The Logistics and Industrial Market Continues its Growth Trend

In the UK's industrial market, few sectors were more severely affected by the Covid-19 pandemic than construction and logistics. All over the country, major developments were halted for several months and the entire supply chain ground to a halt.

However, confounding predictions of disaster, the industry rebounded swiftly with construction output rising by 12.9% in 2021. Although the rate of growth is expected to be lower in 2022 at 2.5% and 2023 at 1.6%, the underlying trend is upwards and 2024 will almost certainly return to the 2022 level on the way to longer-term increases in annual output. According to the CPA, the industrial sector will be the UK's fastest expanding sector for at least the next two years.

In the logistics space, the demand for warehousing has been very healthy since the first lockdown early in 2020. Before the pandemic, the three-year average take-up was 32 million square feet per year. In 2021 it exceeded 50 million. Demand has remained stable for the past 18 months, which suggests the 50-million figure will hold steady.

One of the drivers of this increased demand is the effect of the pandemic on slowing down sales, necessitating greater storage capacity throughout the economy. At the same time, the rapid rise of ecommerce during lockdown has made warehousing more important than ever, for businesses of all sizes. Amazon's profits grew by almost 200% as a result of Covid-19 and even if this is an exceptional result, it demonstrates the extent to which consumer behaviour has changed.

Long-term infrastructure projects are playing a significant role in the recovery of construction, such as HS2 and Hinkley Point C, both of which were temporarily impeded by the pandemic but are now proceeding at full strength for completion in the 2030s.

The CPA's Economics Director Noble Francis described the outlook thus: "activity is likely to remain strong near-term due to projects already signed up to, especially in the buoyant infrastructure and warehouses sub-sectors." However, he also warned: "rising labour and materials prices are likely to mean that the industry sees the value of output previously expected but not the volume."

With unemployment at its lowest level for fifty years and record numbers of vacancies unfilled, one of the biggest challenges facing this sector is that of recruitment. We've discussed this in some detail here [previous blog]. As 2022 progresses, the availability of labour is likely to become a significant issue. Many people left the industry during lockdown and the impact of Brexit in restricting access to foreign labour will further complicate matters for contractors working in a market that has grown dramatically while the workforce has shrunk. Apprenticeships and other training schemes along with other forms of recruitment will be very important in rebuilding these industries.