Member Article

Confidence grows in the Yorkshire logistics sector

The findings of the latest UK Logistics Confidence Index report a surge in confidence amongst the sector during the second half of 2013, compared to the previous six months.

The bi-annual Index, commissioned by Barclays and Grant Thornton UK LLP, which surveyed over one hundred senior decision-makers within logistics businesses, recorded an overall confidence reading of 74.9, a leap of almost 25% on the previous six months and 43% year on year.

Following a promising start to the year, confidence in the sector continued to grow throughout 2013 and the latest figure marks the highest index rating and largest half-year increase since the survey was launched in H1 2012.

However, the sector is still grappling with some big challenges as margin pressure, customer demand, fuel costs and market volatility are cited as the greatest cause for concern over the next six months.

Of those surveyed, over three-fifths (61%) said that operating conditions were more favourable, compared to 26% in the first half of 2013.

Only 7% stated that the current outlook had worsened with 32% saying that conditions had stayed the same. Looking ahead to the next six months, the majority of respondents believe the outlook is likely to improve further with over half (55%) expecting more favourable conditions.

35% believe it will stay the same and just 10% believe conditions will deteriorate.

In line with this more positive outlook, 84% of respondents expect their turnover to increase in the next year. Just under half (48%) are expecting an increase of 5% or more with 16% forecasting a rise of 10% plus, which is well ahead of the current UK inflation rate.

Size does not appear to be a factor with regard to turnover expectations as the same percentage of larger and smaller operators (84%) are expecting an increase over the next year, up from 60% and 74% respectively on the first half of 2013.

Similarly, the rise in optimism translates into increased profit expectations with nearly three-quarters (73%) of logistics operators surveyed expecting a rise over the next twelve months.

Over a third (38%) are forecasting a rise of 5% or more, with 16% anticipating an increase of 10% plus. Less than one in ten (9%) foresee a decrease in profitability, compared to 15% in the first half of 2013.

Debbie Mullen, head of Yorkshire for Barclays Corporate, commented: “With the logistics sector a lead indicator on manufacturing and retail activity, the marked rise in confidence is an encouraging sign for the UK economy.

“For nearly a third of the industry, customers expanding their contracts are the main source of new business, up from a fifth in the previous six months.

“However, while confidence has improved, this is only the start of an upturn in the sector where challenges remain and margins continue to bite.”

Phil Whaley, director in corporate finance at Grant Thornton in Yorkshire, said: “Operators have entered 2014 on a strong footing, confident that the wider economic revival will continue to drive demand for logistics services.

“This momentum is encouraging for the sector, however the relatively high level of competition in the sector is putting continued pressure on margins.

“Operators would be wise to keep an eye on value-add opportunities which ingrain them deeper into supply chains and strengthen their roles as critical partners in clients’ success.”

This was posted in Bdaily's Members' News section by Clare Burnett .