The warehousing industry has experienced a challenging two years thanks to the pressures imposed by Brexit and COVID-19.
During COVID-19, warehousing experienced a short-term boom owing to an increase in eCommerce. This was primarily the result of self-isolating consumers moving their shopping habits from the high-street to the internet. However, this increase in demand was also countered by the impact of trade tariffs and slump in European imports caused by the UK’s departure from the European Union.
As the economy moves on from the impacts and effects of Brexit and COVID-19, the warehousing sector faces new tests from the effects of inflation and the cost-of-living crisis. Here, we discuss the challenges the warehousing sector faces heading into the summer.
Figures from the Office of National Statistics show that between Q1 in 2020 and Q2 in 2022, transport and warehousing vacancies increased by 59.9%. This is also compounded by figures that show that in Q1 2022 job vacancies exceeded the unemployment rate. Vacancies rose to 1.3 million, narrowly eclipsing the unemployment figure for the first time since records began.
Such a market favours employees rather than employers. In this environment, warehousing professionals can seek higher-paying roles as the market becomes more competitive in its efforts to attract talent. Warehouse operators must remain competitive and offer improved incentives to retain staff.
This difficulty in recruiting and retaining staff posed a significant challenge as volumes and demand returned to pre-COVID levels in Q1. However, the ever prominent cost-of-living crisis and runaway inflation is likely to have an impact on consumer spending.
Since summer 2021, inflation has increased by nearly 10%, overtaking wage increases in real terms. These sweeping price increases means that consumers are having to make difficult financial decisions. These decisions usually lead to the prioritising of staple necessities over luxury and non-essential items.
In line with the increased cost-of-living, interest rates have steadily risen to help arrest further inflation. By raising interest rates, the cost of borrowing money rises. However, interest rate rises also increases the return on consumer savings. The overall effect discourages borrowing and spending, and instead encourages consumers to save.
These financial factors are in parallel to fuel and utility price rises, influenced by the war in Ukraine. All this points towards a general decline in consumer spending and demand.
The warehousing sector must anticipate and be prepared for a fall in demand as the cost-of-living and inflation hits consumer spending and confidence.
The increased temperatures experienced during the summer months has multiple impacts on warehousing. The first challenge is the general absenteeism experienced due to the warmer weather. School holidays see significant absences as employees take annual leave to cover childcare and enjoy the summer months with their families.
The heat associated with the summer months also has an impact on warehousing equipment. Chilled and frozen warehouses face power plant issues as their refrigeration units struggle against the heat. Warehousing sort systems are also susceptible to overheating faults.
With regards to warehouse employees themselves, the heat can pose safety risks. When warm weather is anticipated, to avoid overheating and dehydration, it is important for staff to have access to an ample drinking water supply.
The warehousing industry has weathered challenging circumstances in the past two years. Short term success during COVID-19 as a result of consumer spending has led to a strong position heading into summer 2022. However, financial pressures on consumers may lead to a drop-off in demand that may see the viability of warehouse operations challenged.
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