Logistics industry enters a phase of high insolvencies

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There has been a spike in the number of courier and haulier businesses becoming insolvent, impacted by an increase in consumers making purchases online and amid increasing competition.

Insolvency figures for the logistics industry rose by 20 per cent to 221 in 2014, over double the figure for 2010, says accountancy firm Moore Stephens.

Increasing ecommerce activity is pushing logistics companies to keep up with the pace of change. Those with top of the range technology and automated warehouse processes that allow companies to work at high speed are staying at the front of the game, leaving those with more traditional practises far behind in the dust.

City Link was one of those 221 insolvencies last year, buckling on Christmas Eve as a result of tough competition and changing customer demands – both given as factors for the gaping hole in its accounts.

On the other side of the fence UK Mail has ploughed some £20 million in to its business, setting up an automated hub capable of sorting 25,000 parcels an hour in an effort to reduce operating costs and take on some of City Link’s market share.

Speaking to the Financial Times Guy Buswell, UK Mail’s chief executive, acknowledges that it is a “tougher market than it used to be”. And says that from a “financial point of view, losing a player in a crowded market place is probably good for the industry”.

The rate of insolvencies is set to continue rising in 2015, Moore Stephens says, with the shortage of HGV drivers pushing wages up higher.