Opinion: the UK logistics industry is now a bit player

[TrueBlueTerrier]

Opinion: the UK logistics industry is now a bit player on the world stage

n the 1980s and 90s the UK logistics industry generally considered itself to be world leading. However since this time almost all the largest operators have been acquired by foreign competitors or private equity companies - a large swathe of the UK logistics industry is now in the hands of overseas owners.

This trend has affected all the main UK sectors including contract logistics, freight forwarding, ports, shipping lines and rail companies. Examples of acquisitions of UK logistics and transport companies include:

* Exel (a conglomeration of NFC, Ocean Group and Tibbett & Britten) acquired by Deutsche Post (Germany)
* Christian Salvesen acquired by Norbert Dentressangle (France)
* EWS Railways acquired by Deutsche Bahn (Germany)
* P&O Ports & P&O Ferrymasters acquired by DP World (UAE)
* P&O Containers acquired by Maersk (Denmark)
* ACR Logistics (formerly Hays Distribution) acquired by Kuehne + Nagel (Switzerland)
* ANC acquired by FedEx (US)
* Lynx acquired by UPS (US)
* GeoLogistics (formerly LEP International) acquired by Agility (Kuwait)
* Bernard Group acquired by Bollore (France)
* Gazeley (warehouse property developer) acquired by Dubai World (UAE)
* Gist (part of BOC) acquired by Linde (Germany)

Wincanton and TDG (owned now by a private equity group) are two of the few really large UK owned logistics companies now left.

Although the consolidation of the industry is part of a global trend, with logistics companies developing international scope to match the needs of globalising clients, the question has to be asked, why did UK companies ultimately become targets rather than buyers?

One explanation is that a large part of the sector was publicly quoted on the stock market. When cash-rich foreign buyers were looking to expand, it was easier to convince shareholders to sell, rather than private owner/managers who had emotional attachment to their companies. This certainly used to be the case in Germany, where family owned businesses were particularly unwilling to talk to outside investors, although two recessions in the past ten years have somewhat changed this perspective.

A second reason was the highly developed nature of the UK industry which offered buyers strong operational competencies and in many cases an attractive ready-made European or even global network.

A third factor was perhaps that the UK market lacked the scale of operators to truly compete on a global basis. Lack of foresight by the UK government meant that its postal monopoly, Royal Mail, was never allowed to develop in the way of, say, Deutsche Post. The relative lack of importance of rail freight in the market meant that it could never compete against the might of Deutsche Bahn or SNCF on the world stage. Moreover the scale of the UK meant that it could never conceive freight companies the size of UPS or FedEx which have prospered in part due to the size of their home market.

There is more to it than that, though. In the case of P&O or Exel, which had undertaken highly successful global growth, the money they were offered was just too good to turn down. They were victims (or beneficiaries depending which way you look at it) of companies with deep pockets (Deutsche Post and DP World), but also with a bigger strategic vision and more determined management. In addition to the two companies mentioned Schenker, Agility, Kuehne + Nagel, FedEx and UPS would fall into this category.

It would seem that it was all too easy for UK companies to focus on short term returns for their shareholders and sell up, rather than to look to dominate the global market in the ways demonstrated by their competitors.

This is not to say that they were wrong within the context of the financial system in which these decisions were being made. European logistics companies were able to take risks with taxpayers' money in ways which UK companies, financed by the stockmarkets, were not.

Does this really matter?

A short answer to this question would be no – not really. In today's global economy few advocate preventing the acquisition of companies by foreign owned entities (although more opposition to such a wholesale sell-off would have been evident in France, Germany and even in the USA).

However it should be noted that all the major strategic decisions related to the global logistics industry are being made in boardrooms in Bonn, Paris and locations around the world. The UK logistics sector, which had played so much of a role in shaping the development of the global market for so many years, has become a bit player. At the very least this must be of considerable frustration to many UK executives who previously had ambitions to run world-leading logistics companies. To paraphrase the comments of a former British prime minister, the family silver has definitely been sold off.