Despite staff and supply shortage issues, confidence in the UK logistics sector has risen to 62.5 in the latest Barclays-BDO Logistics Confidence Index.

Whilst staff shortages are the greatest business challenge facing operators, overall the industry feels better placed than it did 12 months ago when the index fell to its lowest level since 2012.

The strength of the recovery and optimism about the future reflects the improved clarity and visibility around navigating Brexit and Covid-19 when compared to last year, allowing operators to make future investment plans, said Barclays-BDO.

Operators still face significant challenges, with 96 percent pointing to staff shortages as their main concern and many are worried about the increased labour costs this will cause. However, the industry is addressing issues head on with 67 percent of companies saying they are investing more in recruitment or human resources, and two thirds (66 percent) are working with younger people or introducing apprenticeship schemes.

Although coming from a very low base last year, more than three quarters (76 percent) of operators expect their turnover to increase in the next 12 months. The outlook for profitability is similarly optimistic, with almost two thirds (62 percent) of companies expecting to increase profits, up 13 percent on 2020. Three fifths (58 percent) of respondents cite greater use of, or investment in, technology to boost profits.

Underlining this renewed confidence, the Barclays-BDO study reveals 85 percent of companies are likely to make significant capital expenditure over the next 12 months, and almost two thirds (63 percent) expect an increase in headcount within a year.

Meanwhile, over two fifths (42 percent) of respondents say they are likely to make acquisitions over the next 12 months, reflecting expectations for continued consolidation within the sector, driven by operators seeking to achieve economies of scale and to expand service offerings in an extremely competitive marketplace.

Jason Whitworth, partner, merger and acquisition (M&A) advisory, and logistics and supply chain management at BDO, said: “With renewed optimism and high demand, there is significant opportunity for deal-making in the industry. Whether businesses are looking to create scale, achieve efficiencies through technology or make acquisitions to provide value-added services, we expect to continue to see strong levels of M&A activity across the sector.”