The number of insolvencies among UK delivery and logistics companies went up by 20% in the last year, with 221 companies going out of business in 2014 compared to 184 in 2013, according to research by Moore Stephens which suggest cuts in fuel prices will not be sufficient to stem the rise
Despite the well-publicised collapse of City Link just before Christmas, Moore Stephens says the rise in ecommerce is behind an increase in smaller companies going under, as they struggle to meet rising consumer expectations of online deliveries and find it hard to meet growing demand for full flexibility over the timing and location of deliveries.
While intense competition is putting pressure on margins for standard one to three day delivery companies, it is also creating new opportunities including greater scope to offer ‘reverse logistics’ solutions, such as by repacking returned items for resale, or ‘break and fix’, where faulty goods are repaired and returned for resale by the delivery company.
Jeremy Willmont, head of restructuring and insolvency at Moore Stephens, said: ‘The accelerated growth of ecommerce has boosted the fortunes of some logistics companies but left others struggling to keep up. Big logistics companies are, on the whole, more confident than they have been for years but smaller, weaker players are being forced out at a faster pace.
'The traditional courier and haulier model is now under threat. The consistently high levels of investment necessary are beyond the means of most small companies.’
Insolvencies in the logistics and retail sector have more than doubled since 2010, rising from 109 to 221, while there has been excess capacity in the sector since 2008. It also said that the fall in oil prices was unlikely to help struggling companies as many delivery contracts are on an open-book basis, whereby any savings generated are passed onto the customer through reduced delivery costs.
Philip Bird, logistics specialist at Moore Stephens, said: ‘While most of us have been delighted to see fuel prices falling, for delivery businesses it has been mostly irrelevant. The retailers have had the “whip-hand” due to excess capacity in the sector, and have been able to negotiate contracts that place more of the risk on the side of the delivery providers.’
Bird cautions that what may put a break on developments for logistics companies of all sizes is a shortage of drivers, which could squeeze margins if growth in pay accelerates.
