Supply chain spotlight: UK logistics sector primed for airfreight growth

David Wells. Source: Logistics UK

The appointment of a new government will provide a significant opportunity to create a policy environment in which the logistics sector can thrive and support economic growth for the whole of the UK.

According to Logistics UK, the injection of the appropriate investment, incentives and the right partnerships with government could see the sector provide a boost of up to £7.9bn per year to the UK’s GDP in productivity gains by 2030 and the sector is primed and ready to play its part in driving growth across the nation.

Logistics UK’s latest annual Logistics Report, published just before the election, supports this assertion and shows that while the sector is still operating in challenging conditions, it is consolidating and preparing to exploit the opportunities that will present themselves when the overall economy improves.

Airfreight looks well placed to seize these opportunities and the report reveals very positive sentiment regarding the outlook for the sector.

The report’s Logistics Activity Index provides a snapshot of sentiment across modes, and while overall logistics activity is expected to be relatively unchanged in 2024 compared to 2023, airfreight is forecast to see a dramatic rise in the coming months.

The Logistics Activity Index ranks airfreight activity in 2023 at 28.3 out of 100 but forecasts 2024 levels to reach 64.6, indicating a substantial recovery for the sector.

This positive airfreight sentiment is supported by the findings of the February 2024 analysis by the International Air Transport Association (IATA), which reported sustained demand growth, up 11.9% year on year, and capacity expansion at 13.4%.

Notably, bellyhold capacity in passenger planes grew significantly in the previous year, boosting overall volumes and demonstrating air cargo’s resilience amid political and economic uncertainties.

The Logistics Activity Index also reveals positive sentiment regarding airfreight exports and imports between 2023 and 2024.

Notably, for exports in 2024, there is a significant positive shift in sentiment for every region including remarkable increases for regions such as North America, South America and the Middle East.

In these regions, attitudes towards airfreight have seen significant increases in positive sentiment, from lower figures in 2023 to expectations of over 66.7 in 2024. Similarly, in imports, there is an optimistic outlook for 2024, with most regions also anticipating growth except for Australia, which remains stable.

The Far East, including Japan, is expected to see a dramatic turnaround from no activity in 2023 to a robust 66.7 in 2024.

This is extremely positive news for the airfreight sector and mirrors overall attitudes across the whole logistics industry, with 38% of respondents to Logistics UK’s Industry Survey anticipating economic improvement for 2024 compared with 2023.

It is now up to the new government to nurture this positive sentiment and implement decisive policy changes to help the sector thrive and deliver economic growth, while helping the UK achieve net-zero and keeping supply chains resilient.

The logistics sector contributed £185bn GVA to the UK in 2022 (the latest official figures available) which is in line with the 2021 figure of £160.2bn when other factors are considered, and while this is a great achievement at a time of low activity, it is too soon to say the economy is returning to growth.

Despite this, contributing £185bn to the UK economy when the logistics sector has been dealing with global geopolitical volatility, new trade processes, a financial recession and pressures caused by changing climate, this is a measure of the industry’s resourcefulness and adaptability to keep the UK trading and satisfy the demands of businesses and consumers alike.

It also suggests the sector could contribute even more if the new government creates the appropriate policy environment in which our industry can flourish.

The Logistics Report 2024 provides a comprehensive snapshot of activity within the logistics industry, reflecting on the past year and identifying future trends and sentiment within the sector.

It combines the latest official statistics, insight from industry experts and the findings of Logistics UK’s Industry Survey which canvassed 500 of its members to gauge industry sentiment – a free summary, and details of how to buy copies of the full report, can be found here: www.logistics.org.uk/research-hub/reports/logistics-report

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