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Frosty festivities may lead to a blue New Year

Matthew Marriott, Commercial Director of Hellmann Worldwide Logistics UK, shares his thoughts on the not so jolly Christmas trading verses the positive direction UK exports are taking, as he suspects more retailers will disappear from the high street after the January sales.

"This week retail guru Mary Portas delivered her government commissioned report into the health of the high street. Acknowledging economic conditions that have produced more pessimism than profit over the last few years, the report looked at ways that the industry can halt the growing number of high profile retail establishments slipping towards liquidation. Of course, high street retail does not operate in isolation, and is intimately linked with a number of other industries – not least the health of logistics services that ship in goods from across the globe. In a symbiotic relationship that represents a significant aspect of the UK’s economy, what is good for the high street is good for logistics and what is good for logistics is good for the high street.

Portas observed that certain existing measures to regulate the relationship between retail and logistics may well be weakening the position of the industry. One of her most interesting recommendations was a proposal to lift the restrictions on nighttime deliveries to town centres. In theory this should enable retail establishments to increase their productivity and efficiency, while easing the pressure on freight forwarding and logistics companies to deliver into narrow time windows on traffic clogged city centre roads. Underlying this notion is the vital acknowledgement of the delicate balance struck between good logistics provision and improved retail performance.

However, while this relationship helps drive both industries forward in times of prosperity, it can also prove to be a hindrance in more financially unstable times, as poor sales translate into a drop in both import and manufacturing demand. Obviously, since the global markets crashed so dramatically in 2008, logistics companies have had to significantly adjust projections, budgets and general operations in order to stay afloat in largely unknown waters. As it turns out, far from the apparent simplicity of supply and demand market conditions, this enduring recession has created a series of complexities that are negative from the perspective of most logistics providers.

For example, despite 2011 proving to be a desperate year in terms of retail imports for the Christmas period, UK exports have been buoyant, meaning that the UK trade deficit has been seriously reduced. None of which bodes well in terms of UK retail, but for logistics providers the thriving export market has provided an impetus sorely lacking in the imports sector.

Following a poor July and August of pre-Christmas orders, Hellmann, and no doubt our competitors, expected a rush on air and sea freight as recession-hit shops that had under-ordered in the summer struggled to keep up with the Christmas demand. Instead there was no rush, sending a clear and worrying signal that consumer demand was in decline – even at the most profitable time of the year. Whereas prices in August commonly increase by up to 50%, this year they fell by 20-30%, belying the dismal confidence of European retailers. The position of logistics as centrally interconnected to the mechanics of this cycle means that the industry is well placed to assess the status of the economy. Indeed, many experts regard logistics as an effective economic barometer.

Fortunately, the contrasting spike in UK exports has allowed logistics and freight forwarding providers to maintain their revenue stream; even though this only really reflects another symptom of recession – the falling value of the pound. The time lag between the pound’s devaluation and the translation into inflation and costs has meant that it is only in the last few years that UK goods have become such an attractive proposition to overseas buyers. In this regard, there has been greater scope for UK manufacturers to mount a tentative recovery, signs of which have been emerging from beneath the fog of the Eurozone crises.

Major emerging economies in Russia, India, Brazil and China have continued to prosper in relation to the countries bogged down in the debt crises, and it seems crucial for the UK to push for trade growth with the regions that represent the coming forces in global economics. Of course, much of this depends on the ability to manufacture British goods that meet global demand, but it is equally reliant on the ability to sell those goods in a competitive market place. The success of this might as well be the best option in terms of improving the market conditions, which could in turn begin to halt the sliding profits of the high street.

However, with imports still presently sinking ever further into the mire of the high street, the logistics industry has propped itself up on the exports market. Unfortunately, exports are unlikely to be able to sustain currents heights, particularly as the Eurozone crises is still yet to have any meaningful resolution. As a result, it’s incredibly important to both logistics and manufacturing that retail finds a way to buck the gloomy trends and predictions peddled by experts countrywide."

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