Monday, April 6, 2020

Warehouse Association Crunches the Numbers on the Effects of the Virus in the UK

Feedback from Members Illustrates the Current State of Play
Shipping News Feature

UK – One of the advantages of the professional Associations which represent different sectors of the logistics industry is the opportunity they have to discover the true statistics on any given subject courtesy of their membership, all of whom tend to be serious players in their profession. Today it is the turn of the United Kingdom Warehousing Association (UKWA) which has been looking at the current impact of the Covid-19 virus.

The UKWA asked its members, a range of professional warehouse companies, freight handling organisations and retailers, a set of questions with a view to find the current state of play and seek ways of maximising the potential of the logistics sector by unlocking opportunities for collaboration. This can be done by identifying where space and services are available and then matching that capacity to those in need, or by finding where labour and resources can be best redeployed.

Full findings will be exclusively available to UKWA members but some of the initial facts uncovered from the respondents are as follows:

  • 60% of warehouses are leased (40% owned) exposing those operators to rent
  • 70% of respondents with fixed income (i.e. storage charges) receive less than half of their total income from this (the other income streams being charges for handling and value-added services)
  • 77.5% have seen a reduction in inbound volume in the last 2 weeks
  • 83.5% have seen a reduction in outbound volume in the last 2 weeks
  • 4% have been forced to close operations, i.e. 96% currently remain operational
  • 68% are experiencing increased levels of sickness/absence
  • 60% have reduced shift patterns and productivity
  • 64% are in the process of and/or considering furloughing
  • 60% have a shortage of warehouse operatives
  • 58% are concerned about their cash flow and customers’ ability to pay
  • the market is currently operating at 87% of capacity

The findings give an accurate snapshot of how the warehousing community feels at this point in time with operators facing extreme pressures as the Covid-19 crisis and consequent global lock down looks likely to stretch for many more weeks, if not months. Those serving the food and ‘essential’ supplies sector are struggling to maintain a ‘business as usual’ service during the crisis, in the face of a massive spike in demand, while having to observe government guidelines on social distancing to keep their workforces safe.

Implementing safe-working practices is essential, but this too is presenting obvious practical challenges, ensuring access to necessary PPE and hand sanitising products, the necessity of introducing different shift patterns, and coping with critical labour shortages as a rising number of employees self-isolate or stay home to care for children.

Additionally many parts of the industry have a high dependency on temporary staff, for whom there is currently little or no government protection. Outside of PAYE, these workers are not eligible for sick pay, nor furloughing, nor can they be treated as self-employed. Consequently, many continue to work to maintain an income, regardless of whether they are ill and a risk to fellow workers.

Meantime, those operating in the ‘non-essential’ space are feeling another kind of pain. With outbound flows severely reduced or stopped altogether as stores are closed, inbound flows have become literally a mounting problem. Inbound supply chains cannot simply be turned off, orders placed and dispatched before the lock down will continue towards destination, arriving at ports, requiring receipt, handling, onward distribution and storage.

Clearly, warehouses in this situation are quickly reaching capacity, and if they cannot accept any more goods, the consequences potentially could be catastrophic, blockages upstream in the supply chain, fully loaded containers and trucks unable to discharge, ports unable to cope with the backlog, ultimately potential prevention of the flow of essential supplies such as food and pharmaceuticals.

Then of course, there’s the financial impact for the sector. While storage revenue alone may cover fixed costs for some, reduction of receiving, handling and delivery (RH&D) of cargo will reduce profitability for most, and may even put some operators at risk of closure. This situation is being exacerbated further by deterioration of cashflow as locked down customers struggle with drastic drops in income and as a result can’t or won’t pay their bills.

Obviously, the government has acted to mitigate some of these hardships, with the Job Retention Scheme enabling workers to be furloughed, although we await the process for accessing these funds. Businesses can also defer VAT, take advantage of a special Coronavirus Business Interruption Loan Scheme and SMEs can apply for Statutory Sick Pay relief. However, the business rates holiday does not extend to the logistics sector, nor does the grant funding. Landlords are encouraged, but not compelled, to offer rent holidays.

Warehouse operators are in the frontline of this crisis, including those who are not handling essential goods. The UKWA considers the attempts, of which we have seen many, in some parts of the media to portray them as businesses risking the health of their staff in pursuit of profit as deeply unfair and deeply unhelpful at this difficult time.

The UKWA has already introduced a warehouse space matching service for those desperate for more storage and are working with recruitment specialists Harri to help transfer workers from the hard-hit hospitality industry into warehousing and logistics jobs. In addition, along with peer trade associations, UKWA has submitted the case to government and commissioned this survey of members to better understand and monitor what is actually happening ‘at the coalface’.