While the 3PL industry has had to adjust to the dramatic downturn in the economy, UKWA is working hard to ensure that its member companies continue to view being part of the Association as vital to their ongoing success, says Roger Williams, UKWA’s chief executive officer
In common with every other sector of the business community, the third party logistics (3PL) industry has had to adjust to the dramatic downturn in the economy.
While the population’s ongoing need for food and drink has meant that those operators that serve the food retail sector have continued to perform well during the recession, some logistics services providers that are closer aligned to the non-food retail industries have had reason to feel vulnerable.
Needless to say, the present Government continues to do little or nothing to help the logistics industry ride out the current storm. In fact, the Government’s failure to reduce the high cost of fuel in Britain is prompting fears that many companies may relocate their major UK-based warehouses and distribution centre hubs to mainland Europe with many hundreds of jobs lost as a result.
Fuel represents around 36 per cent of an operator’s costs and the UK Treasury imposes the highest level of fuel duty throughout whole of Europe – around 25 per cent more than any other state.
But the logistics industry isn’t just about lorries. Modern third party logistics contracts comprise a range of services – including distribution, storage, packaging etc –rolled into one. So, if – as has been demonstrated – a lorry refuelled in northern Europe pays over £10,000 a year less than a similar vehicle doing the same mileage that fills up in the UK, it is easy to see why a 3PL might be persuaded to locate its distribution hubs on the other side of the channel.
UK firms are further handicapped by the fact that, in comparison with many European hauliers, our wage bills are high. An Eastern European lorry driver can be up to 20 per cent cheaper to employ than his British counterpart and, regardless of the guidelines laid down in the Working Time Directive, the truth is he will work longer hours to earn his wage.
The Government’s intransigence over the widely criticised decision to change the rules relating to Empty Property Rates – a move that has resulted in empty warehouses becoming liable for the same rates as occupied buildings – is also adding to the sector’s burden
The intention when, the Chancellor introduced EPR rule changes was to increase the availability of property and to reduce rents or the cost of occupation. However, it is clear that Ministers have not thought this policy through and in the long term its consequences will be precisely the reverse of what they sought to achieve.
Given that the Government has picked up an estimated £800 million in extra revenue since the new ruling was introduced, most commentators feel that the chances of the ruling being reversed are, at best, slim. The general view is that the most optimistic outcome that can be hoped for is that the Government will consider reducing the rating liability of empty buildings to 50 per cent of the occupied rate – rather than the full 100 per cent as things currently stand – although even this is probably unlikely to happen. Depressingly, it would appear that the situation will not alter much in the likely event of a Conservative administration being returned at the election.
But, if there is a positive side to this unhappy situation it’s that tenants of rented warehouse space can currently negotiate some goods deals with their landlord. With some 70 per cent of warehouse space currently on the market having been empty for six months or less and, because the EPR kicks-in six months after a property first becomes empty, there are plenty of landlords out there under great pressure to find tenants before their six month ‘holiday’ period ends.
So, at the moment, it’s a buyers – or renter’s – market. But, with the economic slump bringing an abrupt halt to speculative construction, it is unlikely to remain so.
However, while it is all too easy to dwell on the negative, the fact is that despite the economic uncertainty, many companies in the 3PL sector are finding that this is an excellent time to pick up new business. In today’s price sensitive market, the need to drive cost out of the supply chain is a major reason for using third party logistics service providers and any company that is running it’s logistics operation in-house has to consider outsourcing the work to a third party.
Because the UK relies on imported products, it is arguable that the 3PL sector has more reason than other industries to look to the long term with confidence. More immediately though, all operators must stay positive and entrepreneurial in their outlook while at the same time keeping a tight control on costs.
UKWA is working hard to ensure that its members are well placed to take advantage of any openings that present themselves.
We are always looking to improve the quantity and quality of business related services that we offer to member companies, and have made moves to encourage greater interaction between UKWA members in terms of generating new business. Going forward our aim is to attract new companies and deliver more tangible benefits to our long standing members to ensure that more and more businesses see belonging to UKWA as vital to their ongoing success.
To this end we recently launched a new website which is proving a valuable source of business leads for UKWA members (www.ukwa.org.uk). The new facility has been developed to attract people who are looking to place contracts with third party logistics companies. Buyers of 3PL services use the site to search by geographical area or type of service that they require to access details of relevant suppliers who meet their needs quickly and easily.
The response from our members to the new site has been very positive indeed.
UKWA is evolving as an organisation that embraces all companies that provide warehousing or other logistics support services in the supply chain, and this evolution is, we hope, reflected in the new corporate identity that we unveiled this summer.
UKWA last changed its logo over 10 years ago – since which time the Association’s membership has been opened to retailers and manufacturers as well as companies from outside the UK. We also have over 100 Associate Members – companies that supply products or services to the warehousing community.
The new logo is symbolic of the changes that are happening within UKWA as we strive to strive to enhance our position in the wider logistics sector and ensure that our 700 plus member companies continue to view being part of UKWA as vital to their ongoing success.