Photo: EDDIE / Flickr / CC BY-ND 2.0

Almost 50% of UK & Ireland logistics operators plan acquisitions in 2023, study finds

While confidence among businesses in the logistics sector has dropped in the last year, almost half of logistics operators say they are likely to make an acquisition in 2023. That's according to BDO’s latest UK & Ireland M&A Update for Q4 2022.

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The 2022 edition of the BDO & Barclays Logistics Confidence Index presents the results of BDO’s survey of the views and insights of 100 senior decision-makers in the UK logistics sector.

Ten years after the launch of our Logistics Confidence Index, 2022’s overall result slipped to 50.4 from the previous year’s score of 62.5, reflecting a sense of realism in the sector as it readjusts to the challenges of high inflation, soaring energy prices and a more uncertain economic landscape, the research found.

Despite these challenges, mergers and acquisitions continued to be a strategic priority for logistics companies with 45% of respondents reporting that they are likely to make an acquisition in the next 12 months. This is the highest figure ever recorded in this survey’s 10-year history.

Operators are seeking to achieve economies of scale and expand their service offerings, ingraining a trend for consolidation into 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 were expecting turnover to increase over this time frame, with only a quarter (25%) anticipating a decrease.

The appetite for capital expenditure also remains positive, if slightly down on last year, with four-fifths of companies (81%) anticipating making significant expenditures over the next 12 months.

On the flip side, however, high inflation and rising costs were impacting levels of 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 finds.

Meanwhile, almost a third (30%) of the companies asked were anticipating a drop in profitability, up by 11% on 2021, the figures show.

“Of all the challenges facing the industry, 80% say labour shortages will have a major impact on their business in the coming months. In fact, concerns over a dearth of workers have led nine in ten firms to improve pay and conditions for their workforce. The most sought-after roles are drivers and warehouse staff, followed by office and admin staff,” the report reads.

Investment in ESG frameworks is seen as another way to attract talent. More than half (53%) of logistics businesses are focusing on employee welfare and staff wellness as their priority ESG initiative for the coming year.

Other sustainability priorities across the industry include optimising the fuel of existing fleets (52%), with four in ten firms (40%) viewing the introduction or expansion of alternative fuel vehicles as a priority for the year ahead. More than two in five (44%) plan to introduce greener lighting and power supplies to their warehouses.

Commenting on the result, Jason Whitworth, Partner, M&A Advisory and Logistics & Supply Chain Management at BDO LLP, said:

“Our latest report demonstrates that those decade-defining themes are still very much in play, now taking on greater meaning in the face of significant challenges, led by rocketing fuel and energy costs, customer pricing pressures, and a faltering economy. It’s little wonder that, as the market contends with the toughest business conditions experienced for many years, confidence is at its third lowest level since the report began. Concerns over profitability, skills, labour shortages, top line growth, and the rising cost of doing business, are integral to that fall.

Whitworth added:

“However, despite this, it’s reassuring to see that the logistics sector is still keenly focused on capitalising on strategic opportunities, with a focus on better servicing existing customers and also acquisitions the main drivers for growth.”


Photo: EDDIE / Flickr / CC BY-ND 2.0

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