Logistics businesses have shown impressive resilience throughout the Covid-19 pandemic, but costs are set to rise warns Logistics UK.
The cost of moving goods and services is likely to increase in the short to medium term, as the economy feels the impact of the Covid-19 pandemic, said Elizabeth de Jong, policy director, Logistics UK.
“The logistics industry has proved invaluable to the UK economy throughout the Covid-19 pandemic, with businesses across all modes of freight transport taking quick action to adapt their operations to meet the needs of consumers, she said.
“However, a reduction in supply of international shipping containers, and ships to carry them, led to significant rises to the cost of moving goods and services internationally; by the end of 2020, shipping container rates had increased by 185% year-on-year and air freight costs rose significantly when cargo space was constrained due to the grounding of passenger flights.
“Fuel prices collapsed at the start of the pandemic but have now recovered to pre-Covid-19 levels. This reduction may have helped to offset inflation in the short term, but rates charged for all modes of transport are expected to rise in 2021, which could drive increased prices across the economy.”
“For many logistics businesses, already operating on very tight profit margins of only 2% – or just 1% for those in road transport – these rises will make it harder to find the funds they need to develop their operations by investing in green technology, such as in alternatively fuelled vehicles, upskilling the existing workforce or funding new recruits while continuing to pay wages and other business costs.
“These tight margins may mean businesses could be left with little choice but to pass these additional charges onto their customers, rather than focus on building upon the resilience the sector demonstrated in 2020. Logistics businesses face a myriad of challenges on the road ahead, with the cost of vehicle repair and maintenance also increasing in 2020, and cash flow restrictions remaining a barrier to recovery for 40% of logistics businesses,” de Jong said.
She was speaking at the launch of the Logistics Report 2021 available as a download at: www.logistics.org.uk