Sunday 4th Dec 2016 - Logistics Manager

High fuel costs could force 3PLs to migrate

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Many UK-based businesses could be forced to relocate warehouses and distribution centres to mainland Europe if the government fails to reduce the cost of fuel, according to Derrick Potter, national chairman of UKWA.

Potter made the comments in his address to UKWA members at the association’s annual general meeting last week and added that if this is the case then many hundred jobs will be lost as a result.

He said: “Fuel represents around 36 per cent of an operator’s costs and the UK Treasury imposes the highest level of fuel duty throughout the 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 to 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 relocate its distribution hubs to mainland Europe.

“Furthermore, with margins already tight in the UK 3PL sector, it is becoming increasingly difficult for UK-based operations to compete with their European rivals and I fear more and more blue chip British manufacturers and retailers will choose to outsource their logistics operations to established western European transport firms.

“With around 2.3 million people employed in a wide variety of roles within the UK logistics industry, if the government doesn’t do more to bring UK fuel prices closer into line with the rest of Europe, it won’t be just the HGV drivers that suffer.”