50% of logistics operators in the UK and Ireland plan to acquire in 2023, research shows.
Trust among companies in the logistics sector has fallen sharply over the past year. Despite this, nearly half of logistics operators say they are likely to make an acquisition in 2023. This is according to the latest updated report on BDO’s mergers and acquisitions in the UK and Ireland for the 4th quarter of 2022.
BDO’s 2022 survey of the views and opinions of 100 senior executives in the UK logistics sector has been released.
Ten years after the launch of the Logistics Confidence Index, the overall score for 2022 has dropped to 50.4 from the previous year’s 62.5.
The figure reflects a sense of realism in the sector as it adjusts to the challenges :
-soaring energy prices and more uncertainty
Mergers and acquisitions remain a strategic priority for logistics companies despite the problems. 45% of respondents said they were likely to make a purchase within the next 12 months. This is the highest indicator in the entire 10-year history of the study.
Operators are primarily looking to achieve economies of scale and expand their service offerings, driving the trend toward consolidation in what remains a fragmented industry.
Somewhat surprisingly perhaps, against a gloomy economic outlook, a small majority of businesses in the sector are optimistic about the outlook for the coming year, compared to those who are pessimistic, the study adds.
60% of respondents expected an increase in turnover during this time period, and only a quarter (25%) expected a decrease.
Capital spending also remains positive, albeit down slightly from last year, with four-fifths of companies (81%) expecting to make significant spending over the next 12 months.
High inflation and rising costs have had a major impact on profitability. As just under half (45%) of logistics companies said their margins would improve in the next 12 months, compared to 62% in 2021, the study found.
At the same time, almost a third (30%) of surveyed companies expected a decrease in profitability, which is 11% more than in 2021, the figures show.
Of all the challenges facing the logistics industry, 80% say labor shortages will have a serious impact on their business in the coming months. In fact, concerns about labor shortages have led nine out of ten firms to improve pay and working conditions. More than half (53%) of logistics companies focus on the well-being and health of employees.
The most sought-after vacancies are :
-office and administrative workers
Other sustainability priorities in the industry include :
-fuel optimization of existing fleets (52%)
-four out of ten firms (40%) consider implementing or expanding the use of alternative fuel vehicles as a priority for the coming year
-more than two in five (44%) plan to implement greener lighting and power sources in their warehouses
The latest report shows that these themes are still relevant. They are now taking on greater importance in the face of significant challenges, chief among which are the rapid rise in fuel and energy prices, price pressures for consumers and the economic crisis.
The logistics giant is battling its toughest business conditions in years, with confidence hitting its third lowest level since the report began. Concerns about profitability, skills, labor shortages, profit growth and rising costs of doing business are part and parcel of this decline.
However, despite this, it is encouraging to see that the logistics sector is still strongly focused on capitalizing on strategic opportunities, focusing on better serving existing customers, as well as acquisitions, which are the main drivers of growth.