Logistics in 2024: Where we’re at and where we want to be

An interview with David Wells OBE, Logistics UK CEO

While the UK is not currently in a technical recession, the economy appears to be flatlining and freight volumes are low. How well placed do you think the logistics sector is to weather any downturn in economic activity? 

If I look back over the eight years that I have been CEO and then the six years on top of that when I was FD, business goes in cycles. We've been through difficult periods before. All periods have their own unique dynamics or circumstances where you know they go into a down cycle and they have their own particular drivers of that. This is no different.

But you know the industry is pretty resilient. You do see that it hits the smaller operators first, as the larger ones consolidate and control their own cost base. But you know the industry has historically been resilient and I think it will remain so.  

There are some structural issues which I think may have eased, but they're not going to go away. For example, the driver shortage. We are not hearing from members that there is a problem recruiting drivers anymore. When the economy comes through this cycle and starts to pick up again, then we'll be back into another squeeze on driver numbers. 

The skills shortages in logistics were clearly exacerbated during the pandemic. But given that freight volumes are now lower, members are not reporting an issue with recruiting drivers. Do you think that skills will be a less pressing issue for the industry in 2024? 

I think if the economy continues to flatline it won't be an issue next year. I think there's enough capacity out there and enough being done to train new drivers. The situation on testing with DVSA has eased. Plus, there is more capacity at DVSA with some of the changes it made during the 2021 crises. But I would say the bigger issue is that the industry has an ageing driver workforce. It's still not attracting enough people in at the bottom end at a younger age to do the job. And so structurally, we've still got a problem with it. When the economy picks up and there's demand for more drivers then we'll be back into a battle for talent.

The Generation Logistics campaign entered its second year in the summer. How do you feel the campaign is progressing? 

Generation Logistics is way exceeding my expectations. And that's down to a number of things. I would say it was down to a really clear plan as to what we were trying to deliver on in year one, and that was shared with all the team. Government getting behind it helped us to secure sponsorship. 

Government got behind it because it was a collaboration with CILT [the Chartered Institute of Logistics and Transport]. I think without that we would have struggled to have secured its support.  

Actually, I think it's been down to that collaboration and hard work of everybody involved in it. In no small part, Phil Roe’s [Logistics UK’s President] involvement with it, engaging with the industry. Which is really why the role of the President was changed, because I wanted it to be a much more proactive, ambassadorial role. Engaging with the industry, utilising his network within the industry, and this has proved the benefit of that. 

Phil Roe has also played a big role in the new Executive Membership offer and the President's Council, both of which launched last year. What was the reason behind launching these two initiatives? 

They're one and the same thing in a way – they come under the same banner or objective. We regularly get asked by government to comment on strategic issues and our touch point with members is very strong, but tends to be around operational issues. In order to answer those questions of government honestly, we've relied on a very small network of senior people to help us. Now that's fine in one respect, but we really wanted to say with credibility, that we speak for the leaders of the industry. Executive Membership is about engaging with the leaders of the industry and helping them to understand what this association does for them and its importance to them in their businesses and in their operations. The President's Council is a way of formally harnessing their opinion to set policy.  

When you think about the big-ticket items that the industry is facing, to do our job properly we need to understand what the industry thinks and what the industry needs in order to deliver on those big-ticket items. So for example, skills – not just HGV drivers, but skills more generally. 

Whether you love it or loathe it, how do we maximise any benefits arising from Brexit? That's all about trade – how do we improve the relationship over time with Europe? Infrastructure is a massive issue because we're a small island, with areas of very high population density. Infrastructure is a big challenge across the UK, not only in terms of its cost, but where do you invest? It's coupled to decarbonisation because the infrastructure investment required to deliver decarbonisation is going to be significant. And you know, we need to be representing the industry and have our voice heard at the highest level in government around these issues, else logistics will come off second best. 

What is it that you think industry leaders most need from a trade body like Logistics UK? 

Let’s take decarbonisation. When you talk to members of the President’s Council, they are unanimous that the biggest challenge they face is decarbonisation. How are we going to do it in an uncertain environment where we're not sure of the technology or of the government’s commitment to the infrastructure? It's actually bringing the two sides of that debate together, so that there can be some commonality. Everybody wants to do the right thing and they want to decarbonise. The government wants to decarbonise, the industry wants to decarbonise. Understanding the dynamics and the drivers of decisions on both sides of that is where I think we can have a really influential role, by bringing the two sides together and saying this is the way through this. 

How prepared do you think logistics businesses are to transition to zero emissions forms of transport? 

You could interpret that question in one of two ways. Are they prepared to decarbonise? Yes, they are prepared to decarbonise. Do they want to decarbonise? The answer is: yes, they do want to decarbonise. 

The other way of interpreting that question is: are they prepared for decarbonisation? There are a lot of unanswered questions and technical gaps in the solutions. So, I wouldn't say they are feeling prepared – they're feeling decidedly unprepared, and that clearly is a role for us to bring that level of uncertainty and disquiet to government to say we want to do this, but we need to do this together. 

Looking ahead, what do you think the key challenges will be for industry leaders in 2024 and how can Logistics UK help them overcome these? 

I'm hearing increasingly that the members believe the first quarter will be tough. They're not as rushed off their feet as they traditionally are and they see that impacting cash flow and capacity challenges in the first quarter. 

What are the specific economic headwinds that they're facing? 

Consumer confidence is obviously affecting volumes. That is ultimately what drives demand. The construction sector is quiet, that also drives demand. Trading activity with Europe – Europe is in a similar stage of the economic cycle, that's affecting demand. The headwinds are that fuel prices are still high and we're uncertain about those costs, additionally, there’s still pressure on wage inflation and interest rates are incredibly high, so leasing costs are higher. Couple that with the desire to decarbonise and the cost of decarbonisation. Do you want to go to HVO [Hydrotreated Vegetable Oil]? There's a significant premium you’ve got to pay for doing that. And that's going to put some members off doing it and will therefore delay their decarbonisation. 

Looking beyond the challenges of the next two quarters, how optimistic are you that logistics can weather the coming storm? 

I would say look at the history of it – the industry always responds. When we came out of recession, look what we did in 2021. Look what we did during the pandemic to keep the industry going, to keep the country’s economy going. But then as we came out of recession, industry stepped up. And we'll do it again. 

Published On: 18/01/2024 14:00:00

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