Key points:
- Logistics employs 8% of the UK workforce and generates £175 billion of direct GVA a year.
- Every £1 of direct logistics activity generates a further £1.04 across the wider economy.
- In total, the sector underpins £356 billion of economic activity, 5.3 million jobs and £65 billion in tax.
- Logistics supports more than £1 trillion of UK international trade a year.
- Logistics UK wants the government to make the sector’s growth a top priority.
“Logistics doubles your money”
The report, “UK logistics: a critical driver of growth and investment”, was launched at the Houses of Parliament on 27 October, the day before the Budget. It was prepared by the independent macroeconomic consultancy Capital Economics. The figures on the sector’s wider economic impact are for 2024.
Ben Fletcher, Chief Executive of Logistics UK, said: “With the Budget imminent, my message to the Chancellor is that the logistics sector doubles your money.”
He added that logistics “is not simply a critical sector in its own right, but an enabler of prosperity across the whole economy”.
The numbers behind the sector
The report looks not only at the sector’s direct contribution, but also at the money it pushes into other industries. Capital Economics measured three channels:
- direct impact: £175 billion of GVA and 2.7 million jobs in logistics itself,
- supply chains: spending by logistics companies with UK suppliers supported £91 billion of GVA, 1.5 million jobs and £19 billion in tax,
- employee spending: money spent by logistics workers added £90 billion of GVA, 1.1 million jobs and £15 billion in tax.
Together, this adds up to £356 billion of GVA, 5.3 million jobs and £65 billion in tax revenue a year.
The report also calculates a jobs multiplier: every 100 jobs in logistics support a further 96 jobs elsewhere in the economy.
Five sectors gained more than £10 billion of GVA each from logistics spending: transport, administrative services, professional services, finance and manufacturing. According to Logistics UK, the sector’s direct contribution is comparable to, and sometimes larger than, that of construction, manufacturing, or financial and professional services.
Why logistics matters for other businesses
The report argues that the value of logistics goes beyond the figures above, because efficient freight networks make other companies more competitive. It lists several benefits of high-quality logistics:
- lower production and distribution costs,
- higher profits thanks to more efficient movement of goods,
- lower barriers to investment, because firms need less infrastructure of their own,
- fewer supply chain disruptions and more reliable deliveries,
- wider access to UK and international markets.
These so-called catalytic effects are described in the report, but not given a value.
A magnet for foreign investment
The report also links logistics to foreign direct investment (FDI). Capital Economics reviewed existing studies, which found that a 1 percentage point rise in the logistics sector’s share of the economy is associated with a 0.7 to 1.5 percentage point rise in inward FDI as a share of GDP. Other indicators, such as port throughput and the number of airports per capita, also showed a positive link with investment.
Its own model points to a similar result: a 1 percentage point rise in logistics’ share of GVA is associated with a roughly 1 percentage point rise in FDI. For the UK, that equals about £30 billion, or more than £1,000 per household.
“International companies invest in countries where goods move efficiently,” Fletcher said. He pointed to reliable transport networks, warehousing capacity, ports and airports as factors that reduce costs and expand market access.
What the industry wants
Logistics UK, which represents road, rail, inland waterways, sea and air freight, ports, airports and warehousing, has more than 22,000 members. It is calling on the government to make support for logistics businesses to invest, grow and operate efficiently a top priority. It also wants to ensure the sector has the capacity, resilience and infrastructure needed to attract investment.
The report’s main recommendation is that the government should treat logistics as enabling economic infrastructure. In practice, this means prioritising policies that improve the capacity, reliability and efficiency of freight networks, from roads and rail to ports and airports.
What it means for hauliers
For road transport companies, the report offers a strong argument in talks with the government. If every £1 earned in logistics brings another £1.04 elsewhere, pressure on logistics firms’ finances can also be felt across the rest of the economy.
The report comes at a difficult time for road hauliers, who face high fuel costs and a growing number of insolvencies. Before the Budget, hauliers set out their demands on fuel duty. At the same time, the debate on how the UK will pay for its roads as fuel duty revenue falls is gaining pace.
