We don’t need government handouts, just confidence to invest, Logistics UK finance forum hears

While the logistics industry does not need more government handouts to fund the move to net zero carbon emissions, it does want more clarity and certainty over key policy decisions to enable the industry to make the huge investments that will be needed with confidence.

That was the message from Logistics UK’s first finance forum sponsored by Demica held in London on September 12.

Introducing the event, Logistics UK president Phil Roe said that the sector was facing some short term challenges as a result of a stagnant economy and declining volumes, with the hire and reward sector under particular pressure. At the same time operators needed to find “significant funds” to invest in areas like skills, decarbonisation and productivity to ensure the long term health of both the industry and the wider UK economy which depends so heavily on logistics.

Logistics UK policy director Kate Jennings added that 8% of UK jobs were in logistics but that the government “takes it for granted”.

“People only think of us when there is a problem,” she said. “We are not asking for more government money but we need to work together.”

According to a report on how logistics can help the UK improve its productivity written by Logistics UK and Oxford Economics, the UK logistics industry plummeted from fourth in 2014 to joint 19th in 2023 in the World Bank Logistics Performance Index, partly as a result of Brexit making trade with the EU more complex. The report estimates that if the UK could climb to the top of the LPI rankings it would boost GDP by almost £8bn in 2030 through a 0.27% improvement in productivity across the UK economy.

But the investment needed is being delayed due to economic headwinds and uncertainty. Evri has tripled in size over the last three years to become the UK’s largest parcels delivery network, with 7,000 employees and 20,000 self-employed couriers delivering 700m parcels last year.

Alan Richardson, Evri chief financial officer, said that as a result of the chaos of the Covid-19 pandemic, uncertainty over government policy on self employment and now rampant inflation “some of our bigger investment choices are now on hold” and the company is having to “think about where we put our big bets on carbon reduction and the labour market”.

“We opened our biggest site in Barnsley in 2022 and once we had decided to do it, it was relatively pain-free. But we don’t have another lined up because we are unsure about future growth. We need more confidence and certainty to make those decisions.”

Evri now has three hubs and 25 depots and finding sites for more depots in London was a “struggle”, Richardson added. “It’s doable as there are sites – but they are expensive.”

The location of big warehouse developments is also facing growing uncertainty as operators looking to install more automation and charge electric vehicles (EVs) increases the demand for electricity.

Charles Blake, senior director in the logistics team at property developer Segro, said that in the last few years the market had been “electrified” by Brexit and Covid-19, with significant growth in demand for large warehouses.

But he said the logistics industry needed to change the public perception that it was an industry paying minimum wage and that was just about big sheds and scary trucks.

“People get angry when things don’t arrive next day now,” he said. “It is a far cry from the days of ‘allow 28 days for delivery’. But this huge revolution is not recognised, especially by local government.

“Getting new sites through the planning system takes 10 years and then they are gone in three years so there is a big gap in supply.”

 

 

Power requirements were growing for large sheds and one obvious solution was to install solar panels. But Blake said that the electricity distribution network was not set up to handle exports of electricity, which these sites sometimes would be when solar power output exceeded demand on the site. “It doesn’t work if we can’t export,” he said. “On a large site the solar installation might be 30MVA but the average draw is only 7MVA to 8MVA. Charging for electric HGVs will be crucial and national policy is not dealing with it.

“We need more coordination not more money from the government.”

Jennings agreed, saying it can take “10 to 15 years” to get a power supply upgraded.

For global businesses like DHL Supply Chain, the UK operation has to compete for investment with other countries, said Becky Taylor, the giant 3PL’s chief financial officer for the UK and Ireland.

“We employ 40,000 people here but I need to put the UK at the forefront of global decisions,” she said. “ESG [environmental, social and governance] is a massive theme for us. This is a real step change and we need to make big investments to reduce emissions.”

Taylor complained that while DHL was the 12th largest employer in the UK it had not been consulted over the government’s changes to workplace pensions. “We need to find a way of accessing those conversations,” she said.

She also called for more “certainty and stability” in government policy because investment horizons were 15 to 20 years and the upheavals in UK government policy of recent years made it difficult to secure funding.

Taylor agreed that new warehousing was in short supply and new space was significantly more expensive than older sites. “It is a big step to ask customers to pay more,” she said,” but we need automation get the efficiency and that is a big increase in capital expenditure. It just makes it harder to make those decisions.”

While some in the industry call decarbonisation a challenge, others – including Volvo Trucks public affairs director Simon Villanueva – prefer to see it as an opportunity.

“This technology revolution is probably the biggest since the invention of the wheel or at least the internal combustion engine,” he said. “It is extremely difficult and complicated to decarbonise.

“But each truck emits 220 tonnes of CO2 every year. It can’t continue. EVs have a part to play in making your business more efficient and they are here today, not pie in the sky.”

Villanueva also criticised government policy on the plug-in truck grant. “A battery EV is twice the price of a diesel so we get a £25,000 grant – but then we are charged a £25,000 import tariff,” he said. “That has to change.”

He also said operators were being put off buying electric trucks because everyone expected the next generation to be a lot better. “That is true but if an EV will work now it will work tomorrow,” he argued.

“Range is not really a challenge for certain use cases and you need to get ahead of the curve. This is not a fad.”

The government should also stop “outlawing” good technology such as low carbon fuels including biofuels and hydrogen used in internal combustion engines that can achieve real reductions in carbon emissions.

“Volumes of biofuels are not certain so we need a clear government policy on them so the industry can plan,” he said. “Just give us the targets and we will work out how to achieve them.”

Jennings echoed these concerns, saying that while the government claimed it was technology neutral its insistence on zero tailpipe emissions for all new trucks from 2040 meant it was effectively “anti internal combustion engine”.