The delivery crisis before Christmas – 19.2% of transport companies have no cash reserves left

The latest UK Government figures show 19.2% of transport & storage businesses have no cash reserves left. Traders have also been left reeling by the collapse of the pound. Home deliveries could be plunged into a pre-Christmas crisis, warns ParcelHero.

New Business Insights figures released by the Office for National Statistics (ONS) reveal that transport & storage sector companies are facing a pre-Christmas cash crisis. An alarming 19.2% of UK transport & storage businesses have no cash reserves left, while the pound’s crash has had a major impact on the companies that use their services.

Courier and logistics companies must not be allowed to fail before Christmas, says the home delivery specialist  ParcelHero, or we could face a repeat of the City Link disaster. This saw a major national courier – the sixth largest in the UK – collapse on Christmas Eve 2014, leaving around a million presents and parcels still stuck in its depots.

ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘It’s a shock to discover just how significantly transport & storage sector companies have been impacted by the ongoing financial crisis. At such a volatile time, it’s extremely dangerous for companies to have no cash reserves to fall back on to meet short-term or emergency funding needs. No one wants to see another City Link situation, which left gifts undelivered and around 2,700 drivers and warehouse staff made redundant at Christmas, with a further 1,500 self-employed drivers impacted.

“Over the last month, our analysis of the Government’s two most recent ONS Business Insights Bulletins reveals the peril delivery and warehousing companies are facing. The bulletin of 20 October shows that almost 20% of transport & storage sector businesses have no cash reserves left. That’s the worst figure for any major industry sector, with only the education industry – private sector and higher education businesses – experiencing a worse cash crisis (20.7% of education businesses have no cash reserves left).

“By mid-October, not only had almost 20% of transport & storage companies run out of cash but a further 28.4% revealed that, at most, they only had three months of reserves left. Just 26.1% of businesses had more than three months financial reserves.

“The crisis facing transport & storage companies is significantly worse than the problems facing their major clients – manufacturers and retailers. By comparison, just 7.9% of manufacturers have no cash reserves left and 26.7% have 3 months or less in hand. Over 48% of manufacturing companies have more than three months of cash reserves to fall back on.

“Similarly, for retailers, 12.4% of stores have no cash reserves left and 33% have 3 months or less. Over 30% (31.9%) of retailers have more than 3 months’ money left. These are more concerning figures than those for manufacturing, but they are far from the crisis transport & storage companies are facing.

“The reason why transport & storage businesses are faring so badly is not hard to see. While 39.5% of them said their costs had increased, only 8.7% had correspondingly increased their prices in September. The competitiveness of this sector means businesses are reluctant to pass on these increases to their customers and risk losing contracts.

“In contrast, 29.6% of manufacturing businesses reported putting up their prices in September and 38.3% of retailers increased their prices. Even 14.9% of companies in the education sector, facing an even more problematic cash flow than transport businesses, raised their prices.

“The Government’s latest Business Insights bulletin, released this Thursday, reveals the underlying reasons why many transport & storage businesses are so squeezed. Of all businesses with 10 or more employees who imported/exported in September, 59% of importers and 54% of exporters reported a significant increase in challenges since the previous month. It’s no surprise that 39% of importing businesses and 29% of exporting businesses cited the change in exchange rates as their major concern.

“Those logistics companies who deliver for retailers and manufacturers trading overseas will be the first to feel the impact of any reduction in trade caused by challenges in overseas markets. The situation was aggravated by the impact of the former Chancellor Kwasi Kwarteng’s “KamiKwarzi” mini-budget, which saw the value of the pound slump against the dollar, the euro and the Japanese yen.

“With the shadow of the Northern Ireland Protocol bill hanging over the next stage of post-Brexit discussions, Kemi Badenoch, the new Secretary of State for International Trade, certainly has her work cut out. ParcelHero’s in-depth analysis of the ongoing UK-EU trade problems can be read at:  https://www.parcelhero.com/research/brexit-study