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LOGISTICS:DELIVERINGASOLUTIONTOTHEUK’SPRODUCTIVITYPUZZLE

LCGISTICSUK

ReportcommissionedbyLogisticsUKReportsponsoredbyAmazonandVolvoTrucks

LOGISTICS:DELIVERINGASOLUTIONTOTHEUK’SPRODUCTIVITYPUZZLE

ABOUTOXFORDECONOMICS

OxfordEconomicswasfoundedin1981asacommercialventurewithOxfordUniversity’sbusinesscollegetoprovideeconomicforecastingandmodellingtoUKcompaniesandfinancialinstitutionsexpandingabroad.Sincethen,wehavebecomeoneoftheworld’sforemostindependentglobaladvisoryfirms,providingreports,forecastsandanalyticaltoolsonmorethan200countries,

100industries,and8,000citiesandregions.Ourbest-in-classglobaleconomicandindustrymodelsandanalyticaltoolsgiveusanunparalleledabilitytoforecastexternalmarkettrendsandassesstheireconomic,socialandbusinessimpact.

HeadquarteredinOxford,England,withregionalcentresinNewYork,London,Frankfurt,andSingapore,OxfordEconomicshasofficesacrosstheglobeinBelfast,Boston,CapeTown,Chicago,Dubai,Dublin,

HongKong,LosAngeles,MexicoCity,Milan,Paris,Philadelphia,Stockholm,Sydney,Tokyo,andToronto.Weemploy450staff,includingmorethan300professionaleconomists,industryexperts,andbusiness

editors—oneofthelargestteamsofmacroeconomistsandthoughtleadershipspecialists.Ourglobal

teamishighlyskilledinafullrangeofresearchtechniquesandthoughtleadershipcapabilitiesfrom

econometricmodelling,scenarioframing,andeconomicimpactanalysistomarketsurveys,casestudies,expertpanels,andwebanalytics.

OxfordEconomicsisakeyadvisertocorporate,financialandgovernmentdecision-makersand

thoughtleaders.Ourworldwideclientbasenowcomprisesover2,000internationalorganisations,

includingleadingmultinationalcompaniesandfinancialinstitutions;keygovernmentbodiesandtradeassociations;andtopuniversities,consultancies,andthinktanks.

ABOUTLOGISTICSUK

LogisticsUKisoneofthecountry’slargestbusinessgroups,representingtheentirelogisticsindustryandsupporting,shapingandstandingupforsafeandefficientlogistics.

Ourmembershipofmorethan20,000includesglobal,nationalandregionalbusinessesandSMEsspanningroad,rail,inlandwaterways,seaandairaswellasthebuyersoffreightservices,suchasretailersandmanufacturers.

Asanorganisation,wedeliverservices,representationandthoughtleadership,helpingmembersandpolicymakerstoseizenewopportunitiesforthesectorandtheeconomyasawhole,rightacrossthecountry.

Logisticsisasectordeliveringanincreasinglysafe,sustainableandefficientsystemofnational

infrastructure–creatingopportunitiesacrosstheUKandlinkingtheUKtotheglobaltradenetwork.Spanningland,waterandair,itdeliversforeveryone,everywhere,everyday.

LOGISTICS:DELIVERINGASOLUTIONTOTHEUK’SPRODUCTIVITYPUZZLE

2

September2023

AlldatashownintablesandchartsareOxfordEconomics’owndata,exceptwhereotherwisestatedandcitedinfootnotes,andarecopyright?OxfordEconomicsLtd.

ThisreportisconfidentialtoLogisticsUKandmaynotbepublishedordistributedwithouttheirpriorwrittenpermission.

ThecasestudiespresentedinthisreportwereprovidedbyLogisticsUKanditsmembers,andthe

modellingandresultspresentedherearebasedoninformationprovidedbythirdparties,uponwhichOxfordEconomicshasreliedinproducingitsreportandforecastsingoodfaith.Anysubsequent

revisionorupdateofthosedatawillaffecttheassessmentsandprojectionsshown.

Todiscussthereportfurtherpleasecontact:

HenryWorthington:

hworthington@

OxfordEconomics

4Millbank,LondonSW1P3JA,UK

Tel:+442039108061

3

FOREWORDS

FOREWORDBYDAVIDWELLSOBE,CHIEFEXECUTIVE,LOGISTICSUK

WelcometoLogistics:DeliveringasolutiontotheUK’sproductivitypuzzleanindependentreportforLogisticsUKbyOxfordEconomics,aleadingeconomicadvisoryfirm.Thisreport,sponsoredby

AmazonandVolvoTrucks,isessentialreadingforanyonewhowantstounderstandtherolethe

logisticssectorplaysunderpinningthewholeUKeconomyandhow,withtherightpartnershipwithgovernment,itcanhelptosolvetheUK’sproductivitypuzzle.

Wealreadyknowthatlogisticsdeliversforhouseholds,businessesandpublicserviceseverydayandisoneoftheUK’slargesteconomicsectorsandemployers.Logistics:

?Movesgoods200billiontonnekilometreswithintheUKperyearandenablesthetradeofmorethan￡1trillionofgoods,

?Addsanannual￡163billiontotheUKeconomy,equatingto12%ofthenon-financialUKeconomy,

?Pays￡5billioninrevenuetoTreasurythroughVehicleExciseDuty(VED)andFuelDuty,inadditiontoothertaxes,and

?Employs2.7millionpeopleinlogisticsroles,8.2%oftheUKworkforce.

WiththeUKstillgrapplingwiththelowproductivityexperiencedsincetheglobalfinancialcrisis,itisalsocrucialtounderstandthatlogisticsisadriverofinnovationandproductivityforthewhole

economy.

ThelogisticssectortransformedtheUK,fromitscanals,ports,railwaysandmotorisedroadvehicles

and,fromthesecondhalfofthetwentiethcenturyonwards,enabledrevolutionsinglobaltradeand

e-commerce–changinghowtheworldworks,andbringingusclosertogether.Inmorerecentyears,ithasdemonstrateditsresilience,keepingsupplychainsmovingduringBrexit,theglobalpandemicandwarinUkraine.Asisclearfromthecasestudiesinthisreport,logisticshascontinuedtoinnovateandbecomeincreasinglyefficient,usingtechnologyanddatatointegrateprocesses,systemsand

transportmodes,andtodecarbonisefleetsandwarehouses.Thisincludessupportinginnovationandtechnologyadoptionamongstsmallbusinessesthroughmentoring;establishingfacilitiesdedicatedtotheneedsofSMEsellers;deployingroboticsandanalyticsindistributioncentres,aswellas

autonomoustechnologyandAItoacceleratecustomerfulfilment;usingtechnologytoco-locateandintegratemanufacturingandlogisticsservices;digitalisingsystemstorapidlyacceleratevehicle

turnaroundtimes;developingnewdeliverymethodsandrouteoptimisationtechnologiesforcrowdedcities,includingwithautonomousrobots;investinginskills,anddeliveringtheGenerationLogistics

campaigntoattractadiverserangeoftalentintothesector’sfutureroles.

Withtherightpartnershipwithgovernment,logisticscandomuchmore.Asevidencedinthisreport,iftheUKwastoreturntotheWorldBank’stoptenformovementofgoodswithinthecountryand

acrossitsborders,itwouldseeanestimated￡3.9billionboostinGDPthroughproductivitygains.If

theUKweretobecomeagloballeader,thisbenefitwouldbedoubled.However,today,thereare

pressurespushinginthewrongdirectionthatneedtoberesolvedtounlockthesector’sfullpotential.AsidentifiedbytheWorldBank,thesectorhassustaineditscompetitivestandingintermsofpricing

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butisfacingborderfriction,transportcongestionanddecliningconnectivity,andchallengeswithskillsandinnovation,allofwhichisharmingtheUK’scompetitivenessinlogisticsandoveralleconomy.

WealsoknowthattheUKnotonlyneedstoaddressthesechallengesbuttoachievenetzeroaswell.Ifwegetthisright,netzerowillalignwithlongtermhigherproductivity.However,intheshort-term,thelevelsofinvestmentrequired,andthefactbusinessmodelswillneedtoevolve,meanwemust

ensurethattaxpayerandprivateinvestmentdeliversvalueformoney.

Thesectorisinvestingtodecarbonise,andtriallingandinnovatingtoreduceemissionsinacost-

effectiveway.Thecasestudiesinthisreportdocumentthesector’sintroductionofelectricvehicles,includingHGVswiththelatestbatteryandrange-extendingtechnologies;triallingwirelessvehiclecharging;deployingelectricratherthandieselrefrigeration,includingsolarpoweredtrailers,to

maintainthecoldchainduringdistribution;theestablishmentofmicro-mobilityhubstoimprove

sustainabilityofurbandeliveries;theuseofbio-gasHGVstoradicallycutemissions;andleveragingthebenefitsofelectricvehiclestoreducevehiclemaintenancecosts.However,itisclearthat

challengesremainforhowtodeliverthetransition,especiallyforlargervehiclesmakinglongjourneys.

So,howdowemoveforward?Wewelcomethegovernment’scommitmenttoincreasetheshareof

GDPcommittedtobothinfrastructureinvestmentandinnovationtointernationallycompetitivelevels.Itisimportantthatthisismaintained,andthattheUKlogisticssectorgetsitsfairshare.Inaddition,

theshortageoftechnicalskillsmustbeaddressed,especiallygiventhatnewtechnologiesareneededtodeliverzerocarbon.Finally,borderfrictionmustbechallengedandtheUK’sinternational

connectivityinvestedin.Thelogisticssectoriswellplacedtosupportthis,sharingbestpracticeacrossbusinessesandcommunities,anddeployingnewtechnologiestoboostefficiency,butitcannotdoitalone.

AtLogisticsUKweareworkingwithourmemberstosupportthischallenge–includingthroughourpartnershipwithgovernmentonGenerationLogisticsandalloureventsandforumswhichseekto

bringtogethertheleadersoflogisticswithdecisionmakerstoshareanddevelopbestpractice.

Logisticswillalwaysbeapublicprivatepartnership.Giventhepotentialforlogisticstodrivegrowthacrossthewholeeconomy,wearecallingforpolicymakerstoworkcloselywithustotakethesector

forwardandsupportafairtransitiontoagreeneconomy,andtherebyhelptosolvetheUK’sproductivitypuzzle.Thismeansdelivering:

?Innovativeandintegratedinfrastructure–leveraginginvestmentandtechnologytoenable

thetransportnetworktoworkmoreefficientlyforeveryhousehold,businessandpublic

serviceinthecountry.Intheshortterm,wemusttackletheUK’scongestionhotspotsonroadandrailandatportsandairports.Inthelongterm,governmentandbusinessmustwork

togethertodeliveranationallogisticsnetworkthatmovesgoodsintheoptimumproductive,strategicandgreenway.

?Afairtransitiontoagreeneconomy.ThelogisticssectorisembracingthedecarbonisationagendaandiscommittedtoplayingitsparttohelptheUKachievenetzero.However,todeliverafairtransitionandunlockprivateinvestment,thesectorneedssupportand

partnershiptomitigatethecurrenthighcostsofgoinggreen,togetherwithlong-term

collaborationtodelivertheenergyinfrastructurerequiredforallfreighttransportmodes.

?Skillspartnershipstosupportathrivingsector.Thelogisticssectorisinvestinginrecruitmentandskillstorespondtotherapidlychangingneedsofbusinesses,theagingpopulationand

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reducedmigrationfromtheEU.Todeliverforthefuture,skillspartnershipsarerequiredthatreflectthebreadthofhigh-qualityrolesacrosslogisticsandhowcentraltheyaretokeepingthecountrymoving.

?Theexpansionoftrade,asadriverofinnovationandproductivity.Logisticsenablesall

internationalgoodstrade.Thatiswhywearecallingfortradetobebackedenthusiasticallyasadriverofprogress.Thismeansthelogisticsindustryandthegovernmentworkingtogethertodeliversimpleregulationsandborders,includingbyleveragingtheopportunitiesofnew

technologiesandartificialintelligence,andnegotiatingFreeTradeFacilitationAgreementsandFreeTradeAgreementstounlockmarketaccess.

Thisisabigagendabut,asevidencedinthisreport,gettingthisrightwouldmeana￡3.9billionboost

toGDPandenoughraisedinadditionaltaxationtofinancetheannualsalariesofmorethan20,000nursesorsecondaryschoolteachers.Goingfurthertobecomeaworldleaderwoulddoublethesegains.Thisiswhywearecallingforthegovernmenttoworkwithustoestablishacross-WhitehallLogisticsProductivityForum,tomaximisethebenefitsthatthissectorcandelivertothewhole

economy.

Theseprizesaretoovaluabletoleaveinstorage.

DavidWellsOBE

ChiefExecutive

LogisticsUK

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FOREWORDBYJOHNBOUMPHREY,COUNTRYMANAGER,AMAZONUK

Amazonisatitsheartaretailer,butifourheartisinretail,ourlegsandarmsareverymuchin

logistics:movingproductsfromournetworkofover25fulfilmentcentrestocustomers.Whenit

comestologistics,wehavealwaysaskedourselveshowcanwedothisfaster,safer,moresustainably,andmoreaffordably.It’sthisapproachthat’sseenuscutdeliverytimesacrossmillionsoforders,andincreasinglyoffersamedaydelivery.

AtAmazon,wehaveseenfirst-handthehugeeconomicimpactthatthelogisticssectorproduces.

Manyofoursitesarelocatedinpost-industrialareasthathavehistoricallyexperiencedhigherratesofunemploymentanddeprivation,andwethereforeknowhowimportantrelevantinvestmentandjob

creationcanbeforlocalcommunitiesacrosstheUK.EffectivelogisticsalsoenablesbusinessestoservethewholeUKfromasinglesite,anywherefromCornwalltoCaithness.

ButefficientlogisticscanalsotakeyoubeyondjusttheUK.100,000UK-basedsmallandmediumsizedenterprisessellonAmazon,withmorethanhalfexportingtheirproductstocustomersaroundthe

world,recordingmorethan￡3.3billioninexportsalesin2022alone.Theexportingsuccessofthesebusinessesisonlypossiblethroughthesmoothdeliveryofgoodsbetweenbusinessesandcustomers.

Decarbonisinglogisticswillplayasignificantroleinthetransitiontonetzero,andbusinesses

includingAmazonaretakingactionnowtoaddressthischallenge(introducingelectricvansacrossournetwork,forexample)aswellasidentifyingwherefurtherinvestmentandinnovationwillberequiredinthefuture.AmazonhaspioneeredtheintroductionofeHGVstotheUK’sroads,butthereismuch

worktodoindecarbonisingourtransportnetwork,aswellasinotherpartsofouroperations.

ForallthesereasonsandmorewearepleasedtosupportthisimportantreportfromLogisticsUK.

AmazoniscommittedtowardssupportingthefuturegrowthofthelogisticssectorintheUK,andwe

lookforwardtoachievingthisinpartnershipwithbothpolicymakersandthewiderbusinesscommunity.

JohnBoumphrey

CountryManager

AmazonUK

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TABLEOFCONTENTS

Forewords 3

Executivesummary 8

1.Background 15

2.TheUK’slogisticsperformance 18

3.Understandingtheeconomicimpactofthelogisticssector 22

4.TheeconomicwindfallfromimprovingtheUK’slogisticsperformance 25

5.Preparingforanet-zerofuture 30

6.Casestudies 35

7.Appendix1:Literaturereview 55

8.Appendix2:Modellingmethodology 62

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EXECUTIVESUMMARY

THEUKFACESASIGNIFICANTPRODUCTIVITYCHALLENGE

Since2007,UKproductivitygrowthhasslowedmarkedly,anditsperformancehasworsenedcomparedtoitsinternationalpeers.AsdisplayedinFig.1,between1997and2007,labour

productivitygrewatahealthyaverageannualrateof1.9%annually,wellaheadofratesenjoyedby

mostothercountriesintheG7.Theperiodsincetheglobalfinancialcrisis(GFC)hasbeenmarkedby

persistentlysluggishtrendimprovementsinproductivityinmajoradvancedeconomies.Theslowdownhas,unfortunately,beenparticularlyacuteintheUKcontributingtoitscurrentpositionasoneoftheweakestperformersintheG7bythemeasureofoutputperworker.1

Fig.1.Annualoutputperhourworked,1997-2021

Averageannualgrowth

1997-2007

UK

Source:OfficeforNationalStatistics

2010-2019

RestofG7

SuchslowproductivitygrowthhascontributedtothestagnationinlivingstandardsforUK

householdsthatseemssettopersist.OxfordEconomics’baselineforecastfortheUKseeslittle

improvementinproductivitygrowthinthemedium-term,aprojectionthatwouldimplya20%

reductioninproductivityby2030comparedtopre-crisistrends(see

Fig.2

overleaf).Thistrendhas,andwouldcontinuetohave,adeeplydamagingimpactonprosperity.Forexample,averagereal

householdincomehasremainedlargelyunchangedsince2007,andtheUKOfficeforBudget

Responsibilitypredictsthatrealincomeperpersonwillstillbebelowpre-pandemiclevelsin2027-28.2UKpolicymakersare,therefore,confrontedwithapressingchallengetoenhanceproductivitygrowthinthecountry.

1TheUKOfficeforNationalStatistics(ONS),

“InternationalcomparisonsofUKproductivity(ICP),finalestimates:2021”

,January2023(lastaccessedJuly2023).

2TheUKOfficeforBudgetResponsibility(OBR),

“Economicandfiscaloutlook”

,March2023.

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190

170

150

130

110

90

Fig.2.UKproductivity,RealGDPperworker(indexed,1990=100)

GDPperworker,1990=100

Forecast

199019952000200520102015202020252030

GDPperworker(1990=100)

Source:OxfordEconomics

Pre-financialcrisistrend

LOGISTICSISONEOFTHEUK'SMOSTIMPORTANTECONOMICSECTORSANDHASANIMPACTONTHEWHOLEECONOMY

In2021,theUKlogisticssectorcontributed￡163billiontotheUKeconomy,thatis7.2%ofUKGDP(or12%ofUKGVA3excludingthecontributionofthefinancialsector).Thecontributionto

employmentwasalsoofsimilarmagnitude,witharound2.7millionemployedintheUKinlogistics

companiesorinlogisticsrolesinothercompaniesin2021.Thismeansthat8.2%oftheUKworkforcewasemployedinlogisticsorlogistic-relatedrolesin2021.

Throughtheirsupply-chainandwage-spending,logisticsbusinessessupporteconomicactivityinotherpartsoftheeconomy.In2019,thetotaleconomicfootprintofthelogisticssectorwas

approximatelythreetimeslargerthanitsdirectGVAcontribution–oneofthehighestamong

comparatorcountriesandotherUKsectors.However,these“demand-side”effectsdonotcapture

anydownstreamdynamiceffectsorrebalancingthatmayoccurintheeconomyasthesectorevolves.

Itisthereforeimportanttounderstandtherolethesectorplaysincatalysingeconomicactivityinthewidereconomy.Logisticsservicesareusedextensivelybybusinessesandthepublicsectortoinsupplychainmanagementandproductdelivery.Ouranalysisindicatesthatthepublicsectorand

otherprivatesectorbusinessesspent15%oftheirtotalinput-relatedspendingonlogisticsservicesin2019.Itstandstoreason,therefore,thatchangestothespeed,reliabilityandpriceoftheseservices

cascadethroughtheeconomy.Throughthesechannels,thelogisticshasaconsiderableeffectonthecapacityofbusinessestoproducegoodsandservicesi.e.,asupply-sideimpact.

Efficientlogisticsoperationshelpfacilitatemarketexpansionforbusinesses,resultingin

increasedsalesanddrivingeconomicproductivity.Furthermore,theyempowerabroaderrangeofbusinessestocompeteonawiderscale,stimulatingmarketcompetitionandfosteringpotential

improvementsinproductqualityandreductionsinprices.Increasedcompetitionservesasacatalyst

3GrossValueAdded(GVA)isthevalueofoutputsproducedlessthevalueofintermediateinputsusedintheproductionprocess,andisusedasaproxyforGDP.

LOGISTICS:DELIVERINGASOLUTIONTOTHEUK’SPRODUCTIVITYPUZZLE

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forheightenedinnovation,technologicalinvestment,andadynamicreallocationofresources,capitalisingontheopportunitiesarisingfromimprovedlogistics.

Asisevidentfromthe

casestudies

inthisreport,logisticsadvancementsthemselvesalsorequire

technologicalprogress,andtheUKlogisticssectorisinvestinginthisarea.Logisticsbusinessestoldushowtheywereinvestingintechnologytodriveefficiencyandsupportsupplychainsandcustomers,

disseminatinginnovativepracticesacrossthewidereconomy,aswellasinvestinginthegreentransition.

INRECENTYEARS,THEEFFICIENCYOFGOODSMOVEMENTWITHINTHEUKANDACROSSITSBORDERSHASDECLINEDCOMPAREDTOINTERNATIONALPEERS

Accordingtointernationalmeasures,fromapositionofcomparativestrength,theefficiency

withwhichgoodscanbemovedwithinandacrosstheUKhasexperiencedarelativedecline

since2014.Avarietyofsourcesprovideinformationrelatingtotherelativequalityandefficiencyof

differentcountry’slogisticsservices.OneofthemostprominentistheWorldBank'slatestLogistics

PerformanceIndex(LPI)4,whichassessesthequalityoflogisticsservicesandthecontextwithinwhichlogisticsbusinessesoperate.In2014,theUK’sinternationalrankingof4thimplieditsstatusasa

relativegloballeader.ThelatesteditionoftheLPIthisyear,however,sawtheUK’srankingplummettojoint-19th,withbyfarthebiggestdeclineregisteredduringtheperiodbetween2018and2023

(Fig.3)

.

Fig.3.LogisticsPerformanceIndexranking,selectcountries(2014-2023)

LPIranking

2014201620182023

1

3

5

7

9

11

13

15

17

19

21

Germany

Canada

France

UnitedStates

UnitedKingdom

Source:TheWorldBank,OxfordEconomics

Althoughwearenotabletoformallyquantifytheimpactofdifferentdrivers,thelargest

contributorstotheUK’spositionaldeclinearebeyondthecontrolofindustryoperators,as

indicatedbycompositionalanalysis.TounderstandwhatmighthavecausedthedeclineintheUK’s

ranking,itisinstructivetoconsiderthevaryingperformanceofdifferentsub-componentindicatorsof

4TheWorldBank’sLogisticsPerformanceIndex(LPI),measurescountries'logisticsperformanceacrosscountries,basedonfactorssuchascustomsprocesses,infrastructurequality,andtimelinessofshipments.TheLPIisasurvey-basedmeasure,releasedroughlyonceeverytwotothreeyears.

LOGISTICS:DELIVERINGASOLUTIONTOTHEUK’SPRODUCTIVITYPUZZLE

11

theLPIduringthisperiod

(Fig.4)

.Thelargestfallshaverelatedtotimeliness,infrastructurequalityand

thequalityandefficiencyofcustomsoperations.Forthelatter,itisnotablethatthedropcoincidedwiththeimplementationoftheUK’snewtradingarrangementwiththeEU27,achangethathas

broughtadditionaladministrativecomplexitiesforbusinessesseekingtotransactwithpartnersthatstillaccountfor42%oftheUK’sinternationaltradebyvalue.ItisalsonotablethattheUKhas

generallysufferedfromalowintensityoftransportinfrastructureinvestmentoverthelastdecade—theUKspentapproximately0.8%ofGDPontransportinfrastructureduringthisperiod.

Fig.4.AbsolutechangeintheUK’sLPIsub-componentscoresbetween2014and2023

Changeinscore

0.0-0.1-0.2-0.3-0.4-0.5-0.6

-0.7

OverallLPIscore

Timeliness

Infrastructurequality

Customsefficiency

Qualityof

transportand

customs

Pricingof

international

shipments

Abilitytotrackandtrace

Source:TheWorldBank,OxfordEconomicsservices

Intheory,thesetrendscanbeexpectedtohavecontributedtotheUK’srelativelyweak

productivityperformance,giventheplethoraofchannelsthroughwhichlogisticsservices

influencebusinessoperations.Totestthishypothesis,wedevelopedaneconometricmodelthat

estimatedtowhatextentacountry’slogisticsperformance,asmeasuredbytheLPI,canindependentlyexplaininternationalvariationinproductivitygrowth.Ourempiricalassessmentvalidatedthisthesis—indeed,itimpliesthatUKproductivitygrowthwouldhavebeen14.7%higherin2023haditnotbeenfortherelativedeclineinlogisticsperformancesince2014.

GOINGFORWARD,THELOGISTICSSECTORCANPLAYANIMPORTANTROLEINTHEUK’SRESPONSETOITSPRODUCTIVITYCHALLENGE

RestoringtheUK’spositionasagloballogisticsleadercanofferanimportantroutetorealising

theboosttogrowththatbothmajorpoliticalpartiesaspireto.Tocrystalisethepotentialopportunity,thisstudyexaminestwohypotheticalscenariostoillustratethepotentialpositiveeconomicimpactsthatcouldbeavailable.

Theeconomicopportunityfromreturningtothetop-10inlogistics

WefirstmodelledahypotheticalscenariowheretheUKreturnstothetop-10intheWorldBank’sLPIrankingsby2025insteadofcontinuingtodeclineatthesamerateasitdidbetween2014and2023.Inthisscenario,weestimatethatproductivitycouldbe0.13%higherin2030.Thistranslatesintoan

additionof￡3.9billiontoUKGDP,consistentwithanincreaseinaveragehouseholddisposableincomeof￡80intoday’sprices.Theincreaseintaxrevenuesassociatedwiththeincreased

LOGISTICS:DELIVERINGASOLUTIONTOTHEUK’SPRODUCTIVITYPUZZLE

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productivity,of￡870million,couldfundsalariesofaround20,000nursesorsecondaryschoolteachersintheUK.

Toputthisincontext,ourmodellingsuggeststhattheproductivitygaininthishypotheticalscenariowouldconstituteapproximatelyone-eighthoftheannualproductivitygrowthprojectedfrom2030onwards,accordingtoOxfordEconomics’currentbaselineforecast.

Fig.5.Theeconomicopportunityfromreturningtothetop-10inlogistics

Source:OxfordEconomics

Theeconomicopportunityfrombecomingthegloballeaderinlogistics

WealsomodelledahypotheticalscenariowheretheUKrosetothetopofglobalrankingsin2025toillustratethepotentialrewardsifsuchatransformativeachievementisattained.Inthisscenario,we

projectthatproductivitycouldbe0.27%higherin2030.Toputthisintoperspective,basedonour

currentbaselineforecast,suchaboostwouldincreaseUKproductivitygrowthbyapproximately20%duringthisperiod.Ifrealised,suchagainwouldadd￡7.9billiontoUKGDP,consistentwithanincreaseinaverageannualhouseholddisposableincomeofapproximately￡160,withthesefiguresmeasuredintoday’smoney,andthetaxrevenuesassociatedwiththeincreasedactivity,of

￡1.8billion,couldfundthesalariesofmorethan40,000nursesorsecondaryschoolteachers.

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Fig.6.Theeconomicopportunityfrombecomingthegloballeaderinlogistics

Source:OxfordEconomics

Theproductivitygainstemmingfromlogisticsimprovementsinthishypotheticalscenariowould

constituteapproximatelyone-quarteroftheannualproductivitygrowthprojectedfrom2030onwards,accordingtoOxfordEconomics’currentbaselineforecast.

Howsignificantisthisproductivityboost?

Ourestimatedproductivityimprovem