David Wells Chief Executive, Logistics UK
The past 12 months have seen further challenges for the logistics industry – and wider UK economy – with issues such as the war in Ukraine, political uncertainty and the economic crisis, which has resulted in rising inflation and operator costs.
As has been proved in previous years, the logistics industry remains extremely resilient and 2022 has proved no different with great strides taken towards decarbonisation and a great emphasis on reducing the skills shortage. Many of the challenges faced in 2022 will remain a focus across the next twelve months.
Industry continued to recover from the effects of the pandemic with the logistics sector contributing a significant £139 billion Gross Value Added (GVA) to the UK economy, according to Logistics UK’s Logistics Report 2022. However, despite this significant contribution, logistics, like most sectors, has been heavily impacted by rising costs.
Despite logistics businesses operating on already very low profit margins, total vehicle operating costs have risen 16.7 per cent for the six months to 1 July 2022. While rising fuel costs is a key element of this, vehicle maintenance has risen by 7.5 per cent and overheads 12.3 per cent. The Office for National Statistics (ONS) estimates that the Consumer Prices Index (CPI) rose to 11.1 per cent in October and in the view of Logistics UK, the current economic climate is placing an unsustainable burden on industry, particularly among the
small businesses.
Rapidly rising energy costs are also a key concern, especially as the deadlines for decarbonisation draw closer. Logistics UK has written to the Chancellor to draw attention to the needs of industry and hopes to see rising costs stabilise over the coming year, with actions taken to address inflation.
Decarbonisation is a high priority for operators across all modes. The van sector is facing significant pressure with just over seven years until the phase out date for the sale of new petrol and diesel vehicles in 2030. While many businesses recognise the urgency to transition to electric vehicles (EVs) a lack of public charging infrastructure that is suitable for commercial vehicles – with larger parking bays, longer charging cables and more rapid charging – is a barrier to uptake.
Logistics UK was encouraged to see the recent figures showing increased public charge points across the strategic network; however, faster expansion of the network and ensuring commercial vehicle suitability must be a key priority for 2023. Further to this, government must ensure an adequate power supply is in place; with possible power shortages a concern, Logistics UK has urged government to communicate with industry regarding any potential disruptions and to consider the logistics industry a priority when making contingency plans.
There still remains uncertainty regarding alternative fuels and technologies for HGVs and this must remain a focus for government and manufacturers in the upcoming year. In other modes, Logistics UK is keen to see greater progression with railway track electrification and domestic production of sustainable aviation fuels (SAF) to increase availability and decrease costs.
Skills was a key industry consideration in 2022 and will remain so for 2023, with the continuation of industry’s Generation Logistics campaign, supported by government. The number of HGV drivers in employment is estimated to have returned to Q2 2019 levels, due to a number of measures taken to aid the acute shortage, such as increased pay – as stated in the Logistics Report 2022, advertised salaries rose by an average of 12.4 per cent in Q2 2022, compared with a year ago – and increased testing, with the number of people undertaking practice HGV tests increasing 52 per cent compared with 2019 levels.
However, while the acute phase of the driver shortage may have ended, Q2 2019 still saw an estimated chronic shortfall of 60,000 drivers, so it is vital industry keeps working towards recruitment and retention to futureproof the workforce ensure supply chains remain moving. 2023 will see a particular emphasis on addressing skills and labour across the wider industry, including roles such as HGV mechanics – which according to Logistics UK’s Performance Tracker are now the hardest roles to fill – as well as warehouse staff and port operators.
In October 2022, Logistics UK welcomed The Electronic Trade Documents Bill as an opportunity to add efficiencies to modern supply chains, providing it is implemented effectively. The business group described it as a positive step towards simplification and faster processing at the border, where – since Brexit – a significant increase in paperwork is required.
Brexit will remain a consideration in 2023, with the NI Protocol agreement still unresolved, and the introduction of the Entry Exist System (EES) due to take place in May 2023. Logistics UK has raised concerns regarding this system should it result in drivers leaving their vehicles due to the potential safety risks resulting from passengers and truck drivers crossing live traffic lanes. Additionally, the need to leave vehicles could cause extra delays for drivers and due to the lack of holding areas within ports and terminals, even minimal delays could lead to substantial congestion. It is vital government works together with industry to ensure a solution that maintains efficiency and road safety.
Overall, there is much to be encouraged about and Logistics UK looks forward to continuing to work with members, government and industry leaders to tackle the big issues throughout 2023.
For more information about the organisation and its work, please visit: www.logistics.org.uk