Region’s logistics firms remain optimistic despite challenges
PUBLISHED: 06:30 18 July 2012
East Anglian logistics companies are promisingly optimistic in light of the current economic challenges but focusing on cost cutting and core business is restricting innovation, according to new research from Barclays and financial and business advisory firm, Grant Thornton.
The newly launched UK Logistics Confidence Index, which includes a survey of key decision makers from the region’s logistics industry, shows that although the majority of UK businesses plan to invest over the next six months (63pc), they continue to tackle the same on-going issues, leaving innovation to take a back seat.
The biggest concern facing logistics businesses over the next six months is margin pressure, cited by one third of respondents, followed by fuel costs (20pc).
However despite the ongoing turmoil, only 15pc of respondents were concerned by Eurozone uncertainty.
Ian Carr, Haulage and Logistics expert at Grant Thornton East Anglia, said: “The Haulage and Logistics sector is a key contributor to East Anglia’s GDP and provides essential support for the regional economy. Haulage is also a barometer for the economy as a whole as the more activity there is, the more goods need to be transported.
“The ports of Felixstowe and others locally are reliant on the Chinese economy and its slow down will bring greater pressure on the sector where margins are already thin. Overlay the European situation and the challenges are obvious but the fact that confidence still prevails shows the resilience of the industry and indicates a brighter picture for the future.
“The next 12 months will be a period of consolidation in the sector, creating more companies of scale which are able to invest in innovation and diversification. Continuing to do more of the same is simply not an option. We also believe that the really successful companies will be operating on an “asset light” basis and co-ordinating the provision of services across the supply chain.”
More than three quarters (78pc) of those surveyed stated conditions were ‘very difficult’ or ‘somewhat difficult’ – but despite tough trading conditions 53pc expect an increase in profits over the next six months while 47pc expect to take on more employees.
Just under half (42pc) said they were ‘likely’ to invest, while 21 per cent they were ‘very likely’ to expend capital in the next six months
Peter Brown, managing director of Fakenham-based haulier Jack Richards & Son said it was among those firms feeling confident about the future.
“We continue to invest in vehicles and our people, and would like to invest further; however, the only obstacle to this is the uncertainty that the Eurozone situation is placing on future borrowing costs,” Mr Brown said.
In terms of how logistics businesses intend to achieve their growth plans over the next six months, 51pc are focused on winning new contracts, 18pc with margin improvement and 17pc cite maintaining existing customers as a key focus.
Almost a third (29pc) are likely to make acquisitions over the next six months, with nine per cent stating they are currently looking at an acquisition target and 20pc actively reviewing opportunities.
Matthew Peek, corporate director East Anglia at Barclays, said: “While some of the region’s logistics companies recognise the need to innovate to survive, the day-to-day pressures make this difficult to achieve. However, it is pleasing to see an air of optimism in the industr