European logistics market to continue to grow

The logistics market across Europe will continue to experience growth in size by expenditure and employment in the next two years says DTZ Research.

According to DTZ´s 'European Logistics Markets' report the size of the logistics market is expected to continue to grow until 2005, although not as strongly as in recent years. Spanish and Italian markets are anticipated to lead growth whilst the more developed markets, such as France and the UK, are expected to experience slower growth.

Industry consolidation and globalisation continues to be one of the main trends influencing the growth of the European logistics sector, however, over recent years a key development has been the outsourcing of logistics operations by businesses to third-party logistics operators.

Rather than managing logistics operations in-house, companies are turning to dedicated firms to provide these services, allowing the firm to re-concentrate efforts on their core business activities, whilst enjoying the expertise and efficiency third-party operators can bring.

Although outsourcing has deeply penetrated the European logistics landscape with just under a third of operations being dealt with externally in 2002, the proportions of outsourced to in-house vary significantly across the countries.

According to DTZ Research, the UK is the most highly outsourced market where the contracted out segment of the market accounts for 40% of the total. Italy has the lowest share of contracted out logistics at 16% of the market.

Robert Hall, European Industrial and Logistics Director at DTZ, comments: ´Whereas outsourcing will undoubtedly play a major role in the future growth of the European logistics market as businesses continue to look for further efficiencies and cost savings, there has, however, been a notable slowdown in the number of companies outsourcing their logistics services to third-party operators as difficult economic conditions persist. As a result, demand for third-party logistics services is expected to be steady with slight softening being experienced over the next 12-18 months in
Western Europe with an acceleration in activity once the current economic
environment improves.´

´It is also expected that the trends in consolidation and globalisation will continue as key European players seek to diversify and strengthen their business scope and geographic coverage.´

Other issues, which will become more influential over the next 2 to 3 years, will be the expansion of the EU markets. May 2004 is set to see the single largest expansion ever of the European Union as 10 countries joining the existing 15 Member States.

Given the border of the EU moves east along with the plans for infrastructure improvements, this will inevitably result in continued investment and greater transparency in countries including Poland, Hungary and the Czech Republic resulting in a possible drift of business in some areas - such as manufacturing and assembly -away from Western Europe due to the much lower costs of operation in the Eastern European countries.

´It will be interesting to see if the new enlarged EU-25 will become a two-speed economy, with one block playing rapid catch up and the other more advanced economies settling into the new equilibrium in terms of budgetary measures, migration, trade and investment flows. The one factor, which will be interesting, is the competition between these countries for major inward investment projects - availability of labour along with grants will be key,´ added Hall.

Source: DTZ

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