The UK’s haulage and logistics sector is idling on the hard shoulder – and running out of gas fast. While a few lucky operators manage to keep moving forward, a growing list of commercial transport businesses entering administration in recent weeks has shone a new spotlight on this fragile yet critical link in the supply chain.
Figures from the Department for Business show that close to half (49.2%) of all haulage companies that were set up since 2019 have now entered insolvency proceedings or closed down. The same data reveals that an estimated 33% of businesses in the sector are seen as “maximum risk’, up from 22% the year before.
Scale is no protection: Q4 2024 has so far seen logistics administrations large and small, in all regions of the country: Caledonian Logistics north of the border; McGregor Logistics in Doncaster, Alton-based PL Transport; and a Notice of Intention from Smart Hub Logistics in Hemel Hempstead.
Much is beyond the logistics industry’s control and trouble often begins far upstream: disruption in the Middle East and the impact on the movement of trade through the Red Sea has been huge; traffic has plummeted by two-thirds through this key shipping route. The effect further down the chain is dramatic – even without Brexit, Ukraine and global economic woes.
So far in the 21st century, globalisation has returned the carrying of goods and people to the forefront of business. Possibly seen as ‘old economy’ sectors by those focused on areas such as technology and media, transport and logistics are vital to building and growing trade and tourism between countries, as well as for managing supplies for even small, domestic enterprises. At its most basic level, huge growth in consumer e-commerce has fuelled exponential growth in home deliveries beyond the capabilities of any national postal carrier. It is no surprise that research shows clear links between a strong and financially secure transport sector and long term economic growth.
There are, however, perennial challenges. Even stripping out the hike in fuel prices for transport companies over recent years, the industry is navigating a maze of issues including environmental considerations, accessibility, safety and security. As the largest producers of carbon dioxide emissions, companies in this area are faced with the high costs of updating fleets of vehicles in order to embrace the sustainable, ‘clean’ energy that customers, regulators and other stakeholders now demand.
Longer term, there may be a more positive change in the sector’s dynamics. Supply chain experts are very excited about the potential of Artificial Intelligence (AI) to improve returns for businesses involved in the transporting, ordering, stocking and selling of goods. At the same time, the world road transport organisation, the IRU, warns Europe’s driver shortage could top two million by 2026. In the next three years, 30% of drivers will retire, but the rate of replacement apparently needs to be seven times higher.
Faced with Iimited room for manoeuvre when pricing competition appears, it is imperative that businesses in transport and logistics are structured to operate as efficiently internally as the service they promise their customers. The checklist might include: balance sheet optimisation through asset finance and leasing; funding warehousing and new hubs; ownership structures and succession planning; due diligence for acquisitions; planning for merger integration; debt restructuring; and business planning for loan applications.
If you are a transport and logistics business in need of help reviewing options for long term survival, please don’t hesitate to get in touch for a free initial consultation.
Written by David Buchler, Chairman at Buchler Phillips, UK based independent boutique firm with an impeccable Mayfair heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.