Consolidation in the logistics industry expected to increase as foreign ownership grows.
The majority of the UK’s largest logistics companies are now overseas owned and are responsible for the largest share of turnover with further industry consolidation predicted, according to new research from Barclays Corporate and Grant Thornton.
Overseas ownership of the top 50 UK logistics companies has grown to 52% over the past five years with their turnover now equating to 69% of the top 50’s total turnover, a jump of more than 40% over five years.
Barclays Corporate and Grant Thornton carried out research looking at the changing composition of the top 50 UK logistics companies, surveying key decision makers from UK logistics businesses on their views of the industry.
The research shows that 58% of respondents believe M&A activity in the sector will increase over the next 12 months, with over a third of those companies surveyed actively planning acquisitions.
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 total logistics sector turnover in the UK is generated by firms based outside the UK," explained Philip Bird.
Cost inflation is seen as the biggest issue facing the sector over the coming 12 months, which could see businesses reassess their commercial relationship with customers. Supply chain disruption ranks low, with 66% of those surveyed stating they are not reassessing their business plans in light of recent geopolitical and natural disasters.
Over three quarters of respondents will be investing in vehicles over the next 12 months, which can be seen as a result of rising fuel costs. 83% of businesses 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.
The research shows that overall the UK logistics industry has been resilient despite the recession with employment figures back to 2007 levels and operating margins holding up well throughout the past five years. 66% of logistics businesses surveyed expect up to 10% growth over the next year, while almost half (47%) intend to increase staff numbers.
When asked about government support, 82% believe UK Government is not supportive enough of the sector, with the majority of respondents calling for a cap or reduction in fuel duty.
Warning over ‘refocus’ of £1 billion R&D tax breaks
With the difficulties currently associated with raising finance, it is crucial that businesses take the opportunity to review their eligibility for Research & Development tax relief which can offer a significant cash benefit.
Currently the relief costs the Exchequer £930 million per annum, and this is budgeted to rise to £1 billion by 2014/15. Whilst this is encouraging, the relief is currently under Government review in attempt to stimulate innovation and enterprise which achieves the best 'value for money'.
It is important to appreciate that R&D is not limited to developing a new innovative product or service. It can also include developing a new efficient manufacturing process, perhaps driven by cost reduction, or the challenges faced from meeting environmental or health and safety standards.
For more information contact Ian Rowland, North West Head of R&D Tax, Grant Thornton on 0161 953 6411 or ian.rowland@uk.gt.com
