2014 is projected to be a good year for UK manufacturing with growth forecasted at 2.7% according to www.eef.org.uk, reflecting an upturn in the economy as a whole.
This confident outlook is due to increased demand from domestic and overseas markets, capital expenditure and employee recruitment. Additional factors including diversification into new areas, adoption of new technologies and value-added services have added a much-needed boost to a recession-hit industry.
All of which is good news for not only UK manufacturers but also the warehouse & logistics industry who have withstood the worst of the global downturn that forced many operators to the brink. DMG Freight Services explore more below.
Welcome confidence boost for Logistics companies
Confidence is growing in the logistics sector as demonstrated in their biannual Confidence Index survey, which reflects a sense of cautious optimism for this year. This report, conducted by Barclays, Grant Thornton UKLLP and research agency Analytiqa shows a jump to 74.9 points on the Confidence Index as compared to the early part of 2013
This positive outlook is further evidence of ‘the green shoots’ of recovery, as mentioned by Chancellor George Osborne when discussing the UK economy. In addition, figures released by the Office for National Statistics re: GPD for the 4th quarter of 2013 show that the UK economy grew by an estimated 1.9% compared to 2012.
A long road to recovery
These figures are a demonstration of the improved outlook for UK manufacturing and as such, are a cause for celebration. However, one must temper these with caution as the country remains in a fragile state and any economic recovery will be a protracted affair.
The global recession combined with an influx of new operators’ means that customers have a greater range to choose from and will drive a hard bargain to get the service they want.
Added to this are rising fuel costs, skills shortages and a volatile world that drive down margins, causing anxiety for operators who have already cut costs in order to remain competitive.
UK manufacturers need to tread with caution, as 2014 is not without its challenges.
Reasons for optimism for the warehousing and logistics industry
The Barclays and Grant Thornton UKLLP report highlights a ‘feel good’ factor within the manufacturing sector that has long-term benefits for the warehouse & logistics industry.
This expectation of continuing sector growth and confidence is based upon the responses of more than 100 senior decision makers who offered their predictions for 2014.
- 84% of respondents forecast an increase in turnover this year
- 73% of respondents forecast a rise in profits in 2014
- 55% of respondents believe the economic situation will continue to improve within the next 6 months.
The results suggest that economic upturn will drive demand for warehouse & logistics services, which, in turn, will lead to new job opportunities and stronger links with supply chains.
On the domestic front, the UK economy appears to have turned the corner with forecasted growth across a variety of sectors. This upturn has led to a rise in employment coupled with pay rises for many employees who now have a greater amount of disposable income than before.
Industrial output is improving in the Eurozone as a response to the continuing recovery with the greatest increase in Slovakia followed by Portugal and Germany.
Internationally, emerging markets in China and India are fuelling a demand for consumer goods coupled with a rise in the standard of living. The issue is how to keep up with these demands, which if they become uncontrollable, may result in a devastating crash for the economy in question.
Areas of concern
Nevertheless, uncertainty remains for many UK manufacturers. This is important when one considers the volatility of today’s world with ongoing crises in Ukraine, Asia and the Middle East.
These tensions mean that many operators have a cautious optimism about growth in overseas markets, often preferring to invest in areas closer to home.
In the UK, an increase in the number of logistics firms means that customers are basing their decisions on price instead of quality of service or value for money. Any deficiency in these areas will cause the customer to look elsewhere resulting in the loss of a contract that negatively influences the rest of the company.
However, many operators are playing it safe by choosing to offer value-added services thus retaining customer loyalty whilst further consolidating their market position.
This is particularly important as operators are increasingly, having to find ways to differentiate themselves. One way of doing so is investment in fleets, new technologies and infrastructure to improve efficiency and performance whilst reducing wastage and costs.
Part of this investment includes recruitment of qualified, skilled employees who are the lifeblood of any logistics company. But, it is difficult to attract and retain these employees. Companies have to recruit from overseas which is expensive or rely on agency workers, again at considerable cost.
The warehouse & logistics industry has many reasons to be cheerful in 2014. The UK and indeed much of the Eurozone is emerging from one of the worst recessions on record with forecasts for continuing growth and prosperity during this year and into 2015.
Business is picking up with many companies forecasting a good year in terms of turnover and overall profitability. They are looking to expand, taking on new employees and improving their infrastructure whilst seeking out new markets.
This includes picking up new contracts in areas that had fared badly during the recession but are now returning to full capacity. Alternatively, sourcing new opportunities in areas that as the economy improves, offer transportation opportunities.
On the flip side: increased competition, increased expectations from customers and slender margins. Add to this a skills gap, shifting exchange rates and a volatile global market.
In conclusion: things are picking up and the future looks brighter for the warehouse & logistics industry albeit at a moderate pace. The industry needs to improve productivity whilst managing risks in an ever-uncertain world.