08 July 2020

COVID-19's impact on the logistics industry

The coronavirus (COVID-19) pandemic has been a uniquely challenging time for the logistics sector. Never have the world’s supply chains faced such a universally seismic set of circumstances, nor one that is likely to have such far-reaching consequences. Yet the challenges of COVID-19 have been, and continue to be, somewhat different for the logistics industry than that of other areas of business.

Here in the UK, land transport in particular has been a vital factor in keeping the country going despite a national lockdown, which has meant that many logistics firms have had to tackle one of their most intensely demanding periods alongside all the complexities of a national and global health emergency. 

Of course, every logistics business will have been affected by the pandemic in a different way; its impact has much to do with the type of goods a company generally transports. But, as an industry, the logistics sector has risen to meet the tremendous pressure to continue to deliver throughout COVID-19, as we explore here.

An essential service

Like many countries around it, the UK went into national lockdown in March to combat the spread of the virus. While this was undoubtedly a necessary action, the ONS has revealed since that the national economy contracted 2.2 per cent during the first three months of 2020, the worst quarterly fall since 1979. While countless businesses halted operations, furloughed staff and/or asked them to work from home, many logistics firms found their services in more demand than ever.

The start of lockdown came with several weeks of empty supermarket shelves, and logistics companies rallied to ensure food, medicine and essential supply chains continued to flow. Recognising this, the UK government assigned many within the logistics sector as ‘key workers’, enabling them to carry on working through the lockdown (while social distancing), access COVID-19 testing and keep their children in school.

Thanks to calls from business groups such as the Freight Transport Association (FTA), the government took further steps to ease the strain on logistics firms working through the lockdown, including keeping roadside facilities open, exemptions for freight workers in border quarantine arrangements and extending MOTs and annual HGV tests. These and other support measures have proven vital to an industry tasked with ensuring the nation still has what it needs during the pandemic.

An online boom

And of course, this is where online shopping has become indispensable. According to the British Retail Consortium (BRC), 61.9 per cent of all non-food retail sales in May took place online, up a staggering 31.4 per cent from 2019.

Even as lockdown restrictions start to lift and shops to reopen, retail experts predict this surge in online sales will continue, as consumers form new habits and enjoy the convenience of contact-free doorstep delivery and extended delivery hours. Indeed, the FTA has called for the delivery hours extension to stay in place even as the lockdown eases and non-essential retail stores reopen, in order to support economic and societal recovery, and to enable logistics firms to restock stores safely out of hours. Yet, for every logistics business that has dealt with surging demand, there are others that have seen their markets shrink and/or their operations stall due to drivers isolating.

Those that transport goods for the construction, events, hospitality and wholesale trade sectors to name just a few may have seen business suffer, although now that restrictions are easing it’s hoped these markets will begin to recover.

A robust and resilient industry

So, how have logistics businesses in the UK experienced the lockdown on a more granular level? The FTA have run a weekly logistics impact survey since March, asking operations large and small to share the ways in which the pandemic has affected them as time goes on. The picture that’s developed from then to now is fascinating, revealing a resilient industry that is slowly becoming more optimistic about the future.

In week one (20th March 2020), confidence levels among respondents regarding business outlook over the next six months were just 4.22 out of 10. A week later, 76 per cent of respondents reported a general downturn in business and by 3rd April, 69.5 per cent of companies asked had scaled back or suspended operations. The introduction of the furlough scheme meant that by 14th April, 72 per cent of respondents had taken advantage of this, and most intended to defer tax and income tax payments and pursue the SSP relief packages where applicable.

By week seven (5th May) though, 22 per cent of businesses surveyed had brought staff back from furlough and 35 per cent had diversified their services to keep operations running. Over 42 per cent had hired agency drivers to cope with short-term fluctuations in demand after furloughing their own workforce.The pause on manufacturing and international freight had begun to bite too, with shortages of new vehicles, parts and machinery reported by those surveyed.

The most recent survey (25th May) reports an almost universal increase in levels of normal supply chain performance, 45 per cent of businesses had brought staff back from furlough and confidence levels in business outlook were a healthier 5.52 out of 10.

These stats are just a fraction of the insights available and, while it’s clear the logistics industry has been tested to the limit, there is movement in the right direction. It’s a story that closely reflects our own experiences here at Touchstar and although we are remaining cautious in our optimism, we are hopeful that for us and our customers, there’s light at the end of the tunnel.  

Stronger in the long-term

While no industry has had an easy time of it during COVID-19, it’s obvious that the logistics industry has had a particularly difficult few months. It is one of only a handful of sectors that has been simultaneously subject to unprecedented demand in some areas and to an overnight drought in others, while also facing the challenges of social distancing, safeguarding and preserving public health.

There’s much further to go before any kind of ‘new normal’ can be established but, if the coronavirus crisis has proved anything, it’s that the logistics industry is built of strong stuff. We’re confident that it will emerge stronger than ever.