14% hike in logistics companies going bust – London Business News | Londonlovesbusiness.com

Insolvencies of logistics companies have risen 14% in the past year, from 464 in 2022/23 to 530 in 2023/24 (Aug 31), says Forvis Mazars, the international tax and advisory firm.

Many logistics businesses were set up during the pandemic to meet the sudden rise in demand for home delivery. As this surge in demand reversed, some of these companies are struggling to survive.

In May 2020, during the height of the pandemic, internet sales made up 34% of all retail sales. By July 2024 online sales were only 28% of all retail sales.

The bounce back in high street sales and fall in home deliveries is contributing to the reduction in demand for logistics services, which are closely tied to the growth of online sales.

Some online retailers are also beginning to charge customers for returning goods bought online, to reduce their own losses. This is leading more customers to reduce their habit of ordering a large number of items and returning many of them. This has started to impact demand for logistics services.

Overall consumer spending has also fallen since the pandemic, with the index volume of retail sales in July 2020 numbering 105 compared to 99 in July 2024. This is in part due to high interest rates leaving people with less disposable income.

Macro-economic factors are impacting the logistics service directly. High interest rates and wage inflation mean the leasing of vehicles and employing drivers are becoming increasingly expensive.

Rebecca Dacre, Partner at Forvis Mazars, said, “The delivery boom started by the pandemic has not lasted the way smaller logistics businesses hoped it would. Most of the work is now being won by the biggest players in the logistics sector, leaving smaller companies struggling to compete.

“The combination of a drop in demand and tough economic circumstances has created a difficult environment for many in the sector.

“With more and more companies charging return fees, customers are cutting back on their ‘try and return’ habits. That has started to impact delivery volumes for some logistics companies.

“With greater demand for capital expenditure on electric vehicles, it remains to be seen whether many smaller players will be able to adapt to survive.”