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Sector review: Transport Summer 2017

Sector review Transport

 

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

The results are based on the Close Brothers Business Barometer, a quarterly survey of close to 1,000 SMEs across the UK 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: 

  • Knowledge of alternative finance 
  • Economic outlook 
  • Access to finance 
  • Staffing 
  • Succession planning 
  • Gender diversity 
  • Workforce mobility

 

Sector review Transport: traditional banking

Knowledge of alternative finance

Three fifths (60%) of Transport SMEs surveyed are unaware of alternatives to funding outside of traditional banking, with 51% having a good understanding of asset finance. 

“While the asset finance industry continues to grow and alternative finance becoming more mainstream, it is clear more work needs to be done,” said John.

“There are multiple products, ranging from hire purchase to refinance, that SMEs could be benefitting from without impacting their cashflow.”

 

 

Economic outlook 

Transport SME business owners are cautiously optimistic about the current economic outlook, with 20% expecting a steady recovery and a further 30% feeling prosperity will come, but only slowly. Concerns remain among many; however, with 30% worried that the UK could slip into decline again and 15% still to see a true recovery; 5% feel the economy is worsening. 

In terms of trading conditions, half of Transport firms surveyed (50%) have seen no difference compared to 12 months ago; 15% say they are prospering while over a quarter (27%) say it’s ‘worse than ever’.

“Transport firms face a number of factors that are preventing them from growing, ranging from fuel price fluctuations and lack of drivers to increased regulation and insurance costs,” said John Fawcett, CEO of the Transport division. “Haulage firm owners are finding it tougher than most of the other sectors we operate in.” 

Looking ahead to the rest of the year, over two thirds of businesses (68%) expect performance to remain static, while 15% predict growth; 10% contraction with the remainder unsure. 

When asked the question ‘has your business grown in the past 12 months?’ the following results were obtained: 

 

National

Transport

Yes 

33%

33%

No 

59%

60%

Don’t know

8%

7%

 

Access to finance 

Sector review Transport: Access to finance

In the Transport sector, the top three sources of financial support and advice are: 

  1. Accountant: 27%
  2. Bank manager: 18%
  3. Friends & family: 18%

The top three sources of funding are:

  1. High street bank: 52%
  2. Existing lender: 27%
  3. Broker: 10%

When it came to access to finance, 31% felt it was more or as difficult as a year ago, while 22% said it was easier, and 32% saying they had never had a problem getting hold of finance. 

During 2016, 12% of Transport SMEs needed additional finance, with 15% feeling it’s more expensive despite record low interest rates. 17% felt it was cheaper while the remaining 61% said it remained the same.  

Looking to the 12 months ahead, exactly a quarter of firms confirmed they would be seeking funding for business investment during 2017, with the most popular form of finance being a bank loan followed by asset finance.

 

Staffing levels, including Brexit impact 

Sector review Transport: Brexit impact

Only 5% of Transport firms are planning on reducing headcount, with 25% expecting to increase the size of their workforce and 62% keeping their staff numbers at current levels; the remaining firms are ‘unsure’. 

“This is very encouraging because employment levels are a good indication of business confidence,” said John.

“SME owners are also confident in the skill levels of their existing teams with 70% of respondents answering ‘no’ to the question ‘would you say there is a skills shortage amongst your current employees?’.” 

Brexit is currently not a major factor for Transport firms, with 69% stating their hiring numbers will remain unaffected by the UK’s decision to leave the EU. 13% will be hiring more and 18% less. 

Cost of hiring is also a minor issue, with 95% of SMEs either being unconcerned or ‘slightly concerned’ about the amount of money it costs to employ their employees. This left only 5% of respondents feeling that it was a ‘significant’  issue. 

 

Succession planning  

Around one in every six (15%) Transport SME business owners are concerned about who will take responsibility for their firm after their departure. The remaining 85% said this was not an issue for them. 

“While 15% may seem low, it still tracks at the national average,” said John. “With so many Transport firms being family-run, it should come as no surprise that for many owners this is something they worry about.”

Over a quarter (27%) of businesses in the sector have a business continuity plan in place in the event of senior management leaving. 

“Given the size of most SMEs, it’s understandable that most don’t have continuity plans in place, but it’s always a good idea to think about what you would do should a senior member of your team leave,” said John.

 

Gender diversity 

Nearly two thirds (63%) of Transport businesses surveyed would not class themselves as being ‘gender diverse’, compared to the national figure of 52%. 

“Transport has traditionally been male-dominated; however, work is being done to redress the balance,” said John. “And 43% of firms in our sector don’t feel enough is being done to encourage women to take up a career in Transport. This is encouraging because it means there is a recognition that more needs to be done, and is significantly above the national average of 35%.

“Over one third (35%) of Transport firms are now actively striving to recruit women, which means that companies are now taking it upon themselves to do something about gender diversity.”  

The following results were obtained when asked the question ‘is it important to encourage more women into your sector?’: 

 

National

Transport

Yes, there are not enough

32%

23%

No, because they are well represented

52%

55%

No, because it’s not important

15%

22%

 

Workforce mobility

Sector review Transport: mobility

Nearly half (45%) of Transport workers would be classed as ‘mobile’, reflecting the nature of many employees in the industry. In addition, 36% of SME owners felt it was important for their workers to have access to data ‘on the go’, with 28% saying it was unimportant; the remaining 36% were undecided. 

“These statistics reveal a lot about the changing nature of our work patterns,” said John. “Access to data from smart devices is making it easier and more affordable to have workers out of the office and on site, but still with access to the information they need. Transport firms have been quick to adopt new technology and ways of working, with 25% investing in a mobile application that gives them access to company data on the move.”

Nearly half (47%) of firms don’t feel mobility increases productivity against 23% who do (the rest are ‘unsure’). 

“Although businesses have given employees access to data and information from their phones, there isn’t the implicit expectation that it must lead to an increase in productivity,” said John.   

 

Methodology: All figures, unless otherwise stated, are from a GMI survey conducted in December 2016. The survey canvassed the opinion of 900 SME owners across the UK and across several industries on a range of issues affecting their businesses.