A survey by leading accountant Moore Stephens has revealed that over three-quarters of owner-managed businesses (OMBs) in the UK operating in the shipping and transport sector are confident about their prospects for 2016.
The survey revealed that, despite facing a number of major challenges and risks, shipping and transport (S&T) OMBs were particularly focused this year on training staff, expanding their UK customer base, investing in new technology and pursuing cost-reduction initiatives.
The survey analysed responses from UK-based OMBs, and revealed that 78% of S&T OMBs were confident about the general outlook for 2016, with 71% expecting to hit their revenue targets for the year. These figures corresponded broadly to the responses from OMBs across all sectors, but expectation levels on the part of S&T OMBs dropped slightly in relation to hitting profit targets, with 60% expressing confidence compared to 68% of OMBs across all sectors.
The survey showed 71% of shipping & transport OMBs expected 2016 to be better than 2015, with 21% of these expecting a “much better year.”
The optimism of S&T OMBs in this regard was based on a number of factors, including organic growth, strategic acquisitions, continuing growth in UK and international markets, prospects of recovery among US clients, significant cost-savings, and hopes for improved shipping and freight rates. Lower charter rates and oil prices, however, were among the significant factors cited by the 14% of S&T OMBs who expected 2016 to be worse than 2015.
In terms of the top five risks deemed to be of concern to their business in 2016, many S&T OMBs identified strongly with the international nature of their business, with the strength of the global economy as the sector’s biggest risk, and international competition ranked equal second, together with employee skills shortages.
“In shipping, transport and logistics, generally the international market place is a lot more important than the domestic market place,” said Moore Stephens shipping partner Richard Greiner.
“In shipping, it’s the whole market that impacts the wellbeing of the business.”
Philip Bird, Moore Stephens transport partner, agreed, noting: “Most logistics businesses, even if just operating in the UK, are dependent on the global economy and how well it does.”
S&T OMBs were far more likely than OMBs overall to identify regulation as a key risk, while over a third of S&T OMBs saw the availability of external finance as a key risk.
Staff training topped the list of the three main strategies planned for 2016 by S&T OMBs, with 82% saying they were likely or certain to undertake this during the year. Expanding the UK customer base (79%) and investment in new technology or IT systems (72%) came second and third respectively. Almost two-thirds of S&T OMBs planned to seek cost reductions.
Among S&T OMBs, 43% of respondents said they were likely or certain to undertake some form of merger and acquisition activity in 2016 and were also much more likely to downsize in 2016. “This is about reducing your top line, but improving your bottom line by pulling out of unprofitable activities,” says Richard Greiner. “In the shipping space, there are depressed areas of the market where operationally people are losing money. They cannot support that indefinitely.”
Meanwhile, 61% of S&T OMBs, surveyed before the Brexit result, did not think Britain should leave the EU – a result closely aligned with the views of OMBs generally. OMBs wanting to stay in the EU said there was “too much uncertainty as to the other options” and that a Brexit would “cause massive reductions in business opportunities at least for the first few years.” S&T OMBs were less likely than OMBs generally to think that leaving the EU would have a negative impact on their business – 29%, compared to 46% of OMBs surveyed overall – while 61% of S&T OMBs thought a Brexit would have no impact at all on their business, compared to 49% of OMBs overall.
Mr Greiner concluded: “Levels of confidence on the part of shipping and transport businesses may have dropped slightly since the survey closed in late 2015, but the findings still underline the resilience of those competing in the UK S&T sector.”