Over half of the UK’s largest logistics companies are now foreign-owned, with more likely to fall into overseas hands over the next few years, according to new research from Barclays Corporate and accountants Grant Thornton.
During the past five years, foreign ownership of firms making up the top 50 UK logistics companies has increased to 52% – a rise of 40 per cent. These businesses have a combined turnover of 69% of the total sector.
Merger and acquisition (M&A) activity in the sector will increase over the next 12 months, according to 58% of respondents to the survey, with more than a third actively planning acquisitions.
Corporate finance director at Grant Thornton, Philip Bird, said: "Many medium-sized logistics firms need to consider mergers or acquisitions to avoid being squeezed out by major operators offering economies of scale or niche players offering tailor-made solutions.
“UK logistics firms need to be more successful in expanding overseas if they want to remain independent. After all, more than two thirds of the UK's top 50 total turnover is generated by firms based outside the UK."
Inflation is viewed as the biggest issue facing the sector over the coming 12 months. More than three quarters of respondents plan to invest in vehicles over the next 12 months – a result of rising fuel costs. Some 83% are concentrating on improved vehicle efficiency as a measure to counter rising costs, however only 15% of businesses surveyed are currently hedging against fuel prices.
Supply chain disruption ranks low, with two thirds of those surveyed stating they are not reassessing their business plans in light of recent geopolitical and natural disasters.
Rob Riddleston, head of transport and logistics at Barclays Corporate, said: "The logistics sector is always going to have to face the vagaries of the foreign exchange (FX) markets and fuel price volatility. While fundamental movements in FX and fuel rates have to be managed by the sector, companies can hedge against short and medium-term volatility in price movements."
The survey also shows that employment levels in the logistics sector are now back to 2007 levels with operating margins holding up well throughout the past five years. Some two-thireds expect up to 10% growth over the next year, while almost half (47%) intend to increase staff numbers.
Philip Bird continues: "The sector is hugely competitive, both domestically and internationally, and logistics companies have had to be flexible to stay profitable. The ability to increase margins and invest in vehicles suggests that operators have understood the importance of maintaining a firm grip on their cost base as well as there being a degree of buoyancy in core markets, which also helps to explain the growing interest in M&A within the sector."
Some 82% believe the Government does not supportive the sector enough, with a majority calling for a cap or reduction in fuel duty.
Rob Riddleston concluded: "It is pleasing to see that, despite the headwinds of the last three years, the industry is looking forward positively to the future. The logistics sector is the vital element in helping world trade grow and the economy to become more efficient."
As part of its July edition, Swindon Business News is producing a special feature analysing the strength and opportunities of the Swindon area's logistics sector. For further details contact Ann Freegard on 01793 616544 or email ann@swindon-business.co.uk
