The red briefcase was out in November, as chancellor of the exchequer Philip Hammond set out his plans for spending in the 2017 Autumn Budget. Amongst the talking points were stamp duty for first time buyers, shrinking economic growth and, of course, Brexit.
How about logistics? There were a number of changes announced in the budget that will affect the logistics sector both directly and indirectly. Read on as we look at four key areas of interest and their potential impact.
1. Digital training
For long-term growth, it’s critical that businesses focus on digital skills. That was one of the chancellor’s messages during his budget speech, backed up by an additional £20 million investment for further education colleges. This will be used to prepare them for the new T-Levels – a technical equivalent to the A-Level.
£30 million has also been set aside to deal with the current ‘digital skills gap’. This money will be targeted at existing training programmes, to bring them up to date with modern digital requirements. With an ever-increasing reliance on digital technology, this will provide training programmes fit for modern working environments, making upskilling much easier for employers.
These digital skills have become an essential requirement in a wide variety of sectors. That’s exemplified in part by the chancellor’s £500 million investment in new technological initiatives like artificial intelligence, 5G and full fibre broadband. Logistics is no exception. Artificial intelligence and automation have a growing role in warehousing and manufacture, so it’s good to see them – and the digital training needed to accommodate them – being highlighted in the budget.
2. Fuel duty
You don’t need to be an expert to realise that fuel duty has a huge impact on the logistics sector. It’s estimated to account for around a third of costs for operators. So, it was a welcome announcement that fuel duty will be frozen for the coming year. But is that enough?
The Freight Transport Association (FTA) has been pushing for a 3-pence cut in fuel duty (per litre), and suggests the freeze won’t do enough to boost the economy. Logistics is crucial to all kinds of business, with the vast majority of UK products being carried by truck at some point in the business cycle.
Because logistics is a low-margin sector – around 3 percent – any rise or fall in costs is likely to be passed to customers. Put simply, rising fuel costs means higher operating costs, which makes transporting goods less viable for lots of businesses and slows the economy.
Conversely, it’s thought a cut in fuel duty – even as small as 3-pence per litre – would provide a significant boost for the economy. According to the FTA, the loss in revenue would be funded by a rise in tax receipts from increased trading as a consequence of the lower costs.
3. Skills shortage
The Road Haulage Association estimates a driver shortage of 45,000 in the UK. Even worse, the average age of HGV drivers is 55, with under 25s accounting for just 2%. With nobody coming through to replace many drivers approaching retirement, that shortage is only going to get worse. On top of that, there are around 60,000 EU nationals working in the sector, whose future is now uncertain with the ongoing Brexit talks.
One part of the budget that could solve this is the commitment to driverless technology. Mr Hammond set out plans to remove ‘red tape’ for tech firms, making on-road testing much easier going into the future. He also pledged £150 million for training and research into autonomous driving, with hopes to have driverless cars on the roads by 2021.
In the long run, it’s thought driverless technology could reduce the need for drivers in the logistic sector. Utilising driverless lorries could go some way to counter the number of drivers retiring with no replacement. However, there’s still a need for qualified drivers, training in other areas of the supply chain industry, and – looking forward – training to facilitate the incorporation of the new driverless technology.
4. New homes
The country is currently faced with a housing crisis, and it’s no surprise that this came up in the budget. Spreadsheet Phil, as he’s allegedly known by his colleagues, announced a wide range of funding schemes for house building and regeneration – as well as abolishing stamp duty for some first-time buyers.
In total, the government is hoping to build 300,000 new homes per year by the middle of the 2020s. Initially, this has implications for the transport of construction materials. The government is aiming to improve air quality with clean air zones and funding for alternatively fuelled vehicles, but needs to consider how this fits in with plans to build more homes, as it will require more construction road freight across the country.
However, there’s also the long-term requirements of new homes. In the age of ecommerce, more homes will result in more people looking for fast and efficient delivery. Whether it’s food, clothes or electronics, the occupiers of new homes require an effective supply chain to service them.
House builders are responsible for the first step towards an effective supply chain. They should consider the needs of the homeowners and the logistics sector when planning new homes. Quite simply, carriers need to be able to reach the homes. So, it’s crucial that construction companies liaise with logistics governing bodies to ensure vehicles can access new builds.
Effective training to curb the skills shortage
The supply chain industry is both hugely important and dynamic. To attract and retain the right people in the volumes required, it’s crucial for the industry to develop the resources it already has using the Apprenticeship Levy, allowing companies to grow in line with the increasing requirements of ever-demanding customers.
Bis Henderson Academy are committed to closing the gap in supply chain talent through the development of staff and inclusion across the supply chain. Our primary goal is to develop your teams in line with industry changes and encourage more people into the industry itself. If you want to discuss the training needs of your business, feel free to get in touch with our Academy specialists.