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Logistics operators looking towards mergers and acquisitions in volatile market, Barclays reports

Marcin Jozwiak on Unsplash

Logistics industry confidence has dropped 12 points over the past year, according to the 2022 Barclays-BDO Logistics Confidence Index, with increased costs, economic pressures and concern over talent shortages seeing confidence levels fall to 50.41.

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.

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.

Competition for talent was so high that HGV drivers qualified to drive the heaviest vehicles saw advertised salaries increase by an average of 25% in the past year alone (Q1 2022 vs Q1 2021).

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.

“Understandably, the circumstances of the past year have led to a drop in logistics sector confidence. Price rises, supply chain challenges, a scramble for talent, and strikes at UK and European ports have taken their toll,” said Lee Collinson, head of manufacturing, transport & logistics at Barclays Corporate Banking.

“However, it’s encouraging to see that businesses are looking ahead at capex and finding ways to grow. Many are looking to invest in mergers and acquisitions, as well as ESG initiatives and staff welfare programmes to remain competitive, and it’s clear they see investment in tech as key to managing their cost bases and improving efficiency. This spirit of determination and innovation has come to define the UK logistics industry and looks set to continue.”

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