Logistics UK 2024 report covers industry challenges, optimism levels, and government priorities

On the occasion of the opening day of Multimodal 2024 in Birmingham on Tuesday, trade body Logistics UK published its 'The Logistics Report Summary 2024'[1]. The report offers a detailed insight into the health of the UK logistics industry, including warehousing, intermodal, and all the different freight transport modes. The document also makes Logistics UK's lobbying plans clear, with there being evident optimism that a new administration can better assist the sector going forward.

Survey results show mixed optimism levels across the logistics industry

The report states that in 2023, the UK logistics sector generated GBP1.3 trillion in revenues, a substantial 25.8% increase from the previous year.

Logistics UK stresses that this growth underscores the sector's critical role in the UK economy, contributing GBP185 billion in value, approximately 12% of the total non-financial economy. Additionally, Logistics UK says that there have been moderate improvements when it comes to trading with the EU and recruiting skilled personnel. Another positive is that warehouse capacity has increased by 4.3%, highlighting the sector's continual expansion and its preparedness for future growth.

However, Logistics UK's survey of over 500 respondents from the logistics sector showed overall business confidence slightly dipped to 53.4 in January 2024 from 54.9 the previous year. In addition to this, revenue generation declined to 53.4. Investment levels remain stable at 64.0, indicating ongoing efforts towards growth and development, while competitiveness holds steady at 61.0.

Moreover, the adoption of new technology is robust, with a score of 75.6 evidence of solid innovation in the sector. As regards individual transport modes, the report states that sentiment in the UK's road freight sector is projected to remain the same in 2024, with warehouse-road activity expected to decline slightly. On the plus side, sentiment in the sea freight industry is projected to improve from 48.7 to 55.4.

Finally, air freight sentiment is forecast to skyrocket from 28.3 to 64.6.

Trade and connectivity challenges

The report highlights how trade disruptions have significantly impacted the sector. Chief of these have been the attacks in the Red Sea that have seen cargo ships diverted from the Suez Canal to the Cape of Good Hope, thereby adding at least 10 days to journeys and increasing shipping costs. Nevertheless, despite these disruptions, Logistics UK says that the UK's integration into the global market remains strong.

It bases this claim on data from 2023 showing that exports of goods and services rose by GBP36.8 billion to GBP842.6 billion, while imports slightly decreased, resulting in a narrowed trade deficit of GBP53.0 billion. Another key observation in the report has been a evident shift in UK road haulage from accompanied haulage across the Dover Straits to unaccompanied trailers across the North Sea. Logistics UK notes that this reflects adjustments to new trade realities post-Brexit.

Efficiency and operational difficulties

The report also touches on the challenging economic landscape faced by stakeholders in the UK's logistics industry.

Among the issues the sector has had to deal with are fluctuating fuel prices and inflationary pressures, which continue to influence demand for haulage, distribution, and just-in-time deliveries. Adding to these challenges has been a more unreliable road network, as well as climate change resulting in more frequent and intense extreme weather events that have disrupted transport networks and damaged infrastructure. In Logistics UK's opinion, these challenges highlight the need for strategic planning and investment in resilient infrastructure to ensure the continued efficiency of logistics operations.

Sustainability

On a more positive note, as the logistics sector strives to meet decarbonisation targets, Logistics UK finds that significant progress has been made in reducing greenhouse gas emissions.

The organisation cites 2023 data that shows domestic transport emissions fell by 1.4% to 111.6 MtCO2e, marking the first decrease since 2020. However, it also stated that the sector still faces substantial obstacles, including high costs for low carbon fuels, insufficient infrastructure for electrification, and inconsistent regulations. Looking forward, the report notes that the UK Government has announced ambitious targets for rail freight growth and investment in alternative fuels, with 62.9% of logistics firms planning to maintain or increase their investment in alternative fuels in 2024.

The report stresses that these initiatives are crucial for achieving net-zero goals and ensuring the long-term sustainability of the logistics sector.

Business investment priorities

The Logistics Industry Survey 2023/24 contained within the report has also revealed a sectoral shift in investment priorities. The survey indicates that there is a general decrease in the intention to expand physical infrastructure, with plans to purchase additional warehousing and distribution premises dropping from 21.8% in 2023 to 15.2% in 2024, and plans to rent additional premises falling from 21.4% to 15.0%.

Similarly, intentions to relocate business premises have decreased from 19.2% to 14.7%, and plans to acquire other businesses have reduced from 22.8% to 18.0%. Conversely, there is an increase in the intention to diversify businesses, rising from 24.9% to 27.0%, and to consolidate businesses, up from 23.4% to 24.5%.

UK warehousing sector

Sectoral shifts have taken place in the UK warehousing as well, according to the report.

Citing Global Commercial Real Estate Services data, the report notes that total warehouse space take-up was 22.1 million square feet in 2023, a 42.0% decrease from 2022 but aligning with the pre-pandemic 10-year average. Third-party logistics providers (3PLs) led the market, accounting for 36.0% of deals, an increase from 33.0% in 2022.

The manufacturing sector saw a rise in take-up, capturing 27.9% of the market, up from 23.2% the previous year. Post and parcels services accounted for 8.5%, retail - food for 8.8%, retail - online for 6.4%, and other retail sectors for 11.5%, with a small percentage attributed to other sectors at 0.8%.

Reaching out to the UK's new government

Looking ahead, the report concludes that key priorities for the government include reducing fuel duty, cutting bureaucracy, and improving infrastructure and regulations. The comments here are noteworthy as the UK will hold a general election in a few weeks.

It is widely expected that the vote will result in a newly-formed government. Logistics UK is also advocating for a public-private partnership to unlock investment and enable the sector to maximise its economic benefits. "Our priorities include ensuring costs on the sector are sustainable, infrastructure is invested in, innovation is supported, the transition to a green economy is fair, skills pipelines are strong, and that trade is backed, with reduced friction at our borders.

This is a big and vital agenda which is why we are calling for the appointment of a dedicated minister for logistics and supply chain, backed by the centre of government to deliver for the sector and the UK," said David Wells OBE, Chief Executive of Logistics UK.

In addition to the above, the trade body is proposing the establishment of a cross-Whitehall Logistics Productivity Forum, whose aim would be to ensure cohesive and effective policy implementation.

Finally, Logistics UK considers investment in a national logistics network, planning reforms, and innovation funding as essential components for supporting the sector's growth and adaptability in the face of today's evolving challenges.

References

1. ^ The Logistics Report Summary 2024' (logistics.org.uk)