There’s lots of mixed messages going on in road transport at the moment, and so trying to understand what’s going on isn’t always easy.

If we look below at the graphs I’ve created for this post, the blue one is showing us the TEG index for Transport Exchange Group's Haulage platform (solid blue line) against the SPPI* for road freight (dotted blue line). The SPPI has been pretty flat for a bit while more recently the TEG has been on the rise until it got to its usual January cliff edge.

The opposite is true for the yellow graph, which is showing the index for TEG’s Courier platform (solid yellow line) against the SPPI for courier services (dotted orange line). The TEG has been quite restrained for the past year, while the SPPI has just carried on rising – because it’s quarterly, we don’t know what it’s done in January.

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I’ve been getting my head around this and come up with a variety of explanations:

• Is it about a mix of under and over-supply? Going back to December, we know from a Linkedin post by Sam Wilkinson, CRO of TEG, that artic demand was up 10% in the last full week before Christmas and that small van demand was up 27% but met with strong supply. Strong supply aka over-supply may partly explain the difference between the courier SPPI and TEG, but what about haulage? Is there an element of under-supply because of the various insolvencies that have occurred across logistics companies over the past couple of years.
• Is it a vicious circle of indices impacting rates? Is there a bit of a circular thing going on with haulage for the past eighteen months, where client companies are using the SPPI as a multiplier and saying: ‘Well, it hasn’t gone up, so you can’t put your rates up’, resulting in the index not going up again. But that’s certainly not the case with the courier element.
• Could it be about what element of transport client companies value? Could it be that there are more customer pressures on costs for trunking than on the delivery element. The latter element is directly related to a sale, and so client companies are prepared to pay what it takes to make that sale, as opposed to moving goods from dock to DC, DC to shop or factory… But this isn’t reflected in the courier spot rate.
• Is it about the changing value of online sales? It’s difficult trying to get a handle on internet sales at the moment, with value reported rather than volume and returns not accounted for in some figures. Is it the impact of reduced internet shopping at the budget end as reported by IMRG, so contracted courier costs are not as constrained? Although the popularity of Shein and Temu would suggest that budget shopping is just voting with its feet!
• Or could it simply be about what ‘bucket’ mid-sized vehicles fall into? Being me, I investigated and didn’t have to go very far: I unveil the grey graph.

  I produced the grey graph from the TEG Market Index (which already exists and is shown as the solid grey line), which is a combination index for road transport pricing for spot rates - it is an index based on the average ppm paid across both TEG platforms. I then created a combination index for the SPPI, not even sophisticated, just 50% road freight, 50% courier (shown as the dotted charcoal line).

  Not an exact match, but it’s never going to be. But I think this is probably a good explanation!

  
  

  *The SPPI is a series of quarterly indices from the ONS. SPPI stands for Services Producer Price Inflation and is like the CPI for consumer inflation but measures the changes in prices paid for services from UK businesses. Ref the courier index, ‘Other’ means that it’s not ‘Postal Services Under Universal Service Obligation’, which is mainly Royal Mail.

The Services Producer Price Inflation indices were published by the ONS yesterday. The current figures have a base of 100 and show the increases in prices since then. So what is the graph showing us? The blue line is showing the price change for the freight by road element of the SPPI* - this element of the index has been plateauing since the third quarter of 2022. Teaser: I have a theory which I’ll return to in a future post!

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In contrast, the SPPI for Other Postal and Courier Services (‘Other’ meaning that it’s not ‘Postal Services Under Universal Service Obligation’ = mainly Royal Mail) shown in orange, and ending up at the top of the graph, continues to rise and rise. It could be down to enormous volumes (and traffic levels were the highest we’ve seen them in December) or ...I’ll return to this at the same time as freight by road!

The purple line is the SPPI for warehousing & storage, which has just dipped after a rise, following a relative plateau. This ends up partway between the two indices described above and doesn’t feel like it’s out of step overall with Savills graph looking at annual rental growth in a piece written in December, which shows rental growth returning to more reasonably levels.

And then, in grey, we have the SPPI aggregate index for all services other than financial ones. It shows that since 2015, general business prices have increased by over 25%, indeed over 15% just since the start of 2021.

Many growth figures now quoted are distorted by the inflation that has been ongoing for quite a while. Inflation explains confusion that I’ve seen somewhere (but can’t re-find this instant!) around how you can have revenue growth but with reduced footfall in stores, website traffic etc. It’s about pound notes versus boxes.

In an article in The Grocer about Poundland, which was mainly about clamping down on shoplifting, CJ Antal-Smith was quoted as saying “According to the Bank of England, Poundland should be £2.42-land today, based on the way inflation has risen since it opened its first store 35 years ago”.

*The SPPI from the ONS, is a series of quarterly indices – it stands for Services Producer Price Inflation and is like the CPI for consumer inflation but measures the changes in prices paid for services from UK businesses - not just logistics, but a wide range of services from hazardous waste, through holiday accommodation and music recording, to data processing and much else in between. Prices are obtained via a statutory survey by the ONS from a variety of operators for like-for-like services at the normal market price for period in question.

A 'lacklustre year for retailers' is how the BBC described British Retail Consortium latest statistics this morning: 'growth for the last three months of 2024 being only 0.4% higher than the previous year, it finishes a weak 12 months for retailers overall' and 'sales for non-food items over the year fell by 1.5%' – and those quotes will be value rather than volume, so it will be worse in practice because of inflation.

So what is general inflation in relation to road freight at the moment? Last time I looked at the CPI and the TEG, the Haulage index had got left behind, but now both that and the Courier index are ahead …temporarily, anyway. In December the BBC had headlines like 'UK inflation rate hits highest level for eight months' and 'Pay growth surprise after first rise in over a year'. So I decided to look at road transport versus the CPI again.

The graph shows the period from the start of 2019 to the end of 2024. The TEG price indices, published monthly by the Transport Exchange Group, represent movement in pence per mile for spot rates paid by users for transport provided via its freight exchange platforms. The Haulage index is shown in blue and the Courier index in yellow, and the green line shows the CPI index measuring the impact of inflation on consumer prices over the period.

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The TEG indices are available pretty quickly after the end of the previous month, so the final element of the traces on the graph are for December. The CPI isn’t available from the ONS until during the following month, so it only goes as far as November on the graph.

You can see that the spot rates usually go up in December compared with November. Courier averaging 5%, although it has been as little as 3%, and is just over 4% this time. Haulage averages 4% although it has been as much as 5%, which is what it is this time. But although it looks as if spot rates are now ahead of normal inflation, both Courier and Haulage rates will go down in January compared with December – they always have done - Courier by 7-8% and Haulage by an average of 10%.

By the end of 2021, inflation was well-embedded. Yes, the HGV driver crisis that led to the increase in transport rates generally in 2021 will have had a small influence on the prices that you and I experienced in the shops and other consumption in our daily lives, but there were lots of other factors leading to rises (commodity prices, shortages, shipping costs…). There was the impact of Ukraine on diesel in 2022. But then Haulage was deflationary for an unbelievable 20 months and has only ‘caught up’ with the impact of general inflation at the end of 2024.

So, the two spot rate indices are probably going to end up with a pretty similar percentage increase to the CPI over the whole six years, after having sometimes been ahead, sometimes behind. By the end of January, I reckon it’s going to be even-stevens.

Earlier today, Motor Transport reported "The number of HGV drivers employed in this country increased by almost 55,000 over the last year, according to figures published by Logistics UK" but that "the industry was still over-reliant on drivers from older age groups".

The graph shows three different measures for numbers and the age profile for each. The grey bars show people who say they are working as LGV drivers (SOC 8211), but which is considered by everyone in the industry to be an underestimate (my sample of one person I quizzed as to what he would call himself, when I knew that he drove an HGV, said that he would describe himself as a waste management operative AKA bin man, not a goods driver).

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The blue elements of the graph show people with DQCs, considered to be the best measure of people actually using their licence. The dark blue is people with a CE licence and the light blue those with C only. And the green elements are people with licences – dark for CE, light for C only.

All the coloured blocks are in 5-year age bands. You can see the very different age profiles. There are many people under 45 with C licences who are not available for work tomorrow, but could be with a week’s Driver CPC course. You may not be able to read it on the graph, but 58% of those with DQCs with CE licences are over 45.

The driver licence data is September 2024 = the latest publicly available.

The DQC data (Oct 2024, so after the DQC renewal deadline) comes from a Freedom of Information request made to DVLA (happy to share) and the 8211= ‘Working as an LGV driver’ via a data request to the Office for National Statistics (it represents the period April-July 2024) – this latter is from sample surveys.

Why are hauliers becoming insolvent? This ‘word cloud’ is from various things that have been said on Motor Transport’s Administration Watch page over the past six months. What’s been a particular problem for a while has been volume going down at the same time as costs going up.

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I see people fretting about half the road freight companies that have been set up since 2019 going under, but I’m actually much more worried about the companies that have been trading for 40, 50, 80 years – they’ve survived so much, but not the current environment. Some companies have gone down because of one specific thing that’s happened, some have been affected by a long list that has eaten away at their well-being.

One thing that does come out from a particular instance is a lesson for life – the importance of focus and being able to monitor to manage: “...intended to operate fewer trucks...; focus on higher margin transport work and change their accountant to ensure he had access to timely and accurate monthly management accounts”.

And cashflow is just as important as profit, if not more so. Remember, companies are vulnerable to cashflow when the economy picks up, when you’re having to pay out for drivers and fuel weeks ahead of getting paid. No or slow payment is a particular issue – if your customers are the big boys, there’s a really useful check facility here. And be wary of any company on this list, or if they are a customer of your customer!

And here's a short unillustrated post I did on Linkedin on Motor Transport's Top 100 and the number of companies that are loss making.

Because of Black Friday, I was going to have a look at Courier this month (although actually there’s not much correlation to internet sales other than December). But with the TEG index for haulage showing YoY growth of 9%, although little increase month-on-month, it would be perverse not to look at Haulage!

The TEG index for haulage is inflationary, but it probably needs to be. Motor Transport’s 2024 Top 100 came out a couple of weeks ago and wasn’t totally uplifting if you’re a logistics company. It’s titled 2024 but, because the data comes from Companies House based on the filing of annual reports, the Top 100 figures are really a snapshot of the previous year or earlier – there were some with financial years ending in 2022, the vast majority (over 80%) ending in 2023, and a smattering ending in 2024.

So what’s on the graph. The solid blue line is the TEG haulage index, which is based on ppm for vehicles using the Transport Exchange Group haulage platform, and which started at a base of 100 at the beginning of 2019. If you look at the graph you can see that haulage spot rates in 2023 were deflationary for the whole year, against what were probably low rates in 2022 when diesel prices were high. But things are picking up now – good or bad, depending which side of the fence you’re on.

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The grey line is the price of diesel converted into an index that starts at 100, also shown on the left-hand axis, and is based on the DESNZ pump price at the mid-point of each month.

The dotted dark blue line is the HGV traffic index from the DfT – it started in 2020 as a response to measuring the impact of Covid and is only available a couple of weeks after the month end, which is why it doesn’t get to the ‘ends’ of the graph. This is shown on the RH axis and I’ve chosen the scales to best demonstrate the pattern between the TEG haulage index and the HGV traffic levels – not exact by any means, but they do often move up or down in a similar way. And I’ve used the Wednesday nearest to the middle of the month for the traffic index. Wednesday is the day of the week least affected by bank holidays – yes, Xmas is on a Wednesday this time but it’s not at the middle of the month!

Since May this year, despite diesel going mostly down and traffic levels not being unusual, haulage spot rates have been generally rising. Of course, we don’t yet know what the traffic index is for November and won’t do for another week or so. There will have been a bit of a rush to get goods into the right place prior to Black Friday (which hadn’t filtered through to the courier side by the end of November), and that may have created a capacity constraint, or it could be that hauliers are managing to get the rates they need to make up a bit of lost ground and continue to be in business.

Planning your business in the current environment is difficult - if you’re wondering why the transport industry news is so depressing, dwell on this graph.

I don’t usually go all the way back to 1948 with my graphs, but context is important. This graph is straight from the ONS website. What it shows is an index that the ONS compiles that measures output of the production industries – specifically chained volume of gross added value. It is a weighted index that amalgamates Manufacturing (by far the largest element in current weighting), Mining & quarrying, Water supply, sewerage & waste management, and Electricity & gas.

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As with many graphs, the shape is interesting, showing various historic recessions but an overall pattern of growth. The impact of the financial crash on the UK economy can be clearly seen, followed by recovery. That recovery including quite steep uplift immediately prior to Covid, then lockdowns and, after recovery, a really quite sharp decline. You can read more on today’s ONS figures here.

Trucks bought right at the end of 2019 for a five-year stint will be coming up for renewal right now. Trucks that were bought to deal with a peak of activity, while changing legislation means that their future lives may be restricted.

What’s going to happen next? The government may find its growth plans frustrated if hauliers can’t continue to invest. Or that more and more of our haulage is foreign-owned – another regular news item in the trade press.

The TEG index for spot haulage has just risen again at a time when diesel is the lowest it’s been for three years. It’s now at 127.4, a 27.4% increase since it started in January 2019 and an 18.8% rise since September 2019 – the latter a fairer comparison as spot haulage rates are seasonal. But the latest available CPI index showed that from August 2019 to August 2024 (September not yet available), there was a rise of 23.8% during that period in what it is costing you and I to live our day to day lives.

What have we got on the graph? The two darker blue traces are for annual pay for HGV drivers shown as £ on the left-hand axis.. The dotted one is the annual figures related to April each year that ONS publish as part of its Annual Survey of Hours & Earnings. This data uses the Standard Occupation codes and what is shown is the median pay for a ‘large goods vehicle driver’ – I’ve joined the April figures with a dotted line, but we don’t know what went on during the course of each year.

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The continuous dark blue trace is from Adzuna’s website - like the TEG, also very timely. What it shows is HGV 1 driver’s annual pay on a monthly basis for the past year - it will be based on job advert descriptions and pay that were current at the time, so we get to see the monthly variation.

The lighter blue line is the TEG index for haulage spot rates from Transport Exchange Group. This is an index which is based on the average pence per mile that was agreed for all transactions on the Haulage Exchange platform each month – it is shown on the right-hand axis. There is also a platform, the Courier Exchange, for smaller vehicles.

In terms of the scales, I’ve deliberately matched the April pay for 2019 to the April 2019 TEG, and then gone for visual best fit for the whole period – may or may not be appropriate!

In September on Adzuna, the HGV 1 driver pay was £38,571 – that’s 99.9% of the national average salary, and indeed in August it was pretty much 100%. It will be interesting to see how the ONS April 2024 pay data compares with Adzuna when the ONS figures come out – probably not until November.

And it will also be interesting to see what happens when the next TEG comes out in a month’s time when we will have a better idea about DQC renewals for the crucial period leading up to peak. I don’t think inflation is over yet somehow.

Note: The an updated version of the graph included in this update can be found in this presentation given to CILT(UK)'s Retail Logistics Forum in November 2024.

The latest TEG indices for spot rates are out and, although I keep debating whether to remove 2020, I like to keep 2019 as the 'shape' of the year continues to be useful as representing 'old normal'. In 2019, the increase from July to August for the haulage index (LH graph) was 3.8%, this year it is 3.5%.

Although it's not at its highest level for August (that was 2021), it is 9.5% up on the year. But what the TEG haulage index is doing isn't really surprising. Every year the RHA carry out a survey of their members and then produce a report on costs. Here's Richard J Smith, CEO, towards the end of August on Linkedin: "The cost of operating an HGV has increased by 10% over the past year and as a consequence, a number of hauliers have gone out of business with some operators running at a loss and profit margins wiped out completely. The average profit margin of businesses in our sector today sits at just 2%."

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So what's what on the two graphs? The left one shows the TEG index for haulage, and the right hand one the courier index. These indices are based on the average ppm for spot rates organised via the two Transport Exchange Group platforms. The x-axis shows January through to December, and the y-axis the index values, starting at 100 in January 2019.

On each graph, each line represents a year and are in rainbow sequence:

• Orange is 2019 = Old normal
• Yellow is 2020 = Covid & lockdowns
• Green is 2021 = Staycations, no drivers etc
• Blue is 2022 = Ukraine impact on fuel & energy
• Purple is 2023 = Cost of living/doing business continues
• Pink is 2024 = Red Sea, haulier insolvencies, more cost of doing business

The courier (RH graph) is also not *quite* at its highest level for August (that was 2022), but it's not far off. Although DfT only started publishing daily traffic figures from 2020, by mid-July this year (the most recent available), the levels for LCVs have never been down on the same month a year ago. Yes, van traffic goes up and down with seasonality, but overall it just keeps on going up!

Going back to haulage, we could start seeing a capacity squeeze next month, just as volumes start rising. 9th September is the deadline for HGV drivers to have completed the 35 hours training required to get their DQCs renewed, but because there was (and still is) talk of the requirements being changed, it is only talk, it sounds like some drivers may be putting off doing the training...

The latest decision from the Bank of England monetary committee has been to lower interest rates, but the inflation messages are mixed.

Last month when the TEG came out from the Transport Exchange Group, I looked at how both the haulier and courier elements of this road transport price index moved in relation to diesel prices, and commented that as well as the courier index correlating more closely with diesel, it also had better correlation with light commercial vehicle traffic, as a proxy for demand, than haulage did with HGV traffic.

So I thought it was time to put the courier index (yellow continuous line) and LCV traffic (brown dotted line) on the same graph. The TEG courier index is monthly and already available for July. The LCV traffic data comes from the DfT and is only available a couple of weeks after the month end, which is why it doesn’t get to the ‘end’ of the graph. The TEG index is based on the average ppm across the whole of the month for a variety of smaller vehicles, whereas I’ve used the Wednesday nearest to the middle of the month for the traffic index, which only started in 2020.

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I've chosen the scales to best demonstrate the pattern between the TEG courier index and the LCV traffic levels – not exact by any means, but they do move in a similar way, and when they don’t… note that diesel prices were low in 2020 at start of Covid in lockdown (when most people weren’t allowed to use their cars) and high from Spring 2022 (Ukraine), pulling the TEG away from the traffic index.

The other line is another price index, the Services Producer Price Inflation index for Other Postal and Courier Services (see note at end for description) which is shown as the orange dashed line – I’ve rebased it to start at 100 in Q1, so roughly the same as the TEG index. The SPPI moves more smoothly than TEG – partly because it includes more contractual deals and partly because being quarterly irons out the bumps – but, being quarterly, it’s always slightly behind the times, hence also not getting to the ‘end’ of the graph. In contrast, the TEG index, which represents spot rates, is available very soon after the month end.

Whereas the SPPI index was showing annual inflation of more than 7.6% in Q2, the July Courier TEG was down to a mere 1.2% increase year-on-year.

Note: The SPPI from the ONS, is a series of quarterly indices – it stands for Services Producer Price Inflation and is like the CPI for consumer inflation but measures the changes in prices paid for services from UK businesses. Ref the courier index, ‘Other’ means that it’s not ‘Postal Services Under Universal Service Obligation’, which is mainly Royal Mail.

Note: The an updated version of the graph included in this update can be found in this presentation given to CILT(UK)'s Retail Logistics Forum in November 2024.

A little while back Motor Transport added an Administration Watch page to its News menu and reported that: “A record 494 British haulage businesses entered insolvency in 2023, nearly double the number two years earlier, according to the latest data from the Department for Business and Trade.”.

I did a previous post on this topic and a number of people have asked me a) about the significance of these insolvencies and b) what the figures look like for warehousing.

Dealing with the second point first, as that is why I created this graph using the same sort of methodology as I did before but adding an extra year to get a longer period of ‘normal’. What the graph shows is the number of insolvency notices (*see important note below). And it shows them as a moving annual total to remove all the ups and downs of individual months. The red line is for road freight and the purple line for storage.

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But the thought that I would have a longer period of normal turned out to be interesting - look at the start of the purple line on the graph and where it’s ended up – although it feels as if there is a high current rate of insolvency notices in the warehousing sector, it is lower than the year ending December 2018.

*It’s best to regard my graph as an index made from the number of insolvency notices using the search term ‘road freight’ and ‘storage’. While the demise of some companies results in only one notice, others can result in two or three. I’ve used a combination count of notices for Administration, Creditors' voluntary liquidation, Liquidation by the Court and Members' voluntary liquidation. This method will definitely overstate the number of companies that have become insolvent, and there is a small overlap between the two categories, but the important thing is that the counting method is as consistent as possible across the period. The figures for the graph come from The Gazette, which is based on three editions: London, Edinburgh and Belfast - so my graph is for the whole UK.

Going back to the first point above, how significant are these road freight insolvencies? If you look at the companies reported in Motor Transport, just twenty eight have accounted for over 1700 vehicles. And over 3K staff have either been made redundant or moved with contracts to different companies. These will tend to be the larger ones, but there’s also plenty of businesses not reported on and plenty where detail isn’t available.

Black being the topic of diesel prices. And even though the price of diesel has generally been coming down recently, it’s actually inflationary again - it may be down against last month, but it’s up against a year ago.

Inflation in commodity prices doesn’t generally bother the Bank of England too much as it drops out after a year. An example with figures to make the arithmatic easy: I bought a sack of flour for £10 last year to make some biscuits, and then the price went up to £11 - for the whole of the rest of that year inflation for that item would be 10%. At the end of the year, let’s say that the price doesn’t change and is still £11, inflation is now zero as we’re now comparing £11 with £11 a year ago. Same with diesel. Commodity price increases only bother the authorities once we all need a pay increase to cope with that inflation, further fuelling inflation – inflation is much more sticky once it has become embedded in wage increases.

So what’s the graph showing? The solid blue line is the TEG index for haulage based on pence per mile for spot rates for vehicles using the Transport Exchange Group haulage platform. The solid orange line is the TEG courier index. The dotted black line is the diesel pump price – yes, it’s a higher price than bulk and includes VAT, but it follows the same sort of pattern. The scaling is my decision and has been done to make all the traces start in the same sort of place on the graph and to show the correlation (not 100% by any means!) between diesel and the TEG indices from the start of 2019 through to June 2024.

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Obviously a variety of different factors affect the level of spot rates. The courier index has been more closely correlated with DESNZ mid-month diesel prices than haulage, looking at the whole of the period that the TEG Road Transport Price Indices have been published, so it’s no surprise that the courier index had a much ‘flatter’ increase from May to June when compared with the haulage index.

Not shown on the graph, but the courier index is also more closely correlated with van traffic levels (as a proxy for demand) than haulage has been with HGV traffic levels over the period from early 2020 – the Department for Transport started publishing these stats to try to divine what the economy was doing in response to Covid and weren’t publishing these back in 2019.

Back to black: it will be interesting to see what happens in July as Brent Crude spent the first half of June rising while pump prices were falling.

Fresh out from the ONS yesterday – Textkernel data on job ads.

What the graph below shows is a snapshot for each month from January 2017 to December 2023 for Large Goods Vehicle Drivers. It’s interesting just how low the figure was for January 2017 (long time ago now!) – lower than the start of Covid. And now it’s pretty low, fitting with the low volumes we’re all aware of - the RHA’s MD Richard Smith told Motor Transport, in the current article on SNAP’s survey which questions the driver shortage, that freight movements are currently down between 5-10%.

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The ONS spreadsheet has some explanatory notes about how the data is compiled, including: "Textkernel data is collected using comprehensive web-scraping software which downloads job advert information from approximately 90,000 job boards and recruitment pages. The scraped data includes job titles, descriptions, posting dates and expiration dates. Additionally, Textkernel provide variables which are derived from the scraped data using data science and natural language processing methods. These describe location, salary, seniority, skill requirements, home/office working, and more. Textkernel perform some proprietary data cleaning to identify duplicate job adverts, which ONS have removed in this release. Duplication can occur when the same job is posted on multiple job boards, or when multiple recruiters advertise the job at the same time."

The data is available for all standard occupation codes.

There were decisive increases for both elements of the TEG Road Transport Price Index, with both haulage and courier spot rates higher than they have ever been in May. Given that the prime minister announced the election on the very day that the latest CPI figures were announced, it’s appropriate to look at the impact of inflation on prices recently.

The graph shows the period from 2019 to May 2024. The TEG Haulage price index, published monthly by the Transport Exchange Group and representing movement in ppm for spot rates paid by users for transport provided via its Haulage Exchange platform, is shown by the solid blue line.

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The lighter blue dotted line is the SPPI for Freight Transport by Road. This is rebased so it starts at the same sort of level as the TEG, 100 for Q1 2019. It’s quarterly, so I’ve positioned each point at the middle month of the quarter – Q1 is in February and so on.

The SPPI from the ONS, is a series of quarterly indices – it stands for Services Producer Price Inflation and is like the CPI for consumer inflation but measures the changes in prices paid for services from UK businesses, including logistics.

The SPPI moves more smoothly than TEG – partly because it includes more contractual deals and partly because being quarterly irons out the bumps – but, being quarterly, it’s always slightly behind the times, hence not getting to the ‘end’ of the graph. In contrast, the TEG index, which represents spot rates, is available very soon after the month end.

Although haulage spot rates rose sharply during the driver crisis of 2021 and then, along with the SPPI for road freight, rose in 2022 due to the impact of the Ukraine situation on fuel, it can be seen that both the TEG and the SPPI for road freight have been restrained from 2023 onwards.

Meanwhile the aggregate SPPI measure (dotted charcoal line), for All Services other than financial ones, and the CPI Index (solid grey line), measuring the impact of inflation on consumer prices, have continued to rise (yes, inflation is dropping but prices are still rising – just not as fast as they were). You can see why the Bank of England continues to have concerns about inflation, with the SPPI representing All Services showing little sign of slowing down.

It is services generally that are continuing to feed consumer inflation as can be seen in the first graph of the recent Bank of England report. Petrol and energy prices were having a deflationary effect when this was published, food and other goods weren’t contributing to inflation very much, but it can be seen that the major contributor was services – mainly due to wage increases as we all fight to get back to Square 1.

The number of haulage and logistics companies reported in the trade press as going into administration recently has been striking. Insolvency notices per month are at a five-year high and it may be a ten-year high as I’ve only looked at 2019 onwards.

Everyone in logistics will remember reading, at the end of last year, about 463 hauliers entering insolvency and the increase that it represented over two years previously. Those figures were based on Freedom of Information data that had been procured by accountants Price Bailey.

It’s best to regard my graph as an index made from the number of insolvency notices month-by-month using the search term ‘road freight’. There are other forms of insolvency that don’t get reported individually in the press, such as smaller companies going into voluntary liquidation – giving up because of today’s difficult trading environment.

While the demise of some companies results in only one notice, others can result in two or three. I’ve used a combination count of notices for Administration, Creditors' voluntary liquidation, Liquidation by the Court and Members' voluntary liquidation. This method will definitely overstate the number of companies that have become insolvent, but the important thing is that the counting method is as consistent as possible across the period. The figures for the graph come from The Gazette, which is based on three editions: London, Edinburgh and Belfast - so my graph is for the whole UK.

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The blue line on the graph is the month-by-month combination count and is measured against the LH Axis. The red line is a moving annual total of those monthly counts and is measured against the RH Axis. The dotted element right at the end of the graph for each line is because we haven’t quite reached the end of March yet – it can only go up.

What is interesting to me is that, while there was a very understandable increase in insolvencies at the start of the pandemic, the next big peak didn’t occur until June 2021 when we entered the period of CEO of Logistics UK’s David Wells’ immortal words: “Instead of just-in-time replenishment it is ‘just when I’ve got a driver’ replenishment.”.

In advance of creating the graph I had made myself a little list of dates that might affect the rate of insolvencies:

• Covid - first lockdown legally in force 26 March 2020
• Furlough ended 30 Sept 2021
• Interest rates started to rise 15 Dec 2021
• Ukraine war started 24 Feb 2022
• Truss mini-budget 23 Sept 2022
• CPI peaked Oct 2022

Other than the start of Covid, I didn’t need my list – after June 2021 the increase in insolvencies has become seemingly inexorable. This could be construed not to matter right now, when volumes are low and it’s actually beneficial for the haulage market not to be over-saturated. It will matter a great deal as and when the economy eventually picks up again.

I’m trying to get a handle on the impact of automation going forward including answering the following: What proportion of UK warehouses are currently automated? Or, alternatively, to what extent is the UK typical of the global warehouse estate with respect to automation?

Back in 2019, the Office for National Statistics published a report headed Which occupations are at highest risk of being automated? which had accompanying data by Standard Occupational Classification for the probability of jobs being automated in the future – it’s where the graphic I’ve used came from. When ‘the future’ occurs isn’t defined, although the fact that 62% of LGV drivers’ jobs are seen as being at risk probably gives some idea.

Continued below graphic...

There are various types of automation:
a) The physical automation of tasks such as in the warehouse (c63% of elementary storage occupations are at high risk of being automated)
b) The automation of clerical functions by relatively simple computer programs
c) The use of artificial intelligence to take more complex decisions on the basis of machine learning

And there will be others. The divide between the last two categories is less clear cut when you’re trying to understand impact on staffing - for instance what proportion of the c60% of stock controllers whose jobs are at risk is down to b) or to c), and indeed some will be down to a). It’s also not clear whether the loss of warehouse managers & directors as shown in the graphic (35% at high risk of being automated) is as a result of loss of staff to manage due to a) or whether more is down to, say, c).

A more recent report (2021) on analysis carried out by PwC, commissioned by the government, which is specifically about AI, indicates that over 500K jobs in transport & logistics will be removed by AI over the next 20 years. This includes loss of drivers’ jobs as a result of the development of driverless vehicles, with that loss being towards the end of the 2030s rather than in the 2020s.

As well as identifying when ‘the future’ is, it is also important to know how far are we through that journey already. Based on its latest update (2022), ChatGPT couldn’t help me with the question: What proportion of UK warehouses are currently automated? So I had to do my own research.

A piece on the Business Wire website, published in the same year as the PwC report (and, in this case, specifically about the physical side of warehouse automation), when talking about the global market said “More than 80 percent of the warehouses today have no automation of whatsoever. However, since last decade ~15 percent of the warehouses are being mechanized, while only 5 percent are using sophisticated automation equipment and solutions.” But to what extent is the UK typical of the global warehouse economy?

I’m still looking for an answer if anyone can help me: What proportion of UK warehouses are currently automated? Or, alternatively, to what extent is the UK typical of the global warehouse estate with respect to automation?

Peak mania doesn't do any of us any good. Our pockets, waistlines, or efficiency.

The supermarkets have had their busiest Christmas since 2019 according to Kantar, a research company specialising in retail, as reported by the BBC. And the TEG road transport indices for December, just out, support this picture of busyness, with haulage rates up by just over 4% compared with November. But after peak, Black Friday, Christmas and all sorts of other reasons to spend, we’re now entering the quieter period of the year.

So what’s my little chart showing us? The TEG road transport price indices are based on the pence per mile paid for spot rates through the Transport Exchange Group’s two platforms: haulage and courier. Each of the indices starts at 100 in January 2019 and has flexed up and down each month over the past five years. I have show the indices year by year so the annual pattern can clearly be seen.

Continued below chart...

Each year is separately ‘conditionally formatted’ using Excel's colour gradient with the deepest blue representing the lowest value for that index for that year, generally (although not always) February ...and the strongest red representing the maximum value, which is generally (although not always) December.

Yes, there will be inflationary impact as each year progresses, but I don't think this distorts the bigger picture, which is that road transport companies are (not all, but generally) very dependent on the retail (so-called) 'golden quarter' to make money across the whole year.

In the late autumn and into peak, resources are stretched with users having to pay higher rates to get the job done. And then in the early spring, resources are under-utilised and transport companies offer low rates to chase whatever jobs are around. If only the year was flatter, allowing more efficiency, more even use of less resource.

PwC, one of the large auditing & consulting companies, predicts some 30K companies will become insolvent in 2024, with transport & storage one of the sectors listed as likely to be more affected.

So my advice for the start of 2024 is the same as the start of every year, but possibly with even more emphasis this year: pay attention to credit control and cashflow, as well as to volume of work. You can’t afford to let a single bill be unpaid or delayed.

Yesterday the increase in the National Living Wage for April next year was announced by the government. The Chancellor accepted the Low Pay Commission’s recommendations with the new rate set at £11.44 compared with the current rate of £10.42, a 9.8% increase. NB The Low Pay Commission is made up of business, employee and academic representatives.

So what’s the graph showing us. The majority of the graph isn’t mine, but was published by the BBC last week and its aim was to demonstrate the current divergence of wage growth and price inflation. Two things have happened since then – the very next day the inflation figure for October was announced and yesterday we heard about the NLW increase. I’ve manually added these to the graph, trying to position them in the right place, both with respect to date and value. I’ve deliberately made the NLW a different colour to the wage growth line as it doesn’t represent all workers by any means - the NLW affects just over 2.5m workers with the objective of bringing their wages up to two thirds of average earnings.

Continued below graph...

It’s beneficial that people are paid a decent wage and it’s in the interest of government and tax payer not to pay more benefit to low paid workers than is necessary, but the flip side is that this increase will have an upward cascade on wages generally, feeding into inflation, particularly in service industries, at a time when inflation was starting to reduce.

Given this and the talk of tax cuts, which we will hear more about in the Autumn Statement later today, I’m not at all surprised that Andrew Bailey, Governor of the Bank of England, found it necessary to step into the ring yesterday and say that inflation might not fall as quickly as some are hoping.

Periodically Aricia makes a request from DVLA for an update about how many CE and C-only drivers have DQCs - we think that gives a better feeling for the state of play than the number of people saying they work as Large Goods Vehicle Drivers. And the picture for this update is a series of graphs, which are explained below this image.

Looking at the graph at top left first, the reason that there are irregular gaps between the bars on the chart, is because the data is only available when we've made an information request. We've coloured this data dark blue for CE drivers, those that can drive artics, and light blue additionally for C-only drivers, those who can drive big rigids but not artics. While we don't know what's gone on in the gaps (in particular in 2021, when I didn't have the heart to ask an organisation that was plainly under stress), we can see that there is a general upward trend.

Looking at the chart at bottom left next, we can see that there has been an increase in all areas since 2015 (before the Brexit vote in 2016). There's been an increase in those with a licence and medical (able to do the job with one week's training), an increase in those with a DQC (ready to do the job now) and a small increase in those doing the job. Obviously there are other reasons for having a licence - you may be a scaffolder, but need an HGV licence to carry your scaffolding around. You may be lucky enough to be rich enough to have horses and a large truck to transport them around in. But many people will be available and, according to job ad stats, looking for an HGV driving role.

The two graphs on the right show the age profile in two different years, and the arrows show that drivers have become eight years older during this period, and moved from the start of one bar to the end of the next. What these graphs show is how different the age profile of those immediately able to do the job is in 2023. Yes, we have what I think of as the Stalwarts, those drivers who have been in the industry all their lives, but we now also have a good tranche of younger drivers available, thanks to the various initiatives taken by the DfT and various industry bodies.

If you'd like the image as a pdf which you can download and save, here it is: DQC Update Autumn 2023.

I’m still really interested in the TEG Road Transport Price Index and what it tells us about what is going on in the road transport spot markets. Last month I looked at the Courier element of the TEG index versus diesel price and logistics job ads, so I thought I’d do the same with the Haulage element this time but in a more conventional way!

So what’s the graph showing? The dotted pink line is the Adzuna index for logistics job ads, the dashed grey line is for diesel pump price and the solid blue line is the TEG index for haulage for spot rates for vehicles using the Transport Exchange Group haulage platform. The TEG index and the diesel index that I’ve created both start at 100 and are on the LH axis, the job ads index fluctuates more and so I’ve put it on the RH axis – the scaling is my decision and has been done to make all the indices start in the same sort of place on the graph and to show the correlation between the logistics job ads index and the TEG haulage index from the start of 2019 through to Spring 2022.

Continued below graph...

Back in February, the ONS published some one-off data from Textkernel specifically about freight drivers which showed close correlation with the Adzuna data for general logistics jobs which the ONS publishes regularly, so it’s no surprise that the Adzuna logistics job ads has close correlation with the Haulage TEG.

After overheating in 2021, particularly with respect to drivers, logistics requirement for new people cooled a bit, but by Spring 2022 the price of diesel was rocketing, and we can see how the TEG ‘pulled’ away from the job ads index.

So, we can see the extent to which the jobs market and the cost of diesel affect spot haulage rates, but another factor which has a strong effect on price is demand. There are indices which give us a feel for this.

The HGV traffic index from DfT actually has a closer correlation to the TEG than diesel, although not available for the full time period on the graph - it only started in March 2020 as a response to Covid. HGV traffic levels were comparatively low in 2022, which is why that diesel hike didn’t have as much impact as it might have done and, HGV traffic having risen in May 2023 to the highest point since Dec 2021, has then dropped in June and July – we don’t have August yet.

And Supply Management, reporting on the S&P Global / CIPS UK Manufacturing Purchasing Managers’ Index which is at it’s lowest level since May 2020, noted slowing market conditions and declining new order intakes.

Although diesel went up in August, the Adzuna index for logistics job ads went down for first time versus July since that index started in 2018. The TEG Haulage index has gone up in August for the past four years, and it’s done just that this year, although only a tiny increase. The key question is what does that tell us about the economy as a whole?

Looks a bit scary? I’ve certainly tried to pack quite a lot of information into one graph! Last time I posted on the Courier element of the TEG Road Transport Price Index, there was interest about its relationship to the price of diesel, but there are also other cost drivers.

So, what is the graph showing? Each of the filled circles represents a data point for a particular month/year. If you follow down from any particular circle, the X-axis indicates the pump price of diesel at the middle of that month. If you follow left from any particular circle, the Y-Axis indicates how high the Adzuna index for job adverts in logistics, transport & warehousing was, again at the middle of the month.

Continued below graph...

The size of the circle indicates the level of the TEG Courier index – the bigger it is the higher the pence per mile that customers needing spot courier work were paying on Transport Exchange Group’s platform. The TEG index figure represents the average across the whole month. The different years are then coloured up as follows:

• 2019, the first year the TEG index is available, is shown in brown – you can see that there isn’t a great deal of variation in either diesel price or job ad level – 2019 was what we thought of as ‘normal’ with December the most expensive (largest circle) for hiring couriers, as it has been in all years shown
• 2020 was the year the pandemic started and is shown in yellow – the diesel price dropped a bit due to the lockdown effect on general traffic
• 2021, shown in red, was the year the economy was opening up with staff shortages leading to very high job advert levels, impacting on spot prices – you can see the circles growing in size
• 2022, shown in grey, was when the war in Ukraine started and impacted on diesel prices big time, again impacting on spot prices – the circle to far right is July 2022
• Finally, 2023 shown in green with July 2023, the latest data point, indicated – the spot prices are still comparatively large despite the reduced diesel price – 21% higher than in July 2019

So, why is the courier index still relatively high when there is less pressure on staffing (low job ads) and the price of diesel has come down from its peak? It’s because Light Commercial Vehicle traffic was at an all-time high in June although it came down a little in July. That index isn’t shown - there’s a limit to quite how many things you can usefully show and describe on one graph!

Fortunately, we’ve had nothing up in the top right-hand corner, nothing with both very high index for logistics job adverts and very high diesel prices happening together, so I’ve been able to place the key for this graph up there!

I’ve thought of doing this post for a while, but there’s nothing like a miserable rainy weekend to get on with it: the impact of property prices on the environmental friendliness, or not, of logistics.

In the same way that commuters are often forced to live further away from work than they would wish because of property prices, logistics operations are often further from the centre of their customer demand than is ideal.

Some of you will have seen a similar map to the inset before, when I’ve done posts on the business rates assessment of large DCs – red is the highest valuation through the rainbow and ending up with purple as the lowest valuation.

Continued below graph...

But what I’ve thought about doing and have only got around to posting today is the relationship between property prices (or their rateable value assessment) and their distance from the centre of action.

What the main graph shows is the distance in road miles from Park Royal (centre of the universe!) on the x-axis and on the y-axis the rateable value per sqm. Each spot represents a large DC in the business rates data for England & Wales, sized and coloured up by its size.

Other than one or two outliers, there is quite strong correlation in the drop off and levelling out as the distance from Park Royal increases, and then with a lift at the end as the warehouses start being closer to north than south. It can also be seen that the banana-shaped correlation is similar for both smaller and larger sized warehouses.

It’s virtually impossible to counteract the market elasticity that supply and demand imposes on property costs, but the way that logistics does that is to position its warehouses away from where its customers live and work. This isn’t green - I put some figures around this in an article for SHD Logistics just after the Nocado no-go decision back in 2021.

We are where we are, and accommodating large logistics operations in city centres is probably a thing of the past, but out-of-town generates longer distances and larger volumes of traffic.

Along with the Consumer Price Index (CPI), widely reported in the mainstream press, the Services Producer Price Index (SPPI), which is only published quarterly, became available today for Quarter 2 (April to June). The SPPI is also from the ONS (Office for National Statistics) and is a series of quarterly indices – it’s a bit like the CPI for consumer inflation, but it measures the changes in prices paid for services from UK businesses. I’ve picked out a few logistics-related elements to have a look at – I’ve shown the past five years, taking all prices back to a base of 100 at Q2 2018 so you can see the increase in prices since then.

Continued below graph...

The two that stand out are Postal Services Under Universal Service Obligation (dark orange) at the bottom of the graph – I don’t remember Royal Mail prices going down at the start of 2021, but that seems to be the message here – it may be to do with the mix of letters and different parcel types. And then Other Transportation Support Services (pink) also stands out at the top of this graph. Back in January, the ONS reported: “other transportation support services saw a significant slowing in the annual rate as a result of ship-broker services reflecting the impact of lower freight rates”.

Then we have the SPPI aggregate index for all services (grey) - not just logistics, but a wide range of services from sewerage sludge, through publishing and real estate, to drycleaning and much else in between - that is now back under 5% year-on-year inflation.

We have road freight (blue) and courier services (light orange) ending up at the same sort of overall price increases – note these are different to the TEG Road Transport Prices Index, which I sometimes report on and which is for spot prices for consignments via Transport Exchange’s platforms. The SPPI is the result of a statutory survey, measuring changes in the price received for selected services provided by UK businesses.

And we have warehousing (purple) and railfreight (green) ending up at the same sort of overall price increase, at a higher finishing point than road freight and courier, but with warehousing flattening off while railfreight looks to be about to steam ahead, if you’ll excuse the pun.

It is only railfreight that is ahead of the CPI headline inflation, all the other indicators shown have year-on-year inflation of less than 5%, and in the case of Other Transportation Support Services there is deflation, albeit from a high rate of over 20% less than a year ago.

At this year’s recent Multimodal I came across an interesting statistic from the Prologis report on its most recent sample survey of its occupants – 39% of employees in the warehouses surveyed were female. Interesting, because I had only recently calculated the proportion of women in logistics from the Office for National Statistics occupation statistics and come out with 15% - that also comes from surveys, and is then projected statistically to account for all people in employment across the UK.

The quality of the Prologis premises and distribution parks no doubt plays a big part in attracting a broader spectrum of employees, but they also tend to be larger premises occupied by larger companies, whereas we know that c4 out of 5 companies in Transport & Storage have 4 or fewer employees. This got me wondering about the relationship between the size of logistics companies and / or the size of the premises and the proportion of women employed.

The proportion of women in a company can be calculated from the gender pay gap data. The median percentage for logistics companies varies between 16-23% across the different size bands, but doesn’t follow a particular pattern – it doesn’t grow as the size of companies grow.

But I took the individual warehouse data in the Prologis report, and it’s interesting. My graph shows size of warehouse on the x-axis and total staff up the side. Each spot represents one of the (anonymous) warehouses and is coloured by the proportion of women working there. There’s two distinct clusters which I’ve marked with boxes.

Continued below graph...

Down in the bottom left box (among plenty of other warehouses) are all of the six locations with a low proportion of women (white filled spots) – all the companies with a low proportion of women are less than 200K sqft and have 100 or less workers. Whereas up in the top right box we have a different cluster – all of the six companies that are in premises over 325K sqft are in the top bracket with respect to the proportion of women employed in them (deep pink filled spots).

It's by no means a rule of thumb as there are plenty of exceptions in the first box and a mix elsewhere, but there does seem to be a bit of a pattern – companies in larger premises seem able to recruit a fairer proportion of women, perhaps because they have to put more effort in.

You can download the Prologis report, with all sorts of other interesting warehouse employment statistics – thanks Robin Woodbridge for sending it to me!

The latest Modern Materials Handling magazine is out, along with its ever-interesting (to those in logistics anyway!) Top 20 System Suppliers - you can go straight to the oracle and read about it here, although ignore the growth calculation at the bottom of the Moderns table.

But I’ve done my usual thing, which is to bung all the figures into a graph …or at least, in this case, update the graph I’ve produced for a number of years.

Continued below graph...

The story of the past few years has been growth – both generally and of the big players. The graph shows the worldwide revenue of the top 10 individually featured in the coloured bars, entries 11-20 combined (deep purple) and in previous years the companies that were in the top 20 previously (lighter shade of pale) but not now. The graph shows the accelerated growth that occurred between 2015 and 2021, resulting in approximately double the revenue over that period.

But this year has broken with the mould of the past few years. The story this year is of contraction or stasis for some of the larger players, but expansion for the smaller ones – you can immediately see the increased proportion of the 2022 bar which the deep purple element at the top represents.

With all the current cost of living headlines, one’s mind immediately questions to what extent inflation is playing into this growth, particularly with respect to the price of steel. Increased demand for automation, to cope with the increased demand for online shopping that the pandemic brought, coincided with a reduction in steel production at the start of Covid and the price of steel was then further impacted by the war in Ukraine, along with a host of other factors around the globe.

To what extent did the price of steel contribute to the increased revenue growth of the Top 20 in 2021? Traditional automation is very steel heavy. The price of steel appears to be coming back down again – to what extent is that now deinflating revenues of the larger ‘traditional’ automation companies? Or are there other factors?

That increased growth rate of the smaller players in the Top 20 shows that they are not just copycatting, but leading the market with the flexibility of some of the newer technologies. They are not sitting on the subs bench - their time has come.

I continue to be interested in how low the TEG index for haulage is recently. I know that February has been the lowest month of the year since the Transport Exchange Group started publishing this index (apart from covid-impacted 2020), but the haulage element of the TEG still has an element of year-on-year deflation, ongoing since June, despite rises in many operational costs. However, if we look at job adverts for drivers as a proxy for vacancies which, in turn, could be a proxy for resource availability / capacity, perhaps we see the explanation for those low spot rates.

Last month the ONS published a one-off report looking at online job adverts as a proxy for labour demand, covering the period 2017 through 2022 - the data for this ONS report came from Textkernel, an online job search engine. The category for ‘freight drivers’ represented about 1.4% of online job adverts in the last quarter of 2022. The ONS has five points which address why these ads might not represent labour demand accurately, with a pertinent one for logistics being that “adverts may represent multiple posts …for identical, or very similar positions” and it also makes the point that “the scope of online job adverts does not fully capture the scope of UK economic activity, because of differing advertising methods …word-of-mouth or in shop windows”. A key alternative in logistics is the back of trucks, where adverts for drivers form part of the livery for some companies.

Continued below graph..."

What the graph shows is the number of Textkernel online job adverts for freight drivers (there is no category for HGV drivers or for van drivers, but there is a separate category for couriers & delivery personnel, not included here) – this is represented by the continuous darker blue line which starts at January 2017 and is measured against the left hand axis. I’ve included the non-overlap period so that we can see a longer period of what ‘normal’ looked like.

The TEG index representing pence per mile for haulage spot rates is shown by the dotted lighter blue line which starts at a base of 100 at January 2019 and runs through to February 2023, the most recently published figure – this is measured against the right hand axis. The choice of scales is mine and is designed to show the relatively close correlation for much of the overlap period, although the two lines diverge after May 2022 and stay apart. This divergence is due to the impact of various increased costs elements including diesel.

The level of Textkernel job ads, back to under 20K, suggest that driver supply is now no worse than it was pre-Covid. And the comparative lowness of haulage spot rates suggests excess capacity in the market / low demand.

Time to revisit Amazon’s square footage and see how it compared with internet sales and, therefore, likely requirement, following the news earlier this month in Logistics Manager that Amazon was starting to sublet some of its logistics locations, although only one smallish location was identified, along with others due to close which had been reported elsewhere.

The orange area on the graph shows the square footage for Amazon fulfilment centres in the UK, in millions. The grey then shows, additionally, the square footage for various other types of Amazon logistics locations eg delivery centres. This data comes from the amazing resource that MWPVL regularly compile, which I’ve then supplemented from my own research, and both are shown against the left hand axis.

The dark blue line, which is plotted against the right hand axis, shows Internet sales in £mpa for Non-store retailing only ie for Pureplay like Amazon - Amazon’s UK turnover is usually 40-50% of this figure, although some will come from other sources. This internet sales data comes from the ONS. I’ve chosen the scale to best match the fulfilment centre square footage (the orange area) and you can see that it is generally quite a close fit …until 2022.

When you consider that this is showing value before inflation has been taken into account, you can imagine what the physical volume might have done - which is, after all, what we shift in logistics.

The news a couple of months back was about Amazon closing, cancelling and delaying warehouses in the US. Given today’s news in the UK, about the economy starting to shrink, it seemed to be the right time to have another look at Amazon's footprint in the UK.

Along with a lot of people, I'm really grateful for the wonderful work that MWPVL do each year in annotating known locations and pipeline around the world.

My map, created using Maptitude, shows both Fulfilment Centres and the various other logistics operations. Although many of the headlines report huge sqft, these can include multiple structural mezzanines that have been rentalised - I've tried to bring all the figures back to footprint, to make them more comparable with other logistics operations.

There’ll be more retail sales figures out in a week’s time, but in the meantime the most recent we have were for September. Weekly internet sales were c92% of September last year and the subset of internet sales from non-store retailing was down by a similar amount – that’s value not volume. Meanwhile the footprint has carried on growing in recent years.

Thought-provoking.

Note: The an updated version of the graph included in this update can be found in this presentation given to CILT(UK)'s Retail Logistics Forum in November 2024.

My interest piqued by having looked at the courier element of the TEG index a couple of times recently (see further down this page), I thought I’d do an update on what consumers are being charged for home deliveries these days. This research started off as part of a project for a client looking at the Next Day offer from various different fashion retailers back in 2009 and I’ve then updated this bit of it a few times since.

The graph below shows the change in order cut-off times and charges to the customer at five points over the past 13 years for Next Day delivery of fashion in the UK from five retailers. The various colours indicate the different retailers, with the cut-off time on the x-axis and the charge on the y-axis. The width of the ‘comet’ trace indicates the year, with the widest being 2022 to draw your attention to the current position (see legend). So what's going on?

Continued below graph...

I’ll start at the top of the legend and the bottom of the graph, with ASOS (blue). This shows the extent to which retailers are trying to protect consumers - the charge has remained the lowest across the whole period and the last order cut-off, having pushed out to midnight, had already pulled back to 10pm by 2020. ASOS also have a subscription service, which is good value if you’re a regular customer.

Harvey Nichols (red) didn't offer a next day service in 2014 hence the stray dot for 2009, and it continues to have the earliest cut-off and the highest charge. That highest current charge is shared (assuming you consider £8 and £7.99 to be the same!) with House of Fraser (green), but which offers a later cut-off, further extended in this latest data gathering.

Jigsaw (purple) has increased its price and reduced its service since I last did a snapshot. And finally John Lewis Partnership (orange) which has had the most consistent offer, with just a little refinement over the thirteen years.

Obviously there are now a much wider range of delivery fulfilment services available including Same Day etc, but back in 2009 when I started this, none of these five offered that (I recorded it at the time) and even in 2014 it was only being offered by House of Fraser. And although Click & Collect was being offered by all five by 2014, it was only from John Lewis that you could collect your purchase in 2009.

Four out of the five retailers have held their Next Day delivery charges at the same level as 2020, with ASOS continuing to offer the best value and the latest cut-off time.

We’re short of workers in the UK, right?

Nearly everywhere I go in logistics I hear about it. Nearly every magazine or news email I read talks about it. It seems to have moved from truck drivers to inside the warehouse and at managerial level, but the story is the same - shortage.

Other topics I keep coming across in the news and on Twitter, are things like the current length of NHS waiting lists, the number of people suffering from long Covid, the number of people who can’t stop shielding because vaccines don’t work for everyone – think those undergoing cancer treatments, etc.

I’ve included slides in a presentation and written subsequent posts on the topic of the Silver Exodus – older workers moving into economic inactivity. Economic inactivity is people, aged 16-64, who are neither working nor actively seeking employment.

But it was only on reading an ONS (Office for National Statistics) publication that came out earlier this month that I joined all the dots together.

The single largest reason for economic inactivity back in the ‘90s, and no doubt before that, was ‘Looking after family / home’. And that continued to be the case predominantly until 2013. In 2013 being a student took over and remained the single largest reason for most of the time until 2021.

But in 2021, and it remains the case in the most recent survey for May to July 2022, the single largest cause became ‘Long-term sick’. So, we’re desperately short of workers, in the NHS as well as logistics, but the largest cause of economic inactivity is now …people needing the NHS.

If it hadn’t been for another ONS (Office for National Statistics) publication, fresh out today, piquing my interest (Reasons for workers aged over 50 years leaving employment since the start of the coronavirus pandemic), I wouldn’t have had a look back at that earlier publication and the data that went with it.

Having had my realisation, I find that Faisal Islam wrote a piece, a fortnight ago, where he connects the record numbers of long-term sick with economic impact. But I don’t think this is something that is being shouted loudly enough – the current largest cause of economic inactivity is long-term sickness.

The record NHS waiting lists and Covid are impacting the numbers of workers in our industry as well as the wider economy.

Note: The an updated version of the graph included in this update can be found in this presentation given to CILT(UK)'s Retail Logistics Forum in November 2024.

When I spoke at Tomorrow’s Warehouse back in June, I put up a similar graph, but this one has been both updated, and changed in a crucial way. I commented that it was really the last time I could be lazy and do the calculation I’d done just based on the value of merchandise – the inevitable happened and, after the event, someone challenged me to show the impact after I’d stripped out inflation!

First of all, what’s the graph below showing. The green elements ARE value – they are measured against the left-hand axis and represent the value in £billions based on my best estimate of non-food retail and etail sales using ONS (Office for National Statistics) data.

The darkest green is retail of non-food carried out in-store, and we can see the squeeze that lockdowns put on that element of business. The mid-green represents non-food etail sales that have been made by companies with stores, but the sales have been made online and delivered to home. The lightest green is pure play – sales made by companies that only operate online - the latter will, unfortunately, include some food (Amazon pantry, Ocado, some specialist online-only food businesses…) which it is impossible for me to remove as there are no separated statistics published. It’s not seasonally adjusted, but it is a moving average, which will smooth out much of the seasonal variance. And we can see the extent to which the light and, particularly, mid-green rose dramatically in value during the first stages of Covid.

Back in 2016, Prologis, the largest industrial real estate company in the world, and very familiar to those of us in logistics, came up with a bit of a formula: “Our research reveals online retailers need approximately 1.2 MSF per billion dollars of online sales on average, which is three times the distribution center space required for traditional brick-and-mortar retailers” - MSF is millions of square feet and at the time, this translated to roughly 1.6m sqft per billion GBP online sales and 0.5m for retail.

Obviously since then there have been price variations, with inflation particularly acute in the past few months, and warehousing is very much influenced by volume not value. For retail sales, the ONS publish both value and volume, but that’s not the case for internet sales – I asked. The advice that came back was a suggestion that I might assume that the relationship between value and volume for internet sales was aligned with retail sales, and so that is what I have done.

So the solid grey line, which refers to the right-hand axis, uses the Prologis rules of thumb converted from dollars to pounds, with the sales data for etail and retail separately converted to volume using the retail value to volume ratio, to calculate an estimate of the warehousing square footage required. And, although convoluted, we can see that that figure rises at a fairly even rate until the start of Covid.

The calculated requirement then does what we know the real warehousing requirement has done, after the very initial impact of the first lockdown, and that is to grow at a vastly increased rate. However, more recently, the volume of goods being bought in total has been quite flat and the proportion being bought online has been dropping off, resulting in a drop in the estimated warehousing requirement. I’ve put in a trend line based for what one might have expected as a warehousing growth requirement pre-pandemic – this has also been updated from the Tomorrow’s Warehouse slide to be based on volume sales rather than value.

If you’re selling online, you may be struggling for space or you may feel you over-estimated, but what the graph most definitely shows is how difficult it is to forecast and plan in logistics at the moment!

When I spoke at Tomorrow’s Warehouse in June, I included a statistic that surprised some people – that the nationwide reduction in Forklift Truck Drivers over the past couple of years has been more than a third - that statistic is from the Office for National Statistics workforce numbers on Nomis.

The graphs I also used in that presentation, about the Silver Exodus, came from an academic paper referred to in a post on the World Economic Forum website. The thrust of that post is that there were c300K more UK workers aged 50-65 “economically inactive” than before Covid – neither working or seeking work. It also gave detail on sectors and occupations most affected:

• Wholesale & retail (40% rise), Transport & storage (+30%), and Manufacturing (+25%) had the largest proportional rise in inactivity in over-50s
• Process plant & machine operatives (+50%) and Sales & customer service occupations (+40%) were the occupations with largest percentage rises

Most of this Silver Exodus demographic said they didn’t ever intend to return to work. The piece surmised that it could be that workers had saved more during the pandemic and could now afford to retire earlier than planned.

If you look at the Silver Exodus graphs, the red one is interesting as it represents workers who earned £18-35Kpa in their most recent job and shows the percentage of employed workers in that 50-65 age bracket who became economically inactive one year later. These workers were more and more likely to become economically inactive.

So, logistics has been one of the larger areas of loss and, while I suspect that the process plant & machine operatives are more manufacturing occupations, they sound like some of the sorts of jobs we have in logistics …say forklift truck drivers? £18-35K is the sort of pay for the lower paid half of FLT drivers. And in a recent survey of Forklift Truck Drivers carried out by Talent in Logistics, nearly half (48%) were over 50.

I said in my presentation at Tomorrow’s Warehouse, that my own thoughts were that it could well be that some of this older demographic now look to return to work because of the cost of living crisis. And this does indeed seem to be the case – witness the graph in this tweet, today, from the Resolution Foundation.

Logistics needs to be ready - it’s the opportunity to welcome some FLT drivers and other staff back into the industry.

The latest TEG Road Transport Price Index came out yesterday - May was nearly level against April. The courier element rose a little, but the haulage index went down slightly. Also yesterday, the price of diesel went up yet again, taking the cost of filling up an average car to over £100.

What I’ve done in the graph below is to take the costs from Motor Transport’s 2018 Cost Tables for an artic unit & trailer and update them for January 2019 diesel costs and put profit in at 2% of turnover. Note, profit is already very low, but it’s what the big boys in the road transport industry seem to average according to Motor Transport’s Top 100. So you can see the proportion of turnover companies spent on diesel, driver & vehicle and then what’s left over for overheads and profit. I’ve taken that as a sort of benchmark of normality.

It adds to 100 in January 2019, not only to show the percent each element of costs represented at that time, but also because the haulage element of the TEG Road Transport Price Index was 100 in that month, when it started.

I’ve then left a gap for the intervening years and recalculated costs at the midpoint each month from Jan 2022 to May, reflecting the various cost increases in diesel, driver & vehicle and what’s left over for overheads and profit if income achieved the equivalent of the spot rate of the TEG index, which is what the height of each bar represents.

You can see the real squeeze on what is left after all direct costs have been covered. Yes, I know some companies will have drivers employed for years, potentially at lower cost, and some will be operating vehicles that are not brand new. So there may be a little more in the ‘overheads & potential profit’ pot, but that pot has to cover compliance, planning, yard & office space, power, computers, phones, tolls, parking, PCNs, the accounts team and other management functions, among other costs.

At the end of last year, I predicted 2022 was the year of the 3 ‘i’s – inflation, interest rates & investment. About that last point, I said: I believe there will be a focus and pressure on indirect costs - overheads & HO – automating as many admin activities as possible. However… I don’t believe that has happened that quickly, and (I know I’ve said it before, but I’ll say it again) I do believe that many hauliers will not be making a profit right now, and some will be making a loss.

The current diesel increases will really be impacting hauliers, hauliers who need to operate on an economically sustainable basis if we’re to have food delivered tomorrow as well as yesterday. More worrying is that some may be suffering cashflow problems today because certain customers take for ever to settle invoices, and in the meantime the haulier forks out more & more cash upfront to do the job. And, as I mentioned at the start of this piece, the cost of diesel continues to rise…

Last Friday, the ONS (Office for National Statistics) released the latest retail sales figures. This was reported in the press, particularly with respect to the reduction in retail sales and the impact on the cost of living, particularly around food and fuel inflation.

Earlier last week, and before these latest figures were available, Warren Ackerman, Head of European Consumer Staples Research at Barclays, penned a piece for last week’s edition of The Grocer magazine. Commenting on the performance of some of the major brands such as Nestlé, Danone and P&G, given some of the recent price increases, wrote in a longer piece "The interesting point is so far we are not seeing much downtrading. Indeed, to the contrary the evidence is there is more uptrading to premium products, just at a time where disposable income is getting squeezed hard ...growth in out-of-home channels continues to be very strong even as retail sales for in-home food remain elevated ...Normally we would expect to see this growth in out-of-home impacting in-home food sales. This is not happening, and for as long as this continues, sector growth could remain elevated."

What we’re seeing in the graph are indices for Value at current prices (the grey line), so amount spent, and Volume (the purple line) representing quantity bought. Both these indices have a base of 100 for the year 2019, and both are seasonally adjusted. We can see that with some small variations, volume and value followed a not dissimilar path month by month for 2019. In 2020 Covid hit, and both the volume and value rose sharply, and then for the next year or so followed an erratic path, erratic but pretty much in step with each other. For the past year the lines on the graph have started to separate, gradually at first and now very clearly. I’ve been a bit naughty with this graph as the y-axis doesn’t start at anything like zero, but I’ve done this to emphasise the story - the headline is that as food retail sales do start to see a reduction, the amount of product in average shopping baskets is falling dramatically.

Continued below the graph...

The combination of these figures and that opinion piece in The Grocer, suggests to me that there are two quite different stories going on here. The Barclays commentary on brands suggests that middle class households which can afford brands are continuing to shop in the same sort of manner as they have been in the recent past. Poorer households, who are more likely to be buying supermarket own ranges or shopping with the discounters, are not deciding whether to stop shopping at Waitrose or between buying the basic rather than premium item (they never were), but deciding not to buy that item at all – which fits with the comment earlier in the year from MD of Iceland, Richard Walker: “We’re starting to lose some customers to food banks or, not being overly dramatic, to hunger”. And Jack Monroe, Bootstrap Cook and campaigner against poverty, more recently: “That's not people deciding not to go to the theatre or not have legs of lamb or bottles of Champagne, that's people deciding 'we won't eat on Tuesday or Thursday this week’...”

The volume of groceries now being bought is lower than 2019. If some people are buying the same sort of amount, then others are buying much less – their shopping basket is costing more but has less items in it. This has absolutely nothing to do with eating out or going back to work in the city, this is about a very real cost of living crisis for some people. And this is before elements of producer input inflation which have yet to feed through to the consumer, and the spring-loaded energy uplift this month, which has yet to make its way into official figures.

Note: The an updated version of the graph included in this update can be found in this presentation given to CILT(UK)'s Retail Logistics Forum in November 2024.

February is a good time to get a feeling of how things are really doing in ecommerce. Because it tends to be the lowest month, it’s the least confusing when looking at trends and it’s also without the hype of Christmas and other holiday-related activity.

What this graph is showing is the average weekly internet sales from February 2015 to last month, split into non-store retailing in red (think Amazon), non-food stores in blue (think John Lewis, Boohoo…) and food stores in green (think Tesco) - these are based on the ONS figures released on Friday.

I’ve then added a trendline for each based on recent Februarys up to and including February 2018, showing where each category might have gone pre-Covid. We can see that 2019 and 2020 were pretty much on the trend line and then, as we all know, the impact of the pandemic has been to raise the game for home shopping.

A straightforward projection of these trend lines would imply that internet sales for both non-store retailing (red) and predominantly non-food stores (blue) have already reached the sorts of levels they might have expected at this time of year in 2025. Predominantly food stores (green), have already reached in February 2022 what might have been expected in about 2031.

Continued below graph...

However, we can all see from the graph that the more recent trend for food appears to be on a downward trajectory, which certainly fits with my own behaviour - despite subscribing to the delivery service, I’m visiting stores more often and finding online ordering a) a bit uninspiring and b) more difficult to plan around as we all get out & about more and our lives become less routine. Back in 2020, a report from Bain & Co forecast that 35%–45% of the spending surge (not specifically UK) would survive the easing of lockdown measures.

But the big issue for ecommerce/home delivery, particularly for food and grocery, remains profitability, with the Bain report indicating that even with delivery charges, ‘traditional’ methods of grocery home delivery are not profitable.

And now there’s inflation. The figures in the graph are for value not volume and, while we’ve all been able to get away with ignoring inflation while it was low, this needs to be taken into account. Revisiting the profitability equation, baskets will start reducing in both size and quality as the customer becomes squeezed, and the supermarkets will also be impacted on the cost side by increased bills including fuel.

Unlike most of my posts, this graph hasn’t been created by me, but came from the Commercial Fleet website in the summer. I was really struck by it, so I was interested when Motor Transport’s Cost Tables for 2021 were published last week that while both capital costs and residuals, whether you’re looking at artics or vans, have risen, the residuals for vans have risen nothing like as much as we’re seeing on that graph.

I guess there are a number of potential conclusions you could draw. Five year old vans may not have risen in price to the extent of younger ones. The sort of operators who buy new could be playing it on the safe side, not wanting to count any chickens before they hatch and to cover all costs in the meantime. Perhaps the additional profit is being created by the leasing and auction companies rather than the operators.

What we do know is that there was nothing like the same number of new LCV registrations last year compared with the annual figure for the previous five, only about 80%: And based on the November YTD figures, 2021 is likely to be at the bottom end of those previous five. So perhaps that rise in prices for second-hand vans is a one-off phenomenon?

I love a good graph, so when the new TEG Road Transport Index came along, I had to have a look! The graph is from Transport Exchange Group’s website.

Looking at the graph, you can see the December peak for past 2 years. You can see the impact of the first lockdown reflected in April 2020 when the price of courier vehicles rose, while haulage went down. Haulage then ran below its 2019 rates for the whole of 2020, including over Christmas. In early 2021, the price index was again running low, so no surprise that no-one was recruiting at this point...

And then the tsunami-like increase – breaking out of any previous pattern from March 2021 onwards, with prices just getting higher and higher, and with haulage and courier separating late Spring/summer 2021. And now the dip in October.

As I’ve already commented, although this is a ‘price index’, based on ppm, it is influenced by a number of factors: Underlying cost changes; Availability/capacity of the market; and Demand for the service. And it’s how those elements impact and the result that interests me.

It’s no surprise that the price of diesel is a key influencer – if you compare the TEG Road Transport Index with the pump price of diesel at the midpoint of each month and look at R-squared in Excel, it’s 0.495 for haulage. For those that don’t know what R-squared means, if it was 1 it would mean there was perfect correlation, but if 0 it would mean the relationship was totally random. So, the haulage index is significantly (but by no means completely) impacted by the price of diesel.

The index is also significantly affected by demand. In its real-time economic indicators, the ONS has an index for traffic levels based on DfT camera data. This index started in March 2020. If you ignore the first four months (when we were all adjusting to the pandemic), and in this case compare the ONS index for the Wednesday that’s nearest to the midpoint of the month, the R-squared for the TEG Road Transport Index for courier vehicles compared with ONS light commercial traffic is 0.6012 – so, as with diesel, there is significant, but not complete, correlation.

Crucially, what we can see, if you go about halfway down this page and select HGVs, light commercials etc, is a slight drop off in traffic levels more recently, explaining the lower prices reflected in the TEG Road Transport Index.

Driver pay will also have been an element contributing to the rise from Spring 2021 onwards, but it looks as if potential over-heating of transport rates is now abating, although in the logistics industry we’re all aware of the various supply chain issues that still exist, so there may yet be further pent up demand.

Kirsten was quoted, along with the Governor of the Bank of England in this piece in the Daily Mail, among many others.

From very early in my career I’ve always been very conscious of both supplier payment and cashflow and I’ve been thinking about writing a fresh piece on cashflow for a while, because there must be real pressures on some hauliers right now, with costs like wages and diesel rising, while at the same time the issues with getting money into the business continue.

News of Missguided’s current financial issues draws attention to how changes in money flows, in part down to rising shipping costs and stock shortages, can really impact. In this case, it appears, that there have been pressures from both directions: outgoings have risen, but the ability to get income in has also been reduced. And there must be companies that are getting into difficulty because they have cash tied up in stock.

Meanwhile, in the past week or so, there’s been a news piece on CIPS website about the need to protect small businesses, Terry Corby, chairman of Good Business Pays (GBP) was quoted saying that the law needs to be strengthened after GBP found only four FTSE 350 companies paid suppliers within 30 days.

So, I’ve been thinking about writing a fresh piece, but I realise I’ve said a lot of it before in a Viewpoint in Motor Transport back in 2009, so no point in writing it all again, might as well just let you read that!

The Motor Transport Top 100 for 2020 was published recently and, having written a piece about the Whale graph for SHD Logistics, also published in December, I thought I’d apply the same sort of analysis.

I put the 100 companies in order of percentage pre-tax profitability (on the x-axis) against the cumulative pre-tax profit of the Top 100 on the y-axis - what emerges is not so much whale as sitting bull! What emerges is that 80% of the Top 100 made all the profit, and the remaining 20% eroded it. 80% of those companies made £860m profit, but the remaining 20% then lost over £400m to end up with an overall profit for the Top 100 of just over £450m. Continued below graph...

Just one company has been solely responsible for over 50% of the losses, Eddie Stobart, which has since received financing from Dbay. Three of the other four companies that made more than 10% loss, have since collapsed or changed hands.

It’s not clear whether rates weren’t in line with market values or whether costs got away from rates – assuming the former, it looks like the company should have been charging about a third more for its services if it wanted to make the average pre-tax profit of the profit-making companies which, incidentally, is less than the 5% profit (that’s pre-tax profit!) suggested by Motor Transport’s cost tables published in the same issue.

Motor Transport makes the point that “The figures for this year’s Top 100 come mainly from companies’ 2019 accounts and so are not affected by the Covid-19 crisis”, but also that “One clear impact of Covid-19 is that fact that a few companies have been slower than normal to file their latest accounts at Companies House.”. I have queried, with Motor Transport, Royal Mail’s UK arm’s pre-tax profit being put in at exactly zero (I’m always suspicious of very round numbers!), but I’d be the first to say that I don’t envy the person who has to create the Top 100 each year, extracting all that data from annual reports.

Yesterday the Office for National Statistics published some estimates from its Annual Survey of Hours and Earnings (ASHE). I've combined two of the many data sets in the diagram below. What are the boxes in the diagram all about? It's my attempt to show the span of hours and span of pay for most full time employees working in the UK as a whole and for some specific occupations. See below the diagram for a description of how to read it.

On the x-axis is paid hours worked per week - the span of each box goes from the figure for the 10th percentile through to the 90th - if we look at the red box for the UK as a whole, it means that 80% of employees work somewhere in that span of hours (so it excludes the extremes at each end). And the y-axis shows gross weekly pay, and again the span runs from the 10th to 90th percentiles, so that 80% of employees get paid somewhere in that span. It's important to note that it will be a different 80% for the x and y elements of each box, but there will be a broad overlap.

Note the red spot which marks both median hours and median pay - so 50% of employees in the UK work less paid hours per week and 50% of employees get less gross weekly pay than indicated by the spot. You can see that FLT drivers are virtually all working more hours than the UK average, and that HGV drivers work considerably more!

NB ASHE covers employee jobs in the United Kingdom - it does not cover the self-employed, nor does it cover employees not paid during the reference period. Hourly and weekly estimates are provided for the pay period that included a specified date in April. They relate to employees on adult rates of pay, whose earnings for the survey pay period were not affected by absence. Estimates for 2020 include employees who have been furloughed under the Coronavirus Job Retention Scheme (CJRS). The forklift truck driver entry is described as an estimate as the ONS has not tried to estimate the 90th percentile for either pay or hours - I have based them on the other storage occupation shown.

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Well, this is a different sort of an update for the different sort of time we live in. No stats or graph, more of a blog, but very relevant to the logistics industry.

Coronavirus gets going and everyone is panic buying – the grown-ups make a fuss about people shopping, telling people it’s unnecessary. But the concept of the need to feed the nation is born, with drivers hours regs relaxed to accommodate. My husband who has an up to date CE licence and medical, but let his DCPC expire in September, feels that he ought to be available to help this push to get food to where it needs to be. So he books a DCPC course starting Monday 23 March.

We get up two mornings running at 4.30am for him to be early for a 7.30 start on the other side of the Cotswolds. First day (long story – we’re not stupid and we did our best on Saturday on the web and by phone), he doesn’t find it until c8am and is told that he and another latecomer can’t join the course. So he comes home. That evening Johnson makes an announcement, but no-one from the training rings to say it’s not going ahead, so we have another 4.30am get up – this time there are three of them hanging around in the street – the trainer never appears, doesn’t ring...

At this point we’re £450 down and the company that he booked the course through are refusing to refund his money. After a bit of argy bargy, they do get him booked on the first-ever internet-based driver CPC course, and so we spent the whole of last week with our home office given up to all-day all-week Zoom-based training.

We’d agreed that because of my husband’s age (he’s not 'old', but if he catches Coronavirus, they won’t consider reviving him a high priority on the basis of his birth certificate!), he was only going to drive if it involved foods, pharmaceuticals etc – things that were really necessary.

So what’s the point of telling you this – well, there’s certainly no driver shortage at the moment. There’s certainly no excuse for further relaxation of the drivers hours regs. He rang one of the local agencies during the week – there’s no driving work of any kind. End of.

Among other analytic and visualisation tools, I use Maptitude - mapping/GIS software. I post Maptitude tips on our website and tweet them - always aiming to have three across a variety of features. Today I thought I'd share the tweet from this week with Linkedin. It wasn't a new tip but the result of using a current tip (at the time of writing!): how to turn area census-type data into points, so you can do a heatmap.

The heatmap shows 'overheated' London. But also, given discussion about HS2, population density in Midlands and NorthernPowerhouse - demonstrating the importance of the E-W corridor as well as N-S.

The news from the ONS (Office for National Statistics) earlier this week was that the overall Transportation and storage index provided the largest upward contribution to the annual rate for the SPPI* for Q2 2019. The graph below shows the SPPI for All Services at Gross Sector level (Dark Blue - general inflation for business services) and the indices for Freight Transport by Road (bright pink), Storage and Warehousing (green), Cargo Handling (lilac) and Freight Forwarding (grey).

I usually look at a five year period, but the timing of this release of statistics made it seem appropriate to look at the three years immediately before and after the Brexit vote, and so I’ve included six years on this occasion, with the dark grey vertical line representing the timing of the Brexit vote exactly halfway through that period.

Not all the elements that make up the overall transport and storage index follow the patterns shown on the graph – some have been quite flat over the six years, others have gone up and up, and there are also passenger transport elements as well as logistics. What I’ve chosen here are some key logistics indexes that had relatively flat inflation prior to the Brexit vote, followed by increased inflation afterwards. NB Freight forwarding is often said to be countercyclical.

These indices will be affected by all sorts of things including stockpiling and other contingency measures, and increased cost of attracting staff, with the effect of exchange rates on the worth of sterling and people just not feeling like the UK is so appealing as somewhere to work and live, being part of the mix. But is the inflation genie now out of the bottle? Food for thought!

*The Service Producers Price Index is a bit like the CPI - it shows the increase in prices and rates paid, but for services provided by businesses to other businesses and government. It provides a measure of inflation for the UK service sector with individual price indices, such as Freight Transport by Road, aggregated to create an all-services industry index. The ONS says that the services sector is estimated to account for around 80% of the UK economy based on its weight in gross domestic product (GDP), and that the SPPI is estimated to represent 59% of the total services sector.

Bit of a different update - a personal story: I'm going to talk about cooking the books.

What do the Tesco accounting scandal and M&S 1Bn profit have in common with my first proper role in logistics? Pressure to improve the figures.

Towards the end of last month, Carl Rogberg was cleared of master-minding fraud. He was cleared along with the two other Tesco directors, but the fact remains that, in what has been described as a culture of pressure back in 2014, payments from suppliers were being manipulated to make the finances look healthier than they were.

I was interested that, in all the reporting, little mention was made of similar situations in other companies. Because I worked for the company, my own mind immediately jumped to M&S in the latter half of the 1990s.

Towards the end of Rick Greenbury's CEOship, when great pressure was put on all departments, and in turn on suppliers including our logistics contractors, necessary expenditure and investment was delayed and supplier profit margins were cut, as we all understood that every spare £ was going to be needed. And then the headlines: M&S made over a billion profit that year.

Now, you can put the squeeze on operations, but only until the pips squeak. When you try to squeeze year after year (at the risk of too many metaphors), you find that the well has run dry. The Wikipedia entry includes the phrase "profit margins were pushed to untenable levels". This non-strategy catches up with you and, yes, the inevitable happened – M&S profit was down dramatically.

So what do these national stories have in common with my first logistics role? I had been a graduate management trainee with NFC (National Freight Corporation – now part of DP DHL), and as part of that training had learned all about how NFC managed its finances, with every contract running its own P&L.

My first role after training was as deputy manager of a DC. The manager was leaving the company and the existing deputy manager was being promoted, but rather than taking on the same activities as the previous senior manager, our roles were in some respects reversed because of my understanding of the company’s administration. So I was responsible for the finances.

The first time it fell to me to do the monthly provisions /accruals, the area general manager, who was based elsewhere, checked my confidence levels. I said I was pretty confident I knew what I was doing, but I was going to take it all home and work on it quietly over the weekend.

I couldn’t wait for Monday to come round! It had gone really badly. The contract had been gently profitable up to now, but my weekend exercise had ended up showing a loss. So I drove over to see the area manager and we pored over my figures. They were right. The contract was making a loss.

There was a big fuss and hoo-hah, and one of the directors became involved: had someone been fraudulent? Well, not for themselves I was able to reply - no-one had actually walked out the door with any cash. This was down to genuine invoice payments being spread over too long a period. So a bit of a shock, and it left the issue of lack of profitability, but all out in the open and all apparently understood …until the following week.

In NFC we had to submit what were called ‘Quicks’ every week – a quick version of the P&L for that week. No PCs in those days – you rang your quicks through to your area manager, and they were consolidated for the area and rung through to head office. I reported a small loss that was commensurate with what had been shown by my previous exercise. The area manager immediately said that was no good and told me what figure he needed me to report (a profit). I wouldn’t. But at that point I could immediately understand why the finances had got into a mess and why the previous manager had left. He’d given in to being bullied and couldn't see a way out.

Now, returning to my reply to the director, I realised that because we were all bonused on the profit that was made, my answer had the potential to be not entirely correct, because if anyone had been paid bonus on those adjusted accounts, that would have been fraud. Money would have gone out the door.

My takeaway from this story is that you need to be extremely careful not to exert undue pressure on those below you. Some people prefer an easy life, and although you may not ever have intended them to be influenced to the extent of doing wrong, that can be the result.

And you need to be extremely careful about how people, including (particularly?) those at senior levels are incentivised.