Major shift for UK warehousing sector

Contract Logistics

As consumer sentiment drops, UK warehouses are left with 50% more space and crippling business rates. Ti’s Head of Media Content – Kirsty Adams – caught up with Clare Bottle, UKWA’s Chief Executive, for an update on the UK warehouse sector.

During the pandemic, the UK warehouse sector was buoyant, fast-paced and a bit of a saviour. Whilst healthcare logistics operations continued to deliver masks and medicine, e-commerce offered a lifeline in groceries and comfy trousers.

The pandemic was a catalyst for e-commerce, without a doubt. Logistics and warehousing stood-up as an ascending sector.

In April 2021, the sector was booming. The business rates which warehouses will be subjected to in April 2023 have been revaluated on that period. But how could the post-Brexit-mid-pandemic-UK of April 2021 paint an accurate picture of how things would be in one, two, or even ten years’ time? It couldn’t, and it didn’t.

In April 2023, UK logistics operators will be facing an extreme hike in business rates, even though demand for warehouse space and services has diminished.

“18 months ago, even 6 months ago, warehouses were almost all full. Now things have shifted,” says Clare Bottle, CEO of the UK Warehousing Association. “Operators were very busy, but that has changed. 3PLs have 50% more space on their warehouse floors.”

“We have members with business rates which are going up 70%. And they have labour costs, energy costs and property costs, but you can’t ask the customer to pay more,” she explains.

According to Savills UK’s report – Spotlight: European Logistics Outlook – published December 2022, UK warehouse take-up is -39% compared to Q3 2021.

Clare argues that rates were revaluated at an unfair time, at a point when warehouses were propping up the economy and describes the move as “the final nail in the coffin.”

Operators of large warehouses and distribution space will see the biggest jump in rates bills when the new revaluation come into play in April 2023.

Clare continues. “Companies like Ocado and the big 4 grocers are holding up. But the other side of e-commerce, general merchandise and fashion, are not as resilient to dips in consumer spending.”

For Clare’s members, margins are low, and costs are going up.

“In the run up to Christmas 2021 there was a labour shortage and a reliance on agency labour. There wasn’t anyone to pick products or drive forklifts…  But there was still faith in consumer spending. This meant that 3PLs – which are most of our members – could approach their client and say, ‘we’re going to put the price up, because labour costs are un-manageable.’ But that can’t happen now.”

The Amazon and ASOS warehouse closures announced in recent weeks are a clear indication that current circumstances have taken the shine off the e-commerce boom and are making it difficult for warehouses to operate. It will be interesting to see which operations persist post April.

Supply chain strategists can use GSCI – Ti’s online data platform – for key decision making.

GSCI data can help users identify opportunities for growth, support strategic decisions, help them stay abreast of industry trends, as well as understand future impacts on the industry.

Visit GSCI subscription to sign up today or contact Michael Clover for a free demonstration: [email protected] | +44 (0) 1666 519907