No one seems capable of explaining what Brexit would mean to the UK but there are some clear trends that suggest the UK economy is not enjoying itself. Whilst the government may be stating the economy is strong when you speak to those running UK business the story is a little different.
Retail – Uncertainty around the implications of Brexit are causing retailers to stall, whilst e-commerce continues to flourish concerns about impacts on supply chains are causing real headaches. If exchange rates shift and cost of goods/imports rise, this will hugely impact margins in the UK and as such sales predictions are uncertain. Therefore the planning you would expect to see at this time of year is not occurring whilst businesses evade making key decisions.
Construction – There is a general feeling of the doldrums within the sector which has not recovered; the residential sector has developments going up but potential impacts on property prices jeopardise investments. The commercial sector has slowed down with projects in the pipeline but decisions being deferred and existing speculative builds making up the majority of available logistics facilities. The focus is currently on internal efficiency projects to cut costs and consolidate until the market comes back up.
Private Equity – A lack of acquisition targets has seen a series of false starts and a relatively quiet spell, most of the funds are consolidating at the moment and focussing on their current business portfolios. The last 7 months has seen a lot of desk work to identify future targets with many falling through at early stages, the bigger acquisitions of late have been between competitors looking to strengthen their market position.
3PLs – Uncertainty is never good for 3PLs and distributors because they rely on medium/long term commitment to make investment and tender pricing decisions. In an uncertain market the big players are avoiding putting their necks on the line and as such there have been fewer contract announcements. Rather than investing in new facilities there has been more focus on leveraging existing customers and investment has gone down the route of fleet which has long term benefits regardless of which geographical customer it serves.
Parcels –The parcels sector has actually been growing and investing in the last 18 months, since the failure of City Link the other providers have been picking up the volume and expanding. With e-commerce growing you can be sure that whatever happens parcel volumes are going to rise, the elephant in the room is the high volume low value contracts that some businesses have taken up. Couple that with uncertain peak predictions from retailers and it will be an interesting 6 months ahead.
Recruitment – All of this has meant that recruitment remains on the backburner for many firms; deferring decisions and ‘making do’ for the time being reduces risk and exposure to overstaffing. Areas where there is movement tends to be in more junior operational and business development roles that are business critical and can generate income.
What Does it Mean? Regardless of the vote outcome on 23rd June I anticipate a flurry of activity in July when businesses will have their hands forced. There will be an immediate impact on macro-economic indicators and those on the front foot have two strategies in place to quickly adjust. There is a wealth of cash being held by assorted funds who will then make decisive moves picking up bargains in an unstable market. Development yields will become clearer triggering building and retailers will realise that to survive they still have to sell whatever the market conditions.
What Should Businesses be doing? Taking a head in the sand approach for now will see you on the back foot come the end of June. The smart players are currently talent mapping and highlighting the core talent they will require to support strategy and move quickly before the summer holiday season. Agency recruiters enjoy fear mongering around peak planning at this time of year, the danger is, this time they may be right.
Contact Andy for a confidential discussion if you are looking for advice or ideas; firstname.lastname@example.org
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