Logistics Confidence Index

Confidence and expectations in the UK logistics sector

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. To mark the tenth anniversary of the Logistics Confidence Index, we looked back at the industry’s high and lows over the past decade. Over 100 senior decision-makers, including chief executive officers and managing directors, identified the biggest impact on the logistics sector over that time and what changes they expect over the next ten years.

A realignment of confidence

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.

In fact, our 2022 index figure is now marginally below what we recorded a decade ago, but remains higher than the last pre-pandemic result in 2019.

It’s fair to say that there are still reasons for optimism, despite the gathering clouds on the economic horizon and ongoing concerns around skills shortages and the labour market.

There is currently still growth in the UK logistics market with some areas of very strong demand, with many operators well positioned to take advantage of this.

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Key Takeaways

• Our Logistics Confidence Index has fallen to 50.4, a significant drop from 62.5 last year and the third lowest figure of the past 10 years, but higher than the last pre-Covid figure in 2019.
• More than seven out of ten operators predict business conditions will be tougher in the year ahead, with just 7% foreseeing them getting better.
  
• Three fifths of operators are predicting they will experience a rise in turnover in the next 12 months, but are a little less optimistic about profitability, with 45% anticipating a rise in profits in the next year.
  
• Respondents remain upbeat about capital expenditure over the next 12 months with 81% anticipating significant spend in this area. 
  
• An impressive 45% of respondents expect to make an acquisition in the next year – the second all-time high in a row – with the main drivers being achieving economies of scale and expanding service offerings.
  
• Half (50%) of operators say the single largest source of new business in the last year was from customers choosing to switch to them from other operators, with accessing value added services the key driver for switching.
  
• Winning business from existing customers will be the key focus for driving profit growth in the next 12 months for three quarters of companies.
  
• Staff shortages, increasing labour costs and rising fuel prices continue to be companies’ biggest challenges but other issues are coming to the fore over next 12 months. Falling demand and volumes and increased customer pricing pressure are named as major challenges by around two thirds of respondents in both cases.
  
• Nine out of 10 say they have improved pay and conditions to address skills gaps in the past 12 months, but a growing shortage of office-based staff has become operators’ biggest staffing challenge after lack of drivers and warehouse people.
  
• Twice as many operators are now intending to use tech platforms to collaborate with other companies to cut operating costs and reduce their carbon footprint, with 10% naming it as one of their tech investment priorities in the next year.
  
• Employee welfare and staff wellness has become a major priority for respondents, with 53% naming it as the key ESG activity they intend to pursue in the next 12 months. In terms of the key drivers of ESG activity within logistics companies, commercial considerations are top of the agenda, with nearly six out of ten (59%) respondents saying it is to attract new customers or achieve top-line growth.
  

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