Courier and delivery businesses close as pandemic boom in online deliveries wanes: ONS

Online demand has now declined after the pandemic peaks. Image: Monkey Business Images/Shutterstock

Courier and delivery companies set up to meet high levels of online demand during the pandemic now appear to be closing as that demand declines after Covid-19 restrictions end. Business closures were 23% higher in the first quarter of this year than a year earlier, according to the Office for National Statistics (ONS) Business Demography report covering the period January to March 2022 – an experimental series of reports. They were 75% higher in the transportation and warehousing sector, with the highest closure rate observed in road freight transportation and courier activities. Fifteen percent more retail businesses also closed over the same period.

The report measures businesses removed or added to the UK’s Inter-Departmental Business Register (IDBR), which obtains data from the VAT and PAYE systems as well as business surveys from the ONS and Companies House. Businesses are removed when turnover or employment drops to zero for several quarters or if the ONS is notified that the business has gone out of business.

The high level of closures follows “significant” increases in business start-ups in these industries in 2020 and 2021, says the ONS report, which puts the total number of business closures in the quarter at 137 210. The number of business closures increased in 15 of the 16 main industry groups – led by transport – and closures reached their highest rate since 2017. A total of 15,005 freight transport companies went bankrupt in the first trimester. against 8,590 a year earlier. And 10,055 retail businesses closed in the first quarter of 2022, compared to 8,770 in the same period of 2021, an increase of 15%.

The online share of UK retail sales peaked during the third UK lockdown, reaching 37.1% of retail sales in February 2021, before declining steadily since. In March 2022, they stood at 26%.

During the same period, 136,390 businesses were created, the same level as a year earlier. The number of business enterprises created fell by a third (-34%). New businesses had an average of 2.2 employees, down 19% from the 2.7 businesses created on average in the first quarters of the year, between 2017 and 2021. “Businesses that have been created since the coronavirus pandemic (COVID-19) have started to be smaller in terms of employment than those created before the coronavirus pandemic,” the ONS report states.

David Jinks, head of consumer research at delivery comparison website ParcelHero, says: “Lockdown restrictions have forced people to send in their gifts rather than delivering them in person. At the same time, the closure of all non-essential stores has created a boom in home deliveries. The market is now readjusting as friends and families reunite and shoppers flock to the High Street. Significantly, this new analysis of business demographics from the ONS identifies road and courier (unlicensed carriers) businesses as the two main sectors responsible for the bulk of closures in the transport and storage industry. This confirms our view that many messaging start-ups that peaked in demand during the pandemic have now run into trouble.

“These closures are the flip side of the industry’s significant growth in 2020 and 2021. In the first quarter of 2020, 8,160 new delivery startups opened and, over the same period in 2021, 10,680. These were often small SMEs, employing an average of 2.1 people. Now that peak demand has subsided, many of these new companies have struggled to maintain volumes.

“In many ways, although the number of failures is surprising, the underlying reasons are not. It is no coincidence that Amazon has just announced its first quarterly loss since 2015. In March this year, online orders fell -21.8%, compared to the same month in 2021. Sales in online, the majority of which are home deliveries, now account for around 26% of the retail market, rather than the 37% they held at the height of Covid restrictions last year. This means that many freight and parcel companies have to restructure their operations. Some obviously couldn’t make it in time. Freight companies whose main customer base was EU cross-Channel contracts were also affected by the new Brexit rules, which came into force at the start of 2021. Trade with the EU, in particular for SMEs and their logistics partners, has collapsed, mainly due to new bureaucracy, complicated taxes and “proof of origin” regulations.

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