Fewer transport & storage firms plan to axe jobs or raise prices compared to any other sector
Many industry sectors say they will raise prices and cut staff numbers in the face of rising employment costs, the latest ONS survey reveals. However, transport & storage firms plan to absorb the increases as much as possible, says the home delivery expert Parcelhero.
A new survey by the government’s Office for National Statistics (ONS) reveals that, in late May, 40% of all businesses and over three quarters (77%) of companies with 10 or more employees reported that their staffing costs have increased over the last three months. Compared to late February, there has been a 41% increase in businesses with 10 or more employees reporting increased employment costs, including wages, bonuses, National Insurance and pension contributions.
Worst hit are accommodation & food businesses. 73.8% of accommodation & food sector companies of all sizes said their employment costs have increased. In contrast, a markedly lower 37.8% of transportation & storage sector firms (the category which includes logistics, parcels, haulage and warehousing companies) reported an increase in staffing costs. Of their industry partners, 45.6% of manufacturers and 43.2% of retailers reported a rise.
The rise in costs reported by many firms is largely a result of increased employer National Insurance contributions and a 6.7% increase to the National Living Wage. Both of these measures were originally announced in chancellor Reeves’ 2024 Autumn Budget but only took effect this April.
The home delivery expert Parcelhero says the new ONS survey shows that, compared to other industry sectors, transportation & storage sector firms seem to be taking a more moderate approach in response to staffing cost rises.
Parcelhero’s head of consumer research, David Jinks MILT, says: ‘Only 4.8% of transport & storage firms plan to cut staffing levels to meet increases in employment costs. That’s the lowest number of planned layoffs of any industry sector. It’s a stark contrast, for example, to the hard-hit accommodation & food sector: 22.8% of these businesses plan to reduce staff numbers to cope with increasing employment costs. It’s also significantly fewer than transportation & storage companies’ partners in the manufacturing and retail industries. 13.2% of manufacturers and 11.9% of retailers plan to reduce staff numbers in response to future rises in employment costs.
‘Similarly, only 15.3% of transport & storage firms plan to raise their prices to cover increasing employment costs. That’s the lowest number of companies of any sector planning price rises. For example, a whopping 48.7% of accommodation & food businesses plan to up their prices to compensate for increasing staff costs. It’s also a significantly smaller amount than transport & storage companies’ partner businesses. Of these, 32.6% of manufacturers and 32.5% of retailers say they will up their charges.
‘Of course, this begs the question: how will transport & storage sector firms deal with increased staffing costs if they aren’t going to let staff go or increase their prices? The answer is that 26.6% of transport & storage companies say they plan to absorb these costs within their profit margins. That’s more than most other sectors, although a whopping 42% of health & social work activity businesses also plan to do the same. 18.2% of manufacturers and 24.1% of retailers plan to absorb these rises.
‘If they can afford to swallow increased staffing costs within their profit margins, these figures appear to show that transport & storage sector companies are better set than many other industry sectors. However, the truth is that the majority of these businesses work with very slim margins in a highly competitive environment. As a result, their contracts may be so tight that they cannot pass on costs through increased prices.
‘Likewise, with 9.6% of transport & storage firms saying that they are already unable to meet demands because of a shortage of workers, getting rid of staff is simply not an option for many. Therefore, they have no choice but to swallow the costs that will eat into their already slim margins. How long this situation is sustainable remains to be seen.
‘Ultimately, it’s those stores with a combined High Street and online offering that are most protected against staffing cost increases and unexpected events. 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