The latest government figures reveal that employment costs in the UK’s transport and storage sector are rising faster than in any other industry, putting severe pressure on logistics firms to find cost-saving measures.
Unprecedented Cost Pressures in Transport & Storage
The latest findings from the UK’s Office for National Statistics (ONS) show that employment costs for transport and storage companies have risen by 35.7% in just three months, a sharper increase than any other industry. For comparison, employment costs in manufacturing rose by 24%, while retail saw a 20.4% increase.
Higher wages, increased employer National Insurance contributions, and pension costs are driving up employment expenses, leaving logistics businesses with difficult financial choices. With narrow profit margins, logistics firms are struggling to absorb these increases, especially as further hikes are expected. According to the ONS’ Business Insights survey, more than a third of transport and storage companies expect further employment cost increases in the coming months, while very few foresee any reductions.
The Reality of Cost Absorption
For transport and storage firms, balancing these rising costs with operational sustainability is becoming increasingly difficult. While manufacturers and retailers are more likely to offset costs by raising prices, transport and storage businesses are under greater pressure to absorb them, with just 19% indicating they plan to pass on the increases. Instead, many are opting to absorb the increases internally, with 24.7% willing to take the hit on their already tight profit margins.
To manage costs, some firms are scaling back on overtime, with 16.3% planning to restrict extra hours—significantly more than manufacturers or retailers., a significantly higher rate than in manufacturing or retail. Despite these financial strains, training budgets remain largely protected, with only 2% of transport and storage businesses planning to reduce spending in this area., showing a continued commitment to workforce development even as resources tighten.
A Long-Term Challenge for the Industry
Adding to the pressure, employer National Insurance contributions are set to rise from 13.8% to 15% in April 2025, compounding financial concerns for the sector. The sector’s reluctance to pass costs along to customers raises concerns about sustainability. With margins under constant strain, the long-term stability of businesses in the sector will depend on how well they can manage costs without compromising service quality.
However, companies with strong partnerships with retailers who maintain robust online and in-store sales may be better positioned to weather the storm. As logistics firms navigate this challenging landscape, strategic collaborations and operational efficiencies will be critical in offsetting rising employment costs without compromising service levels.
