Logistics mergers set to increase

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Mergers and acquisitions are set to increase in the logistics market, according to a survey from Barclays Corporate and Grant Thornton.

It found that 58 per cent of decision makers from UK logistics businesses believe that M&A activity will increase over the next 12 months and over a third of companies are actively planning acquisitions.

Philip Bird, corporate finance director at Grant Thornton said: “Many medium-sized logistics firms need to consider mergers or acquisitions to avoid being squeezed out by major operators offering economies of scale or niche players offering tailor-made solutions.

The survey also revealed that that more than half of the UK’s largest 50 logistics companies are now overseas owned.

“UK logistics firms need to be more successful in expanding overseas if they want to remain independent,” said Bird. “After all, more than two thirds of the UK’s top 50 total turnover is generated by firms based outside the UK.”

Cost inflation was seen as the biggest issue facing the sector over the coming year months, which could see businesses reassess their commercial relationship with customers.

Over three quarters of respondents will be investing in vehicles over the next 12 months, which can be seen as a result of rising fuel costs. 83 per cent of businesses are concentrating on improved vehicle efficiency as a measure to counter rising costs, however only 15 per cent of businesses surveyed are currently hedging against fuel prices.

Rob Riddleston, head of transport and logistics at Barclays Corporate said: “The logistics sector is always going to have to face the vagaries of the foreign exchange markets and fuel price volatility. While fundamental movements in FX and fuel rates have to be managed by the sector, companies can hedge against short and medium term volatility in price movements.”

The research shows that overall the UK logistics industry has been resilient despite the recession with employment figures back to 2007 levels and operating margins holding up well throughout the past five years. 66 per cent of logistics businesses surveyed expect up to ten per cent growth over the next year, while almost half intend to increase staff numbers.

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