiththe7.3%whowonbusinessprimarilyfromcustomersoutsourcingforthefirsttime,morethantwothirdsofrespondentssaynewcontractscamefromnewcustomers,ratherthanexistingones.

Inthisenvironment,operatorsclearlyfeeltheyneedtodifferentiatethemselvesfromtheirrivalsbyprovidingvalue-addedservices–suchaspick-and-pack,premiumpackaginganddeliverytracking.Closeto31%saythishasbeenthekeydriverbehindcontractwinsinthepast12months.

Theimportancethatoperatorsattachtopersonalrelationshipstowinnewbusinesshasbeengrowingoverthelastfewyearsinoursurveys,perhapsreflectingthereassurancethiscangivetocustomersinmoreuncertaintimes.Thisyear,nearlyaquarter(23.7%)ofoperatorssaythisisthekeytocontractwins,up2%on2018.

Qualityofservice–whichmightsimplymeanthatcustomershaveanamedcontactattheirlogisticssupplierwhocanprovideend-to-endassistance–isseenbymanyrespondentsasakeyfactorinsortingoutthewinnersfromthelosersinthiscompetitivemarket.

Lessemphasisonprice

Underliningthefocusonvalue-addedservices,oursurveyshowsthat,whileclearlystillimportant,respondentsbelievethatpricinghasinfactbecomelessimportantinwinningnewbusiness.Just21.3%ofrespondentsseepriceasoneofthemostimportantfactorsincontractwins,downslightlycomparedtoour2018findings,andatitslowesteverlevelsinceoursurveybeganin2012.Thisyearisalsothefirsttimepricehasbeenseenaslessimportantthanpersonalrelationships.

Thissentimentisechoedbyonerespondentwhocommentsthatcustomers“arebeginningtorealiseyougetwhatyoupayfor”.

Tocounterthethreatoflosingcontractstorivals,operatorsrankmaintainingtheirexistingcustomerbaseastheirmainfocusoverthenext12months.Onenotablechangeinour2019surveyisthatrespondentsputcostcontrolinclearsecondplace,aheadofwinningnewcontracts.

E-commerceseenaskeygrowtharea

Asconsumerscontinuetomigratetoonlineshopping,22.6%ofoperatorsseee-commerceasthesectorlikelytoprovidethegreatest,mostimmediate,newbusinessopportunitiesforlogistics.Thisisariseof2.7%comparedtooursurveylastyear.

Around20%ofrespondentsseethefoodanddrinkindustryasthenextmostattractive,perhapsindicatingacontinuingdefensivestrategyoffocusingonarelativelyrecession-proofsectoramidthecurrenteconomicuncertainty.

Newcustomersswitching

59.4%

Currentcustomersexpanding

18.8%

Currentcustomersrenewing

13.5%

Other2.9%

Newcustomers

outsourcingfor the first time

7.3%

Whathasbeenthesinglemainsourceofnewbusinesswoninthelast12months?

“WeaknessofsterlingcontinuestosupportthecompetivenessofUKexports,andtheUKisoneofstrongestintheworldforonlinee-commercefashionretail.”

Respondent comment


Value addedservices30.8%

Personalrelationships

23.7%

Pricecompetitiveness

21.3%

Scale ofnetwork15.4%

Other3.0%

Marketconsolidation

of serviceproviders

5.9%

Automotive

Construction

FMCG / food / beverages

Industrial / manufacturing

Pharmaceutical / healthcare

Retail - bricks and mortar

Retail - e-commerce

Technology

Other

25%0% 5% 10% 15% 20%

Inthelast12months,whatarethekeydriversbehindyourcontractwins?

Whichindustriesareprovidingthegreatestnewbusinessopportunitiesforthelogistics

andtransportsectorin2019?


Inresponsetoanewfocusforoursurveythisyear,morethantwothirds(71.6%)ofbusinessessaytheywillbeinvestinginsustainable,environmentalor‘green’projectsinthenext12months.

Justover40%ofsurveyrespondentssaythemaindriverforinvestingin‘green’projectsiscommercialrationale,while35.8%citethechancetoenhancecompanyreputationand22.4%makethedecisiontoinvesttomeetregulatoryrequirements.

Largeroperatorsshowthemostenthusiasmforinvestmentingreenprojects(80%),buttheshareofsmallercompanieswhoplantospendinthisareaisstillroughlytwothirds(65%).

Whenaskedwhatincentivesbestsupportorencouragealogisticsindustrydrivetowardsgreatersustainability,surveyrespondentsseethemostimportantfactorsascustomerpressure,tax/financialincentivesandgovernment-ledregulation,eachslightlyaheadof‘moralpressure’.

Long-termcostbenefits

Investmentinsustainabilityisseenbymanyoperatorsaskeytomanagingcostsinthelongterm.InitiativesliketheCleanVehicleRetrofitAccreditationScheme(CVRAS)aimtocutharmfulairpollutionemissionsfromheavygoodsvehiclesandvans,butthereisalsoacommercialgaininthatmeetingthetargetsoftheschemewillreducefuelusage.

Green measures seen as good for business

Operators highlight the commercial drivers of investment in sustainable, environmental and ‘green’ projects.


Thecertificationschemesupportstheoperationofso-calledCleanAirZones.AgrowingnumberofUKcities,includingManchester,Glasgow,SheffieldandOxford,arefollowingLondon’sexampleoftougheningairpollutionrules.BeingCVRAS-approvedisthereforeincreasinglyimportanttoallowcontinuedaccesstoalldestinationswithoutincurringfinesfornon-compliance.

ThereareanumberoffinancialandtaxincentivesavailabletocompaniesthatinvestinupgradingorreplacinglegacyvehiclestobecomeCVRAS-approved.Oneexampleisthe

100%capitalallowancethatcanbeclaimedforzero-emissiongoodsvehiclesboughtbefore1April2021.

Someofourrespondentshighlighttheinconsistentandfragmentedapproachtoairpollutionstandards,anissuethathasalsobeenrepeatedlyraisedbytheFreightTransportAssociation7.Onerespondentpointstoa“lackofjoinedupthinkingonnewfueltechnologiesbetweenvehiclemanufacturers,governmentandfuelsuppliers”.

However,withsustainabilityissuesincreasinglyimportanttoprocurementdecisions,acompany’sgreencredentialshavebecomeakeycompetitiveadvantageinwinningnewcontracts.

“Environmentwillbecomethemainfocusandpressurewillfallonourindustrytobecarbon-neutral.”

Simon Reed, Chief Executive Officer, Simarco International

No28.4%

Yes71.6%

Other

Peer group pressure

Customer pressure

Tax/financial incentives

Government-led regulation

Industry-led regulation

Collaborative programmes or schemes

Moral pressure

Trade association initiatives

0% 5% 10% 20%

Inthenext12monthswillyourcompanybeinvestinginanysustainable/environmental/

’green’projects?

Whatincentivesbestsupport/encourageanindustrydrivetowardsgreatersustainability?


Consolidation set to continue

Strong levels of M&A activity as operators pursue economies of scale and expanded service offering.

Athirdofcompaniessaytheyarelikelytomakeacquisitionsintheyearahead.

Althoughthisisdownbyslightlymorethan1%comparedto2018,thismaintainsalevelofintendedM&Aactivitythathasbeenaboutthesamesince2015,withtheexceptionofasingledownwarddipinthesecondhalfof2016.

Comparingresponsesbysizeofcompany,moreofthesmalleroperators(38%)saytheyarelikelytomakeanacquisitioninthenext12monthsthanlargeroperators(27%).

Economiesofscaleandexpansionofserviceofferingremainthekeydriversofdealactivityasoperatorslooktobringdowncostsandboostmargins.DanishfreightfirmDSV’sproposedacquisitionofPanalpinaisjustoneexampleofM&Aactivitydrivenbytheobjectiveofachievingeconomiesofscale.Thedeal,ifapproved,willalsostrengthenDSV’sgeographicalreachintheAsia-PacificandtheAmericasregions.

Agoodtimetosell?

LogisticssectorM&Astrategiesreflectthegrowingimportanceofabroader,value-addingserviceofferingtowinnewbusinessandholdontoexistingcustomers.Theformationoffull-servicebusinessEVCargofromsixdifferentlogisticscompaniesisacaseinpoint.Furtherdeals,includingtheacquisitionofUKwarehousingandfulfilmentcompanyCoreManagementLogisticsbyRhenus,reflectthecontinuingconsolidationtrend.

M&Aactivityislikelytocontinue,withbusinessvaluationsremaininghealthyintheshortterm.Theprospectofcontinuedpoliticalvolatilityinthenearfuture,whichmightseetheintroductionofchangesinpoliciesaroundtaxbenefitsforentrepreneurs,isalsolikelytoencourageoperatorstogetdealsdone.

Commentsfromsurveyrespondentssuggestthelevelofconsolidationinthesectorpresentsopportunitiesforsmallercompaniesofgreatercollaborationwithretailersand3PLs,andofdifferentiatingthemselvesbyofferingmorepersonalisedcustomerservice.

No - we are unlikely to make acquisitions

66.7%

Yes - because we want to enter a

new sector1.0%

Yes - because we want access to

specific customers3.1%

Yes - because we want to achieve

economies of scale14.6%

Yes - because we want to expandour service offer

13.5%

Yes - because we want to achievehigher margins

1.0%

Areyoulikelytomakeanyacquisition(s)overthenext12monthsand,ifso,whatisthemain

driverbehindthis?


Growing interest in automation

System upgrades are the main technology focus, but the sector is showing an increasing appetite for automation.

Updatingexistingsystemswillonceagainhavethebiggesttechnologyimpactonthesectoroverthenextthreeyears,accordingtooursurvey,butoperatorsarealsoshowinggreaterinterestintechnologyasasolutiontotheshortagesofbothdriversandwarehousestaff.

Aswithlastyear’ssurvey,themainfocusformostoperators(23.3%)isupgradingorreplacingexistingresourceplanning,warehouseorfleetmanagementsolutions.Thereiscontinuedinterestwithinthesectorininnovativedigitalwaysofworkingusingbigdataandanalytics,cloudservices,andleveragingonlinecustomerplatforms.

Morethanoneintenrespondentschosesustainabilityandenvironmentalapplications(anewoptioninthisyear’ssurvey)aslikelytohavethebiggestimpact–morethanroboticsandautomationortheInternetofThings.

Driverlesstrucksclosertoreality?

Whiletheuseofdronesintheshorttermislargelydismissed,therehasbeenasmallbutsignificantincreaseinthoserespondentswhoexpecttheuseofdriverlesstrucksorplatooningtohavethebiggestimpactonthemoverthenextthreeyears.

Thiscouldsimplybedowntoagreaterawarenessofdriverlesstechnologythroughmediacoverageofongoingtrials.Thisspring,forexample,adriverlesselectriclorrycalledtheT-PodhasbegunmakingdeliveriesusingapublicroadonaSwedishindustrialestate,withestimatesofa60%reductioninroadfreightoperatingcostscomparedtoadieseltruckwithadriver.8Elsewhere,theUSPostalServiceistestingself-drivingtrucksona1,000-milemailrunbetweenPhoenixandDallas.9

Whetherornottheseautonomouslorrieswillinfactbegenuinelydriverlessintheshortterm–theUSPostalService’sself-drivingtrucksstillhaveasafetydrivertointerveneifnecessary–ourresearchindicatesthatlogisticsoperatorsarebeginningtoseethistechnologyasclosertobecomingarealityasasolutiontotheshrinkingpoolofdrivers.

Bearinginmindtheexpectedcostofinvestingindriverlesstrucks,itseemslikelythattheearlyadoptersofsuchtechnologywillbelargercompanies.Thiscouldprovidethemwithasignificantcompetitivecostadvantage,applyingfurtherpressuretotheirsmallerrivals.

Meanwhile,clean-airorlow-emissionzonesareagainmentionedbyanumberofsurveyrespondentsasachallengeduetothecostsinvolvedinupgradingor

replacingvehiclefleets,butalsoasadriveroffuelcostsavingsoverthelongerterm.

Thedevelopmentofelectricvehiclesissimilarlyseenasbothanopportunityandachallenge,althoughlimitedrecharginginfrastructureislikelytorestricttheirusetourbanareasinitially.

Increasingwarehouseautomation

Oursurveyfoundthatwhilelogisticsoperatorsdon’tseetechnologybringingbigchangestowarehouseoperationsintheshort-term,theyexpectittobeincreasinglyimportantoverthenext10years.

Thevastmajority(81.1%)ofrespondentsexpectthatlessthan10%oftheiroperational-basedwarehouseworkforcewillbereplacedbytechnology,automationandroboticsinthenextfiveyears.Justoverafifthdon’texpectittoreplaceanyoftheirstaffatallduringthattimeframe.

Thiscouldbeacaseofthepublicitythistechnologyhashadinthemediaracingaheadoftheactualdemandforit,orthelengthoftimeitwilltakeoperatorstobegintointegratethenewtechnologyintheiroperations.EvenAmazon,wellknownforautomationtechnologyatitsdistributioncentres,sayspeoplewillalwaysbeneededatitswarehouses.10


0%Big data and

analytics/blockchain

Roboticsand

automation

Leveraging thecollaborative/

sharingeconomyand/or

customerplatforms

3Dprinting

Use of drones

Internet of Things

Cloudservices

Driverlesstrucks/

platooning

Upgrades/replacementof existing

TMS/WMS/ERP/fleetsolutions

Sustainability Other

5%

10%

15%

20%

25%

00% 0-9% 10-29% 30-49% 50-69% 70-100%

Within Five Years

Within Ten Years

10%

20%

30%

40%

50%

60%

Whichsupplychaintechnologyapplicationswillhavethebiggestimpactonyourbusinessoverthenextthreeyears?

Acrossthenextfive-and10-yearperiods,whatshareofyouroperational-basedwarehouseworkforcedoyouexpecttoseereplacedby

technology,automationandrobotics?


However,ourfindingsshowthat43.2%ofrespondentsexpecttechnology,automationandroboticstoreplace10%-29%oftheirworkforcewithin10years,withnearly17.6%predictingitwillreplacesomewherebetween30%and49%oftheirstaffoverthenextdecade.Withlogisticsbusinessescontinuingtofindtherecruitmentofwarehouseworkersastruggle,theuseoftechnologyislikelytobekey.

Thisshifttotheuseofautomationandroboticsinwarehousesshouldreleasestafffrommorerepetitiveandlow-skillroles,providingthemwiththeopportunitytoupskill.Thisinturnisachanceforcompaniestotrainandpromoteexistingemployeestomiddlemanagementposts,ratherthanhavetohireexternally.

Knowledgegap

Whilemanycommentsfromourrespondentshighlightthepotentialbenefitsofnewtechnology,onerespondentdoesaddthatstaffneedtraininginhowtoexploitthelatestsoftwaretools.Otherrespondentsfearthatincreasedautomationwillreducethevalueoftheservicesthatlogisticscompaniesprovide.Asonerespondentsays:“TheAmazoneffectdrivesvalueoutofthedistributionmodelandcreatesaracetothebottom.”Theseresponsesillustratethebroadrangeofopinioninrelationtoembracingnewtechnologyinthesector.

“Thereisagapinunderstandingwhattechnologycanbring,becausetheindustryisstillmostlyoccupiedwithstaffwhoareprobablygearedtooldertechnicalsolutions,asopposedtotheverylatestmoderntypesofsoftware/applications.”

Steve Twydell, Executive Chairman, 3t Logistics


Industry insight: Cygnia Logistics Disruption equals opportunity

Cygnia Logistics is one of the UK’s leading logistics and fulfilment specialists. Chief Executive Glenn Lindfield explains how a determination to stay agile and innovate routes to market for customers is helping the company to expand.

It’snocoincidencethatthelogoforCygniaLogisticsisaswan.Thebusinessisallaboutbeingcalmandpoisedinalogisticsmarketplacethatisoftenanythingbut.

RankedasoneoftheMidlands’100fastest-growingcompaniesbyBusinessInsider,atCygniawehaveachievedaverageannualgrowthofjustunder50%overthepastfiveyears.Thisisthankstoinvestmentinourpeopleandfacilitiestoservicethefast-growinge-fulfilmentande-commercesectors.

Witha25-yearheritageindiversemarkets,2018markedasignificantturningpointinthedirectionofthecompanyasweintroducedanewleadershipteam,launchedanewbrandandmadesignificantinvestmentsinourwarehouseandITcapabilitiestohelpfast-trackgrowthinourdiversecustomerbase.

Wecurrentlyoperateover500,000ft2ofwarehousing,employcirca600staff,providewarehousing,systemsintegration,pick-and-pack,co-packingservices,final-miledeliveryandglobalreturnsmanagementtoe-commerce,omni-channel,retailandautomotiveOEMs.

Investingtosupportourcustomers

Typically,ourcustomersarelookingtoadapttoanincreasinglydisruptedmarketplaceandareatthepointwheretheyneedtooutsourcetheirlogisticstoanexpertpartnerwhocanhelpthemfulfilcustomerrequirements,seamlessly.Wehavesupportedpopularbrandsacrossavarietyofsectors,suchasMoltonBrown,WhittardsofChelseaandFord.

ManycustomershavegrownwithCygnia.Weprideourselvesonbreakingdownbarrierstonewmarkets,empoweringbrandstodeliverexceptionalservice,openingupnewcustomerchannelsanddiversifyingtheiroffering.ThisapproachhasbeenparticularlysuccessfulwithonlinebeautybrandssuchasFeelunique,omni-channelcosmeticsbrandssuchasRevolutionBeautyandpureplaye-commercebrandssuchasMoonpig.

Overthepast18months,Cygniahasmadesignificantinvestmentstosupportourcustomers,manyofwhomareexperiencingsustaineddouble-digitgrowth.

Weworkhardtoserviceparticularlydemandingsectors,suchasbeauty,wherevloggersandinfluencerscancreate

mini-peaksindemand.Ourabilitytomanagebothmicroandmajorpeaksinordershasresultedinsuccessfulpartnershipswithbrandsthatneedtorespondtoincreasesinsales,drivenbyonlinereviews,socialmediainfluencers,plannedpromotionalcampaignsandseasonalmilestones.

AtCygnia,ourcustomersarefacedwitharapidriseinconsumerexpectations–whetheritbeleadtimes,cut-offtimes,returnsmanagementortheneedtoofferaverybroadrangeofdeliveryoptions.Increasingly,we’reseeingastrongfocusontheexperientialsideofthefulfilmentprocess.Fulfilmentplaysabigroleinthecustomer’soverallperceptionofabrandsoit’scriticaltogeteveryaspectright.

Sustainabilityinpackaging,fulfilmentandlogisticsisincreasinglyimportanttobrandsastheybecomemoreaccountabletotheircustomers,whilecontinuallylookingforwaystostandout.

Withanewandhighlyexperiencedleadershipteaminplace,wehavesetoursightsfirmlyonhelpingambitiousbusinessesrespondtoadynamicandrapidlychangingretaillandscapethatisrichwithopportunityandchallenges.


Ourclientsrecognisetheimportanceofhavinganinnovativeandexperiencedlogisticspartnerinbuildingpositivecustomerexperiences.Havingthebestpossibleuserexperiencedrivesbrandloyalty–especiallywhenitcomestolifestyleproductsinareassuchashealth,wellbeingandbeauty,gifting,sportsandelectronicequipment.

Ourcustomerscomefromawidevarietyofmarkets,rangingfromhealthandbeautyandFMCGthroughtohigh-techandautomotive,buttheyallfacecommonchallenges.Howcanthesupplychainhelpmegrowmybusiness?Howcanitimproveconsumers’experience?Howcanitbesecureandresilientinsuchafast-movingenvironment?

Consumerexpectationsaregrowingexponentially.Thishassignificantlydisruptedmanymarkets,particularlymulti-channelretail.Wehaveacrucialroletoplayinhelpingourcustomersnavigatethechangesthatcomewithdigitalisationandensuringtheycontinuetothrive.

Thedisruptioncausedbypureplayande-commercesectorplayersiswelldocumentedandit’spromptingchangethroughoutretail.Whethercompaniesaremovingmoreoftheirretailfromthehighstreettoonlineorlookingtoprovideaseamlessomni-channelexperiencefortheircustomers,we’llhavealogisticalsolutionthatenablesthemtostandoutandaddvaluetotheiroffer.

Ouraimistoremainagileandresponsive,sowecontinuetoinnovateroutestomarketandmeetfuturedemands.

Workinginthebeautysectorhasshownhowwecanreallyhoneouroffertomeetoneofthemostdemandingonlineretailsegments.Ourplanistomaintainthatgrowthtrajectorybyservingthewiderspectrumofe-commercemarkets.

Glenn LindfieldChief Executive Cygnia Logistics Ltd www.cygnia.net


Industry insight: Agility Preparing for Brexit

Graham Larder, who leads Agility’s Brexit-planning team in the UK, reveals the thinking behind the company’s contingency planning.

ForAgility,likemanyofourcustomers,theprincipaldifficultyinBrexitplanningis,ofcourse,theuncertainty.Inmanywaysourapproachcanbesummedupas:hopeforthebestandplanfortheworst.

Withglobaloperationsacrossmorethan100countries,includingroadfreightservicestoandfromEurope,we’vebeenmonitoringBrexitdevelopmentssincethe2016referendum.We’vealsobeengarneringinsightfromtheBritishInternationalFreightAssociationandotherindustrysourcestohelpuswithourplanningprocess.

Newcustomsarrangements

It’sclearthemostdisruptivescenario–ano-dealBrexit–willmeanadditionalcustomsprocessesonshipments.Asamultinationalcompanywealreadyhavein-houseexpertiseincustomsmatters,butit’sacaseofensuringwehavesufficientresourcestodealwiththepossibilityofasignificantlyhighervolumeofimportandexportpaperwork.

Thatmeansmorepeopletodealwiththeworkloadandsystemscapableofprocessingtheadditionaltransactions.Allofthisredtapeisasharedresponsibilitywithourcustomers,sowe’relettingthemknowwhatwe’regoingtoneedfromthemintermsofinvoices,commercialdocumentsandotherinformationtomakesurewecan

processtheirgoodsthroughcustomsaseffectivelyaspossible.Infact,we’vebeentalkingtoourcustomersaboutawholespectrumofpotentialimpacts–andhavecreatedadedicatedpageonourUKwebsite(www.agility.com/brexit)thattakesthemthroughwhattheirrequirementscouldbeinthefuture.

Talkingtosuppliers

Agilityhasanassetlightmethodologywhenitcomestosomeofitstransportarrangements,soanotherimportantfeatureofourcontingencyplanningistalkingwithoursuppliers.

Thisincludescheckingwithourtruckingcompaniesthattheyunderstandwhattheymightneedtodotocomplywithnewregulationsaroundroadfreight.We’realsotalkingtoalloursuppliersabouttheBrexitpreparationsthey’vemade,theimpactano-dealscenariocouldhaveonthemandtheirplanstocontinuetoprovidetheserviceweneed.

SupportingEUstaff

Ofcourse,Brexitpotentiallyimpactsfreemovementofpeopleaswellasgoods.Agilityemploysaround350peopleat16officesintheUKbusiness,includinganumberofEUnationals.

Wehavetakenstepstoretainandsupportourstaffsothatwecancomplywithanynewlegislation,includingmakingsuretheyhavetherightdocumentationandunderstandwhattheyneedtodointheeventofano-dealBrexit.


Co-ordinatedapproach

LeavingtheEUwillclearlyhaveanimpactonAgility’sEuropeanbusinesstoo.We’rekeepingourEuropeancolleaguesappraisedwithwhat’shappeningintheUKandtheyaresharingtheirplanswithussowecanhaveanend-to-endsolutionforourcustomers.Aco-ordinatedapproachacrossEuropeiscrucial.

Sofar,ourbusinessvolumeshaven’tbeenimpacteddramaticallybyBrexit.However,we’reseeingindicationsofhowthemarketprofilemightchange,withsomecustomersmovingpartoftheirinventoryfromtheUKtoEUalternativesandconverselyEUbasedcompaniesincreasingtheirinventorylevelsintheUK.

Thatfallbackcontingencyissomethingalotmorecompaniescouldpursueifthereisnodeal.Conversely,we’realsoseeingsomenon-EUcompaniesstartingtothinkabouthavingseparatedistributioncentres–onefortheEUandonefortheUK.

Futureopportunities

Thesearecertainlyunsettlingtimes,butwhatevertheeventualBrexitoutcome,especiallyifit’snodeal,logisticscompaniesoperatingbetweentheUKandtheEUwillneedtoinvestinnewresources–bethatpeople,systemsorjustmovinginventoryaround.AtAgilitywehavethatinvestmentreadytodeploysowecancontinuetoserveourcustomers.However,thequestionatthefrontofourmindsispreciselywhento‘pressthebutton’onthatinvestment?

Brexitcouldcertainlybringopportunitiesaswellaschallenges,butthekeyisforlogisticscompaniestobeasagileaspossibleintheirthinking.Forthosewithanentrepreneurialmindset,disruptioncanopennewdoorsasotherdoorsclose.However,asitstandsthere’snogettingawayfromthefactthatitisfarfromcertainastowhenandhowsuchopportunitieswilldevelop.

Graham Larder, Quality and Project Manager Agility Logistics Ltd www.agility.com


OurConfidenceIndexhasfallenfrom52.6in2018to49.7thisyear,thelowest-everlevelandthefirsttimeithasslippedbelow50

Morethanhalf(58%)ofrespondentssaycurrentbusinessconditionshavebecometougherinthepast12months

While62.4%ofsurveyrespondentsthinkbusinessconditionswillgetmoredifficultintheyearahead,closetothreequartersstillsaytheyarelikelyorverylikelytomakeasignificantcapitalexpenditure

Thelogisticssectorcontinuestostruggletofilldrivervacanciesandplanstoincreaseheadcountinthenext12monthsareatalowest-everlevel

WhilejustasmanycompaniesreportthatBrexit-relatedissueshavebroughtanincreaseincustomerdemandasthosethatreportadecrease,nearlyhalfofoperatorssaytheirbusinesshascommittedtolowerlevelsofinvestmentorputinvestmentdecisionsplansonholdbecauseofBrexit.

Value-addedservicesandbuildingpersonalrelationshipswithcustomersareseenasthekeytowinningnewcontracts

CompaniespursuingexpansionofserviceofferingoreconomiesofscalewilldrivecontinuedstrongM&Aactivity

Systemupgradesarethemaintechnologyfocus,butthesectorisshowingincreasinginterestinautomation

Morethantwothirdsofbusinessessaytheywillbeinvestinginsustainable,environmentalor‘green’projectsinthenext12months

Key takeaways


AllfiguresanddatarelatingtotheUKLogisticsConfidenceIndexwithinthisreporthavebeenresearchedbyAnalytiqa.

Theindexcalculationisbasedontheproportionofrespondentsreportingeitheranimprovement,nochangeordeteriorationwithinthesector,scoredfrom0to100.Therefore,anumberover50indicatesanimprovement,whilebelow50suggestsadecline.Thefurtherawayfrom50theindexis,thestrongerthechangeovertheperiod.

About the report


Richard SmithHead of Transport & Logistics Corporate Banking, Barclays

RichardisaRelationshipDirectorinBarclaysCorporateBankandisthesectorleadforthebank’sTransport&LogisticspropositionintheUK.Richardprovidesclientswithaccesstothebank’sfullsuiteofproductsandsolutions,includingbutnotlimitedtocashmanagement,debtfinancing,foreignexchangeandinvestmentbanking.

HehasworkedatBarclaysforeightyears,spendingthemajorityofthattimefocusingonthetransportandlogisticssector.PriortojoiningBarclaysheranthefinanceandcommercialfunctionsforadiversebusinessintheEastMidlands.

RichardhasaMastersinCivilEngineeringfromLoughboroughUniversity,aProfessionalCertificateinBankingfromtheInstituteofFiscalStudiesandaCertificateinInternationalTreasuryManagementfromtheAssociationofCorporateTreasurers.

T:+44(0)2071164499E:[email protected]

Philip Bird Transport and Logistics Partner Corporate Finance, BDO LLP

PhilipisaPartnerinBDO’sCorporateFinanceteam.Hehasover20years’corporatefinanceexperience,advisingonmergersandacquisitions,privateequitytransactions,fundraisingaswellasprovidinggeneralstrategicadvice.

OverthelasttenyearsPhiliphasfocusedonthetransportandlogisticssectorandhasworkedwithawiderangeofclients,includingmajorlistedgloballogisticsgroupsaswellasprivatelyheldcompanies.

PhiliphasbeenheavilyinvolvedintheLogisticsConfidenceIndexreportsinceitsinceptionandhasalsowrittennumerousarticlesforthetradeandfinancialpressonissuesthataffectthelogisticssector.

PriortoBDO’smergerwithMooreStevensLLP,PhilipworkedwithGrantThornton,RoyalBankofScotland,HawkpointandBankofAmerica.

T:+44(0)7887821007E:[email protected]

About the authors

To find out more about how Barclays and BDO can support your business, please contact us.*Pleasenote:thesearemobilephonenumbersandcallswillbechargedinaccordancewithyourmobiletariff.


Additional sources1http://www.worldbank.org/en/news/press-release/2019/06/04/global-growth-to-weaken-to-26-in-2019-substantial-risks-seen

2https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/januarytomarch2019

3https://home.kpmg/uk/en/home/media/press-releases/2019/06/retails-sales-show-biggest-decline-on-record.html

4https://www.independent.co.uk/news/business/news/ford-bridgend-factory-closed-wales-job-losses-gmb-union-a8946606.html

5https://www.cips.org/en-GB/supply-management/news/2019/june/manufacturing-slips-into-contraction/

6https://fta.co.uk/media/press-releases/2019/may/15-per-cent-of-hgv-driver-vacancies-cannot-be-file

7https://fta.co.uk/press-releases/20180418-fta-part-of-hgv-coalition-asking-minister-for-fair-treatment-in-clean-air-zones

8https://www.independent.co.uk/news/world/europe/driverless-lorries-electric-deliveries-public-roads-sweden-einride-a8917451.html

9https://www.wsj.com/articles/u-s-postal-service-starts-testing-self-driving-trucks-11558432801

10https://www.bbc.co.uk/news/technology-48590628

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