Over two thirds of logistics firms are predicting that Brexit will have an adverse effect on their business whilst more than half are unhappy at the level of government support, a report from Logistics UK and accountancy firm CBW has revealed.
However the report also revealed signs of optimism with almost a third of logistics leaders more likely to undertake merger and acquisition (M&A) activity this year than in 2020, indicating the sector is set for further consolidation, with valuations rising.
The report - UK Logistics Sector M&A Index Q1 2021: Interim Survey Results - looks at trends in M&A activity, including valuations. It also assesses the impact of sector issues such as Brexit, the Covid-19 pandemic and the industry skills shortage.
David Wells, chief executive at Logistics UK, said: “The past 12 months have placed untold pressures on the logistics sector: 68% of survey respondents say they expect a negative outcome for their business from Brexit and the UK’s new trading relationship with the EU, and just under 50% of business leaders say they are satisfied with the support provided to the UK logistics sector by the government in response to the pandemic.
“However, M&A activity and company valuation trends are encouraging: 39% of survey respondents say valuations of logistics companies have increased in the past 12 months, a 17% rise on 2020, and 57% say valuations will continue to increase in the next year – a 30% rise on 2020."
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He added: “With the ongoing success of the vaccine rollout, and as parts of the economy reopen, industry optimism for the next 12 months among our respondents has increased from the previous survey.
“And the sector is already thinking proactively about new business models and strategies in response to Brexit: our findings show that 23% of logistics operators expect to diversify their service offering.
“A successful, resilient logistics industry will be key as the economy reopens and, while many sectors of the economy are yet to fully bounce back, businesses across logistics will provide a good indicator of the health of the nation’s future ambitions for financial growth.”
Philip Bird, partner and head of logistics and corporate finance at CBW, says: “The results of our latest survey suggest that the sector is more optimistic than it was when we undertook our first survey last year and this is reflected in the 23% increase in the M&A Index number.
“Further consolidation is on the horizon and supported by stronger valuations. There is no doubt that the logistics sector has played, and will continue to play, a key role in helping the UK economy and society through the pandemic so far - whether it has been ensuring the availability of food in supermarkets or vaccines at points of delivery, this has increased the attractiveness of logistics companies to other operators and investors.”
