Competition and labour costs hit larger transport & storage companies more than any other sector
An ONS survey reveals competition costs impacted more transport & storage firms employing 10 or more employees than any other sector in August. Similarly, labour costs impacted the sector more than any other except hospitality. The home delivery expert Parcelhero warns that when transport & storage firms catch a cold, the UK’s economy sneezes.
A survey by the government’s Office for National Statistics (ONS) has raised concerning issues for the transport & storage sector. Looking at the results for companies employing more than ten people, competition costs have had a bigger impact on transportation & storage companies than any other business sector. The home delivery expert Parcelhero says these figures expose the wafer-thin margins some logistics & supply chain companies are working to.
Parcelhero’s head of consumer research, David Jinks MILT, says: ‘The result of the latest ONS Business Insights survey, conducted during August, revealed 33.2% of transport & storage firms (the category that includes logistics, parcels, haulage and warehousing firms) employing 10 or more staff say competition is currently impacting their business. No other industry sector reported such a high number.
‘In comparison, 30.3% of retailers employing 10 or more people (the second-highest response) and only 23.5% of manufacturers said that competition is currently impacting their business turnover.
‘This is likely because larger UK 3PLs (third-party logistics companies) in particular are working to very tight contracts with lean profit margins and little wiggle room to cover unexpected cost increases. However, it’s not just 3PLs. Competition is an issue that is impacting companies across the supply chain and logistics industry. It is no wonder that many long-established names in haulage have failed in recent times.
‘Rising competition costs are concerning not just for the transport & storage sector, but for UK plc as a whole. Transport & storage is a bellwether for the UK’s economy. The issues it experiences first will often spread throughout other sectors later. It’s been rightly said that when Britain’s logistics companies catch a cold, the UK economy sneezes.
‘Interestingly, the issue of competition is not such a major concern for smaller companies in the sector. Looking across transport & storage firms of all sizes, not just those employing 10 people or more, only 18% reported competition as an issue impacting their turnover. The implication of this is that smaller couriers, man & van firms and self-employed drivers are not experiencing such severe competition as larger transport & storage sector businesses.
‘Of course, one of the factors reducing profit margins is wage costs and these are particularly affecting larger transport & storage sector businesses. A hefty 42.3% of companies in this sector, employing ten or more people, acknowledged that the cost of labour is impacting their turnover. That’s a total only outstripped by accommodation & food services, 61.3% of which said labour costs were impacting their turnover. In contrast, looking at business sectors that are more closely allied to transport & storage, 37% of manufacturers and just 29% of retailers employing 10 or more people reported that their labour costs were impacting turnover.
‘The big problem for larger transport & storage firms is that they are already experiencing staff shortages. In a competitive environment, that means they’re not in a position to push down labour costs as they bid to attract new workers. During August, 23.9% of transport & storage companies with 10 or more employees said their business was experiencing a shortage of workers, which is more than any other sector except education (24.9%). In comparison, only 16.7% of manufacturers and 14.5% of retailers employing 10 or more people were experiencing a worker shortage.
‘One certainty is that it will be those transport & storage companies that are partnered with retailers with strong in-store and online sales that will ultimately triumph. Parcelhero’s influential report “2030: Death of the High Street” has been discussed in Parliament. It reveals that retailers must develop an omnichannel approach, embracing both online and physical store sales. Read the full report at: https://www.parcelhero.com/content/downloads/pdfs/high-street/deathofthehighstreetreport.pdf