the uk logistics confidence index 2019 - barclays€¦ · have been compiled to create the uk...
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![Page 1: The UK Logistics Confidence Index 2019 - Barclays€¦ · have been compiled to create the UK Logistics Confidence Index 2019. Confidence at lowest-ever level Our overall Confidence](https://reader031.vdocuments.site/reader031/viewer/2022011901/5f0724ad7e708231d41b855d/html5/thumbnails/1.jpg)
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
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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
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likelytobenefitfromchangingmarketconditions.
Thesectorclearlyrecognisestheneedtoinvestinnewtechnologies,withmostoperatorsfocusingonupgradingorreplacingexistingsystems.Butthereisalsoincreasedinterestamongoperatorsinautomationtosolveworkforceshortages.
Finally,anewquestioninoursurveythisyearrevealsthatmorethantwothirds(71.6%)ofbusinesseswillbeinvestinginsustainable,environmentalor‘green’projectsinthenext12months.Thisappearstobeprimarilydowntothecommercialrationaleforsuchmeasures,withoperatorsanticipatingthebenefitsofcuttingfuelusageandcontinuedaccesstotheincreasingnumberofUKcitiesintroducingCleanAirZones.
Wetrustthatyouwillfindthisreportinformativeandhelpful.
Richard SmithHeadofTransport&LogisticsCorporateBanking,Barclays
Philip BirdTransportandLogisticsPartnerCorporateFinance,BDOLLP
Jason WhitworthCorporateFinanceAdvisoryPartnerBDOLLP
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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
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“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?
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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.
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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?
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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.
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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?
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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
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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?
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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
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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
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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?
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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.
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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?
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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?
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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
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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?
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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
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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.
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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
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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.
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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
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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
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AllfiguresanddatarelatingtotheUKLogisticsConfidenceIndexwithinthisreporthavebeenresearchedbyAnalytiqa.
Theindexcalculationisbasedontheproportionofrespondentsreportingeitheranimprovement,nochangeordeteriorationwithinthesector,scoredfrom0to100.Therefore,anumberover50indicatesanimprovement,whilebelow50suggestsadecline.Thefurtherawayfrom50theindexis,thestrongerthechangeovertheperiod.
About the report
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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.
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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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