Sector review: Transport

Transport sector review

 

Welcome to the Close Brothers Asset Finance review of the Transport sector. In this article we highlight a wide range of issues relevant to SMEs in this industry. 

The results are based on the Close Brothers Business Barometer (conducted in August 2017), a quarterly survey of close to 1,000 SMEs across the UK and Republic of Ireland conducted by specialist independent researcher, GMI on Close Brothers’ behalf. 

Where relevant, comparisons are made with national sentiment. 

The commentary in this review focuses on: 

  • Economic conditions
  • Where business owners go for financial support and advice
  • Culture of slow payments 
  • Impact of the general election 
  • Customer data and their rights 
  • Apprenticeship schemes 
  • Conducting business online 

Economic conditions 

Transport sector review: Trading conditions

Nearly six out ten (58%) Transport SMEs expect their business to perform the same as it did in the previous 12 months, with 17% hoping to expand against 10% predicting contraction. Only 2% say they will close their doors for business before the end of 2018. 

Of those surveyed, 22% feel trading conditions have improved over the past 12 months and 57% are of the view that things are no different to last year while things have become worse for 11%. Eight percent say they can see opportunities but can't access the finance to make them happen. 

“The sentiment of the Transport sector closely matches that of the SME community across the UK,” said John Fawcett, CEO, Transport division at Close Brothers Asset Finance.

“While business is improving for one fifth of organisations, it isn’t necessarily translating into growth, as evidenced by the figures. An area of concern is that access to finance is still preventing growth for a large number of businesses despite the varied and non-traditional funding routes available today.”

 

Where business owners go for financial support and advice 

For SMEs in the Transport sector, the most popular source of financial support and advice is their accountant (23%) jointly followed by their friends and family and online (17%). Nationally, friends and family were the first port of call (24%) for assistance. 

“Many businesses have a long-established and trusted relationship with their accountants who have an objective understanding of a firm’s performance, and they are able to provide the kinds of insights not available elsewhere,” said John. “There are also a large number of family-owned companies in our sector and it makes sense that the owner involves those they know and trust.” 

Where do you mainly go for financial support and advice?

 

National

Transport

Accountant

21%

23%

Bank Manager

13%

15%

Finance Advisor

15%

13%

Friends/family

24%

17%

Online

16%

17%

Other

7%

12%

Peers

2%

0%

Solicitor/lawyer

2%

3%

 

Culture of slow payments 

Transport sector review: Slow payments

Nearly two fifths (38%) of Transport companies are affected by slow payments, compared to the national average of 34%, while a two thirds (65%) feel that current legislation does not support  SMEs to counteract slow payment by debtors. 

“Late compensation is a real problem for firms in our sector with a huge number of firms (78%) going so far as to say that there is a culture of slow payments in the UK,” said John.

“And one third (33%) of firms have been forced to seek legal advice because of the issue, which is stressful and time consuming.

“This is no small matter because the consequences of slow payments are multiple, ranging from damage to the supply chain and business reputation to the ability to access further funding.” 

 

Impact of the general election 

Transport sector review: Election

The large majority of Transport SMEs (82%) have not noticed an impact on business levels following the recent general election. 

“Elections can be disruptive and sometimes bring with them an element of uncertainty,” said John. “Some businesses benefit more than others but it appears that for most the effect was negligible this time around.”

Despite the lack of impact on organisations, a large number 77% say that that they have no appetite for another election any time soon, and furthermore, 75% of Transport firms do not think that another election would benefit the UK. 

“The prevailing view seems to be that the UK needs to press ahead to end the uncertainty, regardless of the political landscape,” said John. “Set against these results is the understanding that only 25% of sector SMEs are of the view that the lack of a majority government will help the UK when negotiating Brexit.”

Post Brexit and election sentiment is - for nearly a quarter (23%) of Transport businesses – lower than it was before these two events. Only 12% are more confident with the remaining 75% feeling ‘the same’. 

“In line with national sentiment, Transport businesses are more pessimistic than they were two years ago,” said John. “This continued disruption is having an effect, despite the record employment in the UK.” 

 

Customer data and their rights

Less than a quarter (23%) of Transport firms truly understand what ‘personal data’ means, while the same number answered that they did not; the remaining 54% were unsure of its meaning. 

“Keeping customer data secure is becoming one of the key issues of our times with the new General Data Protection Regulation (GDPR) coming into force in May 2018,” said John.

“It’s vital that businesses of all sizes understand the rights customers have when it comes to collecting and utilising their personal information, because currently only 42% of SMEs in our sector understand customers’ new extended rights and another 43% don’t have the right levels of permissions to contact their customers under the new requirements of the GDPR.”

Just 5% of Transport firms share their customers' personal data with 3rd parties while 22% are ‘unsure’ if they do or not; the remaining 73% are adamant that they do not. When asked if they have a process in place to ensure they are collecting data in the correct manner, 60% either did not or were unsure. 

“The GDPR’s definition of personal data makes it clear that even online identifiers, for example an IP address, can be personal data,” explained John. “The new definitions provide for a wide range of personal identifiers to constitute personal data, reflecting changes in technology and the way organisations collect information about people.

“This example shows just how detailed the new regulations are going to be and it’s incumbent on business owners to understand what this means to them.”

 

Apprenticeship schemes

Transport sector review: Apprenticeship

According to 80% of Transport SMEs, apprenticeships are all or part of the solution to the UK's skills gap.

Firm owners also strongly believe that apprenticeships are a viable alternative to university, with 75% of business owners agreeing with the statement ‘apprenticeships are a valuable alternative to university’. 

“Skills shortages have made headline news recently and it’s clearly an issue that SMEs feel very strongly about,” said John. “Many businesses are very concerned about where their next cohort of skilled workers is going to come from and the answer, they feel, is more apprenticeships.”

One quarter of Transport companies have their own apprenticeship scheme while 60% say it’s not right for their firm; the remaining 15% cite lack of affordability as the reason why they don’t have one of their own.  

“Clearly, not every business has a need for an apprentice; however, the fact that for many it’s simply too expensive shows that more needs to be done,” said John. “Close Brothers has long been a supporter of apprenticeships, with two schemes currently underway in the Transport and Engineering sectors.”

Nationally, 49% of business owners answered ‘yes’ to the question ‘if assistance was available either from either the government or the private sector, would you participate in an apprenticeship scheme?’. In the Transport sector this fell slightly to 45%. 

 

Conducting business online 

Almost half (48%) of firms conduct some form of business online with 35% having seen growth in online trade, although in 43% of cases it was limited to less than 20%; only 10% of firms saw more than 80% expansion of online business.

“58% of those surveyed felt that online will play an increasing role in coming years,” said John. “For many companies, especially those at the smaller end of the spectrum, there will continue to be a reliance on traditional channels to for business development.” 

 

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