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Insights

What are the key trends in the transport and logistics sector?

Dale Trenam hero.jpg

Dale Trenam is the head of Paragon SME Lending’s Transport team, funding a myriad of transport and logistics assets for clients across the country. We speak to him about some of the key issues impacting the sector.

What are the key trends in the transport and logistics sector currently?

The overarching trend is of strong levels of demand across the different sectors of transport and logistics. The way we buy goods has changed and that means more freight on the road than ever before.

Another key issue facing the sector at the moment is clearly the cost of fuel, which as we all know has rocketed in recent months due to industry normalising after the pandemic and the challenging geopolitical issues. This is particularly a problem for firms which have contracts with customers negotiated last year or the year before and they are unable to increase their prices.

Finally, the global supply chain issues impacting OEMs is creating challenges for transport companies to source new vehicles, whilst inflating values in the second-hand market. Companies are also working their assets for longer, which has implications for servicing and reliability.

How are customers dealing with the cost in the rise of fuel? What actions are you seeing?

Margins are being put under pressure with existing contracts in place and we are seeing clients taking a number of actions. Some are simply absorbing these costs and taking the hit, whilst others are trying to renegotiate, which is difficult because their customers are also facing cost pressures.

There is a great deal of pressure on the sector to adopt green technologies. What trends are you seeing here?

This is another area of challenge for the sector. We have seen some early adopters of new technologies emerge and we are keen to support customers make the transition to green.

The sale of petrol and diesel vans will be phased out by 2030 and we are already seeing growth in the choice of electric alternatives hitting the market. The Government, meanwhile, has committed to phasing out fossil fuel HGVs by 2040.

However, whilst the desire to adopt greener technologies is there, the direction for logistics companies on alternative fuel and energy sources is still undefined and guidance can be difficult to find.

There are also unanswered questions on the reliability and life cycle of the new technologies coming onto the market and companies are having to make decisions on fairly significant investments in untested tech.

I think in the medium term, a mix of all options that suit the specific operator will be adopted until clearer guidance emerges.

Paragon has recently introduced a dealer network proposition. Can you tell us more about that?

The proposition has been introduced to support dealers that need to find finance for their customers acquiring new and used assets. The concept is to help compliment their inhouse manufacturer-backed funders, that may struggle to support a customer’s funding requirements because they are full on facility or their appetite for funding is limited.

So, with Paragon dealer finance they have options available for their customers provided by a specialist transportation funder that understand the demands and nuances of the sector. We’ve recruited two people to drive the proposition, and we have been encouraged by the start we’ve made.

What would you say represents the greatest opportunity for operators in the sector in the next couple of years?

Quite simply, the demand for the supply of goods.

Read Paragon’s report into the Transport & Logistics sector.