By Chris Roberston, UK CEO, Creditsafe

When analysing the health of the sector in the first quarter of 2018, it is hard not to ignore the demise of Carillion, which had an inevitable knock-on effect to thousands of smaller suppliers, including many in the transport and logistics sector who had contracts with the company.

However, results from Creditsafe’s Quarterly Watchdog Report – a key barometer for business health – tell a slightly different story. The rate of actual company failures in the sector slowed in the first quarter of 2018 and the last quarter of 2017. In addition, the number of active companies reached its highest volume for over a year, up 34% year-on-year to 128,583.

Given these figures, it looks as though the impact resulting from the fall of Carillion is more likely to be felt through Q2 and beyond. The Road Haulage Association (RHA) has already raised particular concerns on behalf of its members, some of which had contracts with the infrastructure giant, but also with those who were indirectly affected by the collapse.

As with previous quarters, firms face ongoing challenges regarding profit margins and costs. Businesses and consumers expect goods to be delivered faster and more flexibly than ever but at no extra cost. Meanwhile, day-to-day operating costs continue to grow as the Pound weakens against the Dollar and Euro, affecting fuel prices and creating  inflationary pressures on wages. In addition, hauliers face significant tax levies if they
use older lorries with higher NOx emissions or the huge expense of upgrading vehicles to
cleaner models.

It is therefore perhaps unsurprising to see the level of bad debt growing across the sector. Figures from our Watchdog Report show the volume of bad debt owed by the transport and logistics sector (suppliers bad debt) has been growing steadily year-on-year and has increased by 71% since last quarter alone.

In addition, Brexit continues to cast a huge shadow over the industry as no one knows
exactly how the cards will fall in a years’ time. Although the level of employment across the
sector has seen a small rise in growth between quarters of just over 2%, the situation remains very volatile. There are many uncertainties in terms of what the future holds regarding access to markets and border controls.

These factors may already be impacting the success of UK hauliers as they pitch for new
business in Europe. The number of companies owing money to suppliers was up an
equally substantial 79% to 2122 and County Court Judgments (CCJs), issued when a company fails to pay its debts, increased by 37% since the last quarter.

This all paints a very mixed picture and is a sign of how volatile the situation is for the sector. It is clear that the industry desperately needs certainty regarding Brexit and
the knowledge that goods will be able to flow freely from and to the UK, so supply chains are not gummed up. Road freight currently transports more than 85% of what we eat, drink, wear or build so the impact on everyone is sizeable.

Amidst the doom and gloom, there are some Spring-like signs of growth, especially when
considering the number of active companies and increasing employment levels. The latter,
in particular, is heartening as the industry often struggles to find skilled workers.

However, the true impact from the fallout of Carillion, as well as the ongoing uncertainty over the Brexit negotiations, will determine the health of the sector in the remaining three quarters of 2018.

For more information: www.creditsafe.com