Lorries logistics motorway road

Confidence among sector leaders is at some of the lowest levels of recent years, a Barclays report last month showed

The logistics sector is calling for government support ahead of the autumn statement as “storm clouds” loom for the industry amid a drop in demand.

Logistics UK CEO David Wells said a lack of activity in the sector driven by the cost of living crisis could cause lasting damage if the government did not step in.

“With the logistics sector often signalling what is to come for the wider economy, it is deeply concerning that activity in our industry is slowing, with fewer goods being moved as the cost of living crisis bites,” he said.

“Every single business in the UK relies on the logistics sector in order to operate effectively – and despite the best efforts of our member businesses, storm clouds are gathering on the economic horizon.”

Wells warned that the industry was “going backwards” both domestically and internationally in terms of profitability, activity and investment.

Barclays’ UK Logistics Confidence Index 2023 published in October registered a score of 47.3 – down from 50.4 in 2022 – the second-lowest ever and only just above the result for the year of the first Covid lockdowns in 2020.

The trade body urged the Chancellor to prioritise support for the logistics sector “to enable it to help turn the UK’s economic fortunes around”.

The use of warehousing, an indicator of how many goods are in circulation, is down by more than 50% year on year in the first nine months of 2023, the UK Warehousing Association said earlier this month.

At the same time, insolvencies across the sector are up more than 8% compared with a year ago, according to Logistics UK, and employment figures are falling for the same period as demand slows (by 13.6% for HGV drivers).

The cost of shipping containers internationally is the lowest it has been for three years, Wells noted, which is linked to a lack of demand.

Meanwhile, prices for crude oil – upon which logistics heavily relies – are forecast to remain historically high at around $95 per barrel throughout 2024, placing further inflationary pressure on logistics operations.

“Without support in the autumn statement, the logistics sector will continue to battle rising costs and business pressures that will stifle growth and slow the economy still further,” Wells said. “We urge the Chancellor to help our member businesses to keep Britain trading and reverse the current slump our industry is experiencing.”

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The group is urging Chancellor Jeremy Hunt to make the current full expensing allowance for capital spending, which is due to expire in March 2026, permanent to enable succession and expansion planning.

This should include the cost of acquiring leased or hired vehicles, as well as those purchased outright, and the cost of installing the infrastructure required to help the industry decarbonise, Logistics UK said.

The Road Haulage Association echoed the requests and also asked government to provide a fiscal incentive through an emissions-linked rebate to encourage a move to low carbon fuels, such as HVO for HGVs.

Government should also commit to reforming the controversial Apprenticeship Levy to provide greater flexibility for skills training, the RHA said.