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Intelligent software, digital transformation & smart technology solutions for banking, financial and the insurance sectorLogistics sector sees ‘remarkable recovery’, as confidence bounces back
The UK logistics sector has seen a ‘remarkable recovery’, as confidence for the future bounces back following near record lows in 2023.
According to the Barclays-BDO UK Logistics Confidence Index 2024, which assesses confidence and expectations in the UK logistics sector, this year’s score is 57.6, up from 47.3 in 2023 – the second lowest score ever recorded. Aside from the COVID-19 bounce back score of 2021, this is the highest level of confidence reported since the second half of 2015.
The improvement in sentiment has been attributed to a more stable and manageable trading environment, with 82% of logistics operators expecting business conditions to stay the same or get better in the next 12 months. As a result, more than two-thirds of respondents (70%) say their turnover will increase over the next year, with 50% expecting profits to also rise.
The latest research from Barclays Corporate Banking and accountancy and business advisory firm BDO LLP, highlights a renewed focus on growth priorities, following the sharp uptick in confidence. Nearly three-quarters of logistics firms (73%) say cost control and increasing market share are strategic growth priorities, with 65% expecting significant capital expenditure in the next 12 months – a slight drop on last year’s figures.
Jason Whitworth, partner at BDO, said: “This year’s Logistics Confidence Index is a remarkable recovery from 2023, when we saw business sentiment plummet in the face of challenging market conditions.
“The marked change in sentiment recognises the more favourable trading outlook, and the resilience businesses have built up from successfully navigating a difficult period, which has placed immeasurable pressures on logistics providers. While investment intentions have fallen marginally on 2023 figures, greater clarity from the Government on initiatives, policies and support, together with future trading relations with Europe, will help to drive future growth.”
Interestingly, while attracting and retaining talent will always be a top priority for logistics companies, the need for investment in future leaders is high on the agenda, with more than half (52%) ranking succession planning as a leadership and governance priority in a bid to tackle issues like decarbonisation and the demand for systems integration and AI.
The research also shows that M&A appears to be off the agenda. According to the Logistics Confidence Index, only a third of logistics providers (34%) are likely to make an acquisition this year.
Whitworth added: “The expectation for M&A in the next 12 months is at its lowest level since 2019, which reflects a number of factors: high interest rates, trading challenges impacting performance and a relatively short supply of appropriate quality assets at an acceptable price.
“Against this backdrop, many logistics leaders appear to be more focused on ‘getting the basics right’ and optimising operational performance, although there is a clear expectation and recognition of the need for further consolidation across the industry.”
In relation to driving sustainable change, according to the Barclays-BDO UK Logistics Confidence Index 2024, seven out of 10 respondents say the expectations of customers and suppliers is the biggest driver of ESG activity.
Making a positive environmental impact is a key driver, while corporate reputation is also an important factor, up 45% on last year. This reflects a recognition of the importance of how businesses are viewed by stakeholders.
James Lean, Industry Director, Barclays Corporate Banking, commented: “We are encouraged by this year’s confidence levels across the sector with firms seemingly more accepting and successfully working around global challenges. The report also points to essential capex and ongoing investment to protect and grow future revenue. As the sector continues to meet the decarbonisation expectations of its customers, it is brilliant to see more trialling and use of electric vehicles as part of the transition. At Barclays we are looking for ways to encourage further confidence from the sector which includes an appetite to lend more to businesses looking to grow.”