No other industry sector recorded such a high figure
New government data shows that larger transport and storage companies are feeling the strain of rising competition and labour costs more than almost any other sector, sparking fresh warnings about the wider impact on the UK economy.
An ONS Business Insights survey conducted in August revealed that among firms employing 10 or more people, 33.2% of transport and storage businesses – covering logistics, parcels, haulage and warehousing – reported competition was impacting their turnover. No other industry sector recorded such a high figure.
ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., said: “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.”
Jinks added that the situation carries significance beyond logistics alone: “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 ONS data suggests competition is a less pressing concern for smaller players. Across the entire transport and storage sector, only 18% of firms of all sizes flagged competition as a challenge, indicating that smaller couriers, man-and-van businesses and self-employed drivers may be faring better than larger operators.
Labour costs are also emerging as a major burden. According to the survey, 42.3% of transport and storage companies with 10 or more employees reported that the cost of labour was impacting turnover – a figure only exceeded by accommodation and food services at 61.3%. By comparison, 37% of manufacturers and just 29% of retailers employing 10 or more staff cited labour costs as a problem.
Jinks noted: “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.”
Staff shortages are compounding the problem. Almost a quarter (23.9%) of transport and storage companies with 10 or more employees said they were experiencing worker shortages in August – higher than manufacturers (16.7%) and retailers (14.5%), and second only to the education sector (24.9%).
“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,” Jinks added.
Looking ahead, Jinks suggested that survival will depend on partnerships and adaptability: “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.”