Competition costs are having a bigger impact on larger transportation & storage companies than on any other business sector, whilst labour costs are hitting the sector more than any other except hospitality, according to a survey by the Office of National Statistics (ONS).
The latest ONS Business Insights survey, conducted during August, revealed 33.2% of larger transport & storage firms, employing 10 or more staff, said competition is currently impacting their turnover. This compares to 30.3% of similarly sized retailers and 23.5% of larger manufacturers.
Commenting on the survey results, home delivery specialist Parcelhero said this week that the figures expose the wafer-thin margins some logistics & supply chain companies are working to and warned these results do not augur well for the wider economy.
David Jinks, Parcelhero head of consumer research, said: “No other industry sector reported such a high number.”
He added: “This is likely because larger UK 3PLs 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 warned that, since the sector acts as a bellweather for the UK economy, this rise in competition costs in the sector is concerning.
“It’s been rightly said that when Britain’s logistics companies catch a cold, the UK economy sneezes,” he explained.
However smaller companies in the sector have not been as badly affected by competition costs, according to the survey, with only 18% reporting competition as an issue impacting their turnover.
“The implication of this is that smaller couriers, man and van firms and self-employed drivers are not experiencing such severe competition as larger transport & storage sector businesses,” Jinks said.
Wage costs are also particularly affecting larger transport & storage sector businesses, according to the survey, with 42.3% of companies in this sector, employing ten or more people, reporting that labour costs are impacting their turnover.
Jinks said: “That’s a total only outstripped by accommodation & food services, 61.3% of which said labour costs were impacting their turnover. In contrast, looking at business sectors that are more closely allied to transport & storage, 37% of manufacturers and just 29% of retailers employing 10 or more people reported that their labour costs were impacting turnover.”
He added: “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.
“During August, 23.9% of transport & storage companies with 10 or more employees said their business was experiencing a shortage of workers, which is more than any other sector except education (24.9%).
“In comparison, only 16.7% of manufacturers and 14.5% of retailers employing 10 or more people were experiencing a worker shortage.”
Pointing to Parcelhero’s report ‘2030: Death of the High Street’, which argues that retailers must develop an omnichannel approach, embracing both online and physical store sales, Jinks added: “‘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.”
