“Can the shipping industry solve the UK logistics crisis?”
The UK logistics sector is in significant crisis – in fact so much so that when invited onto the panel at the recent Lloyd’s List event held at the Royal Liver Building to discuss ‘can the shipping industry save the UK logistics crisis’, I asked is there a particular aspect of the crisis they wanted me to discuss; driver crisis, warehouse crisis, Hanjin crisis, fuel crisis, the dreading impact of BREXIT, collusion over price fixing in the airfreight industry or perhaps the most recent demise of Monarch!? No doubt, it’s a turbulent time for the logistics sector and it’s at a major crossroads.
But can the shipping industry help solve the crisis? Well yes, I believe it can. In fact, it’s already proving it can help alleviate a number of the major concerns in the sector and itself has reacted well to its own crisis earlier last year after the collapse of Hanjin. There are two crises in particular I commented on during my involvement with the Lloyd List panel event that were close to my heart.
Firstly, there is a chronic shortage of young talent in logistics, particularly in my sector; freight forwarding. A parliamentary report in 2015 recently highlighted that employees within freight were largely over the age of 45, with 40% of roles having an ageing employment profile. There is a lack of support from educational institutions getting young people into logistics, very few (or not enough) courses promoting the development of the next generation and a shortage of businesses ready to put their faith in youth. That’s creating a lack of diversity and opportunity that is supressing our industry. Perhaps this is most stark is with the current driver shortage. That same Parliamentary report highlighted how only 2% of drivers are under the age of 25, with 60% over 45m whilst the majority of the 40% are actually in their 50’s and 60’s.
Secondly, coupled with a shortage of drivers and young talent, as consumer habits have changed and with the e-commerce boom, there is now a major shortage in warehousing capacity, not only space, but units that are fit for the demanding requirements of the e-commerce model. No longer does the square box warehouse model, one size fits all work. E-commerce demands longer, thinner spaces, with more racking were the emphasis is on moving goods quickly rather than bulk storage. Recent reports in Germany showed that B2C e-commerce was worth €66bn in 2016 – the market has had double digit growth since 2012. Even in India where internet usage is much lower their e-commerce sector has grown by over 200% in the last 5 years.
This recent boom, growing demand alongside years of underdevelopment in the UK has left us behind.
A recent report by Savills commented that in 2009 before the financial crisis hit, there was 100million sq. ft. of warehouse space on the market, today its only 30million – a 70% reduction. The demand from e-commerce driven business is there, did you know in 2015 Amazon accounted for 10% of all warehouse demand and as a sector we’ve failed to act quick enough. Between 2004 and 2007, 40million sq. ft of warehouse space was being developed, since 2012 – just 10million! The reduction in space has led to shortages and rent increases, both of which make the UK a less attractive market and in the wake of BREXIT – that’s not good.
However the investment from the shipping industry in projects such as the £1.5bn spent on developing London Gateway and more closer to home, the recent £400m invested in Liverpool2 is helping address some these concerns. Liverpool2 will help reduce the over reliance on southerly ports (solving a completely separate issue of mass congestion at Felixstowe and Southampton), whilst their heavily backed Cargo200 initiative will drive increased containers to Liverpool, creating jobs and opportunities.
The investment in Liverpool2 along with its focus on technology helps create an excitement and a buzz that can stimulate interest and careers for the next generation. It also shows how logistics is a forward thinking industry (contrary to popular belief), building for the future. The added developments circling Peel Ports Liverpool2 project; I hope, can create a logistic community that provides bases for industry organisations to run courses, provides careers advice set amongst one of the UK’s largest transatlantic ports in a city stepped in maritime history and encourage new young talent into the sector. The investment will have knock on effects that can stimulate new warehousing too (similar to the expansion currently growing around Manchester airport’s) equipped to handle the increased traffic, but more importantly catered to the growing demands of the e-commerce market.
The shipping industry is helping the UK logistics sector becomes more efficient, competitive and buoyant, their investment is ensuring it’s not being left behind other neighbouring European countries and that its infrastructure and drive remain strong.