THE LOGISTICS SECTOR IN GREATER MANCHESTER: SECTOR PROFILE

NOVEMBER 2013

IntroductionThe logistics sector is of national importance in terms of the number of businesses who operate within it and the number of people these businesses employ. In addition to this, the sector underpins the activity of many other major parts of the UK economy – for example, the goods needed by the retail and health and social care sectors are transported by the UK’s logistics sector. This dual role is reflected in the fact that approximately 1 in 4 people who are employed in a logistics occupation are not actually employed by a logistics company (e.g. the supermarket lorry driver or the retail warehouse operative). Nationally, the logistics sector directly employs 1.5m people, with a further 800,000 in logistics occupations within other sectors. The sector’s national GVA contribution is estimated at £93bn1 (or just under a tenth of national output).

For the purpose of this report, the sub-sectors included in the definition of the Logistics sector are as follows:

Land transport and transport via pipelines (SIC code 49) Water transport (SIC code 50) Freight Air transport (SIC code 51.2) Warehousing and support activities for transportation (SIC code 52) Postal and courier activities (SIC code 53)

The sector, and its various sub-sectors, is characterised by lots of small businesses - 82% of workplaces employ fewer than 10 people - and very low profit margins (1-3%).

Within Greater Manchester the presence of major storage and transport infrastructure (Manchester Airport, motorway network, Manchester Ship Canal/Trafford Park etc) has helped to attract and grow the logistics sector. Some of the largest employers of Logistics personnel based within Greater Manchester include Manchester Airport Group, DHL, Wincanton, Argos and Yearsley.

Within Greater Manchester the logistics sector is estimated to contribute in excess of £2.5bn in Gross Value Added (GVA) to the sub-regional economy, which equates to 7% of the total GM economy. However in terms of productivity, GVA per employee (commonly used as a proxy for skill levels) within the sector is £38,000 per employee vs. circa £35,000 per employee for the whole GM economy.

In the rest of this report we review data and information relating to the demand for skilled employees from the GM logistics sector, the potential supply of skilled Greater Manchester residents to meet this demand, and previous studies of the key skills issues faced by logistics companies and the sector as a whole.

1 Skills for Logistics figures (2013).

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The demand for skills from the sectorNumber and profile of Logistics sector businesses in GM

In 2012 the Inter-departmental Business Register (IDBR) recorded just over 1,850 Logistics sector businesses within Greater Manchester. Of these, half operate within the land transport sub-sector and a further one third in the warehousing sub-sector.

Table 1. Number of Logistics sector businesses in GM by sub-sector, 2012

Sub-sector Number of businesses

%

Land transport and transport via pipelines 934 50%Water transport <50 1%Freight Air transport <50 2%Warehousing and support activities for transportation 610 33%Postal and courier activities 260 14%All Logistics sector businesses 1,854Source: IDBR, 2012

By district, Manchester records the highest number of logistics sector companies, followed by Wigan and Trafford. The number of logistics sector businesses in Wigan is higher than would be expected given the borough’s total share of GM businesses. The same is true for Manchester and Rochdale.

Figure 1 GM Logistics businesses by locality vs. all GM businesses profile, 2012

0%

5%

10%

15%

20%

25%

Logistics companies All companies

Source: IDBR, 2012

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Looking at just the three largest logistics sub-sectors:

Land transport and transport via pipelines – there is a noticeable cluster of businesses within Wigan (17%), with the remaining companies spread evenly across Greater Manchester;

Warehousing and support activities for transportation – this sub-sector is concentrated in Manchester (34%) and Trafford (13%); and

Postal and courier activities - this sub-sector is concentrated in Manchester (21%), Salford (14%) and Bolton (12%).

The IDBR data show that GM logistics sector businesses are likely to be larger in terms of total numbers of employees than GM businesses operating in other parts of the economy – 37% of GM Logistics businesses employ more than 9 people compared to 27% of all GM businesses.

Business start-up rates within the sector are slightly below those seen across the whole economy.2

Within the three largest sub-sectors, large employers are particularly prevalent in the ‘Postal and courier activities’ and ‘Warehousing and support activities’ categories.

Sub-sector 1 to 9 10 to 50 50 to 249 250+Land transport and transport via pipelines 68% 24% 6% 2%

Warehousing and support activities for transportation 59% 30% 9% 2%

Postal and courier activities 52% 26% 20% 2%All Logistics sector businesses 62% 26% 9% 2%

Table 2. Employee size of Logistics sector businesses in GM by sub-sector, 2012

Source: IDBR, 2012

Number and profile of Logistics sector employees in GM

In 2011 there were nearly 48,600 employees working within the logistics sector in Greater Manchester. The land transport and transport via pipelines and warehousing and support activities for transportation were the largest sub-sectors in terms of employees, being approximately twice as large as the other major sub-sector, postal and courier activities.

2 UKCES, Logistics Sector briefing paper, October 2012

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Table 3. Number of Logistics sector employees in GM by sub-sector, 2011

Sub-sector Number of employees

%

Land transport and transport via pipelines 19,100 39%Water transport <100 <1%Freight Air transport <50 <1%Warehousing and support activities for transportation 19,500 39%Postal and courier activities 9,900 20%All Logistics sector businesses 48,640Source: Business Register and Employment Survey, 2011

Four out of every 10 GM logistics sector employees work in Manchester. Trafford and Wigan are next largest but still a considerable way behind Manchester in terms of total sector employees.

Figure 2 GM Logistics sector employees by locality, 2011

9%3%

37%

8%

8%

6%

6%

3%

10%

10% Bolton

Bury

Manchester

Oldham

Rochdale

Salford

Stockport

Tameside

Trafford

Source: Business Register and Employment Survey, 2011

Manchester’s dominance is especially strong within the Freight Air Transport and Postal and courier activities. In the former it accounts for nearly all GM employees (due to Manchester Airport); in the latter it has nearly as many employees as the other nine localities combined.

Since 2008 (the oldest directly comparable data) the GM logistics sector has contracted in terms of employee numbers by 16% (vs. -12% regionally). Over the same period, the number of GM employees in all sectors of the economy has decreased by 2%. Driving this has been sharp falls in logistics employment in Stockport (-42%), Rochdale (-24%), Salford (-24%) and Manchester (-21%). Oldham (42%) is the only GM borough to record

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a growth in logistics sector employment over the period. However, this fall in employee numbers has been counteracted by a rise in self-employment in the sector.

Looking at the full-time and part-time split, analysis shows that:

83% of sector employees are employed full-time – but rates of part-time working within the sector are increasing;

Bolton is the only borough where FT employment is noticeably less common (66%); and

There has been no noticeable change in the FT/PT split since 2008

A total of 60% of sector employees work in machine operative or elementary occupations (i.e. relatively low skill posts). In more detail, one in every three sector employees works as a driver. Other key occupations include:

Warehouse operatives Mail sorters and couriers Mechanics and engineers Clerks Importers and exporter Warehouse and distribution managers

The sector is one of the most poorly qualified with 37% of workers holding no qualifications or a qualification below Level 2 and only 39 %of managers holding a qualification.3 This is in part due to the sector requiring vocational licences as opposed to academic qualifications.

Data show that 80% of sector employees are male4.

12% of the sector’s workforce was born outside of the UK.5

Skills for Logistics has produced research looking at the age and ethnic profile of sector employees within the North West6. They found that only 9% of NW Logistics sector employees are aged under 24, compared to 14% in all NW sectors; and 6% of NW logistics sector employees are from a BME background – the same percentage as that seen across all NW sectors.

3 UKCES, Transportation and Storage SSA (2012)4 Ibid.5 Ibid.6 Skills for Logistics, NW Logistics sector factsheet (2011)

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Forecasts for growth in GM Logistics sector

At the national level, the Working Futures III project forecast that 748,100 additional workers would be required to work in the Logistics sector by 2017. Considerable demand is forecast for managers (150,300), customer service positions (117,200) as well as for transport and machine operatives (97,400).

Replicating this process at the North West and GM levels:

The net NW logistics sector workforce is anticipated to increase by 6,000 between 2007 and 2017. In addition, replacement demand is expected to be around 91,000 – i.e. there will be a total of 97,000 vacancies to be filled.7

Within Greater Manchester we forecast a 6,000 increase in total employment to 2017 (plus forecasts that over 30,000 current employees will need to be replaced as they retire, move or change career) and a £270m increase in the total contribution of the sector to GM’s economy8.

The supply of skills to the sectorThis section reviews data on the number of apprentices, further education and higher education students who live in GM and who are studying logistics sector related courses. It aims to give an indication of the potential supply of skilled labour to the sector. However, when reviewing the following data the following caveats should be noted:

1. A person’s subject of study is not necessarily an indicator of their future employment occupation;

2. Many GM learners are studying for academic qualifications (e.g. history, geography) which could make them suitable for employment in a range of sectors – these learners are not included in the analysis;

3. Across the relevant datasets up to 10% of learners have their study subject listed as unknown – these learners are not included in the analysis;

4. The latest available data on 16-19 year old and Higher Education students is less current (2011/12 vs. 2012/13) than the latest available data on 19+ and apprenticeship students; and

5. There is no official line on which subjects of study are directly relevant to which sectors of the economy. Therefore New Economy has had to make a judgement on which subjects and apprenticeship frameworks map to which sectors – detail on this mapping exercise is provided in an appendix to this report.

7 Skills for Logistics forecast

82. NOTE: these national, NW and GM forecasts are drawn from different forecasting models and were made at different points in time; they should not be compared.

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Thus the figures presented are indicative of the pool of labour from which the sector could recruit.

16–19: Further education (FE) and school sixth forms

Analysis of Education Funding Agency (EFA) data shows that FE Warehousing and Distribution training provision for GM 16-19 year olds is very small scale. In each of the years 2009/10, 2010/11 and 2011/12 there were fewer than 15 youngsters studying for NVQs or other awards in these subject areas, with Manchester College being the main provider of these courses.

Adult SFA-funded Logistics training provision (excluding apprenticeships)

In contrast to these low 16-19 start numbers, in 2012/13 the SFA funded 2,432 adult learners.

SFA funded provision to the sector has increased strongly over the past two years (up 54% on 2010/11) but SFA funded starts to the sector are still 12% down on 2008/9. Over the same period SFA funded starts across all sectors have fallen by 8%.

Looking in more detail at the types of residents on these courses:

SFA funded learners are predominantly male – only 8% of starts in 2012/13 were by females compared to 53% of starts across all subjects;

SFA funded learners are far more likely to study Level 1 or 2 logistics courses than students on other subjects, with level 2 study particularly prevalent; and

Manchester and Stockport residents are less likely to start an SFA funded logistics course, whilst Wigan and Rochdale residents are more likely.

Figure 3. Level of study by GM residents of SFA funded logistics courses, 2012/13

Level Logistics All sectorsLevel 1 & Entry 19% 20%Level 2 72% 20%Level 3 8% 21%

Source: SFA, 2012/13

The largest providers of logistics sector training in GM by number of SFA funded starts include:

Mantra Learning System Training Tameside College Wincanton; and Bury College

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Apprenticeships

Every year approximately 750 GM residents start an apprenticeship framework that is related to the logistics sector. The most important frameworks by learner numbers are:

Warehousing and storage – approximately 375 apprenticeship starts per year;

Driving good vehicles – 250 starts; and

Aviation operations on the ground – 75 starts per year.

There has been strong growth in the number of logistics sector GM apprenticeship starts – up by over 400% since 2008, compared to a 125% rise in all GM apprenticeship starts.

Nearly 95% of logistics sector GM apprenticeship starts are at the intermediate (or lowest) level; however, with the ‘Logistics Operations’ apprenticeship there is a concentration (45 in 2012/13) of advanced apprenticeship starts.

As with SFA funded adult training for the sector, the vast majority (89%) of logistics sector apprentices are male; across all apprenticeships 46% of starts are by males.

Apprenticeships are mainly started by 25 to 49 year olds (44% in 2012/13 - with 10% being between 25 and 30 years, and 34% 31 to 49 years). The demographic make up of apprentices in this sector has changed considerably since 2008/09: the proportion of under-19 year olds starting apprenticeships has decreased while at the same time the proportions of 25 to 49 year olds starting training in this sector has steadily increased.

In terms of where these apprentices live in GM, the profile of logistics sector apprentices is not that different from the profile seen across all apprenticeships – i.e. learners from certain GM boroughs do not display a noticeable preference towards undertaking a logistics apprenticeship.

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Age GroupsApprenticeship starts 2012 / 2013 (total number)

Under 19142

19-24178

25-3079

31-49263

50-64105

65+1

Total Number768

Figure 3 Home location of GM apprenticeship starts within logistics sector, 2012/13

Bolton

Bury

Manchest

er

Oldham

Rochdale

Salford

Stockp

ort

Tamesi

de

Trafford

Wigan

0%2%4%6%8%

10%12%14%16%18%

Logistics All sectors%

all

star

ts

Source: SFA, 2013

The four main providers of logistics sector apprenticeships in GM are:

Mantra Learning; North Lancs raining Group Ltd; Hull College; and Locomotivation Ltd.

Higher education

There are four universities within GM (Manchester Metropolitan University, University of Bolton, University of Manchester, and the University of Salford). Together these institutions grant approximately 33,800 qualifications per year9.

Due to how HE data is classified it is not possible to identify how many of these graduates qualified with degrees that are of relevance to working in the logistics sector. However, the Higher Education Statistics Agency (HESA) also produces data on which sectors a sample of these graduates subsequently start work in:

The 2010/11 Destination Leaver Survey found that of 14,000 GM HEI graduates, only 1% were working in the transport and communication sector six months later; and

The total number of GM graduates working in the Logistics sector was evenly spread across the main sub-sectors.

9 Higher Education Statistics Authority, 2010/11 qualifiers data

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Key skills issues facing the sectorIn recent years there have been a number of research reports which look at skills issues within the logistics sector. These include quantitative and qualitative research by the Sector Skills Council (Skills for Logistics), Department for Transport research, and nationwide skills surveys within which it is possible to isolate logistics sector responses. This section summarises the key findings from this research10.

Employer Skills Surveys

The UKCES Employer Skills Survey 2011 found that the Logistics sector is little different from other sectors in terms of percentages of companies with vacancies, skills gaps or difficulties in retaining staff. To illustrate:

A total of 12% of logistics companies had a vacancy – same as all economy figure;

Some 4% had a hard to fill vacancy – same as all economy figure; 60% of these vacancies are at elementary or machine operative occupational

levels; and Some 9% had a skills gaps within their workforce – vs. 13% all economy, with

skills gaps most common amongst lower skill occupations where the figure rises to 15-20%.

In their most recent review of the sector11 UKCES found that:

“The lack of basic computer literacy is reported by proportionately more employers within the sector than across the economy. The reason for this is the generally mature workforce, which still needs to get up to speed with the use of technology-based equipment, such as devices using the satellite navigation systems.”

“Additional skills reported to be lacking by around half of sector employers include oral communications skills, technical or practical skills, customer handling skills, problem solving skills and planning and organisation skills.”

Regional research suggests that vacancy and skills gap issues are more of a problem for NW logistics companies than logistics companies elsewhere in the UK. For instance, 13% of NW logistics workplaces have at least one vacancy and 12% had a skills gap – both these figures are higher than the national sector averages reported above.

10 Data and information taken from the following reports: Skills for Logistics – Training practices consultation (2010), Sector Skills Assessment (2009/10), Skills to Survive survey (2009), Perception Survey (2009), Sector Profile (2009); UKCES - National Employer Skills Survey (2011); and DfT – Logistics Growth Review (2011).11 UKCES, Logistics Sector briefing paper, October 2012

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Recruitment

One area where the sector is different from others is in its recruitment methods. Some 15% of logistics businesses say they have recruited a member of staff from school, college or university within the last three years – below the 24% all economy figure.12 The sector is noted as being particularly poor when it comes to school age recruitment. This latter point is reinforced by Skills for Logistics research (2008) with young people which found that 6 out of 10 school children do not know what the logistics sector does/involves and that the sector has a poor image amongst young people, in particular amongst girls.

Training providers report that the majority of the sector recruit via agencies during peak periods which then become permanent positions for the most competent workers.

A total of 5% logistics companies said that they struggled to retain staff, which is the same as all economy rate.

Training activity

When it comes to addressing skills shortages through training the sector again performs relatively poorly. It is one of the worst performing sectors of the economy in terms of the percentage of staff (43%) trained in the last 12 months and the average logistics company pays for 2.9 days training per employee per year – below the 4.3 all-economy average. And 60% of NW logistics companies provided some form of training or development in the previous 12 months, below the NW all sector figure of 68%. However, the amount that logistics companies spend per trainee (£3,650) is in line with the national average. Sector employers say that they are unable to spare staff time away from their positions, and also cite a lack of funds as key barriers to greater engagement with training providers.

Skills for Logistics research has also found that logistics companies generally commission training from local training providers or specialist logistics providers, with bite-sized, licence to practice training courses favoured. However, only 16% of sector employees train towards a nationally recognised qualification in a given year.

One reason for low rates of training within the sector that is sometimes identified is relatively low staff turnover levels, the reasoning being that this creates less of a need to train new staff.

The economic case for logistics companies to train their staff is strong. A significant link between a skilled workforce and competitive performance has been found - trained workers can be on average 23% higher in productivity, than untrained workers. However, the extent to which UK logistics employees are trained is particularly weak compared to our international competitors. The World Bank has found that the UK’s logistics sector is the 8th most competitive and the World Economic Forum states it is 13th.

12 UKCES, Transport and Storage SSA (2012)

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Future priorities

In their most recent review of the sector13 UKCES highlighted the following factors as being behind changing skills needs within the logistics sector:

Ongoing regulation within the sector driving up skills needs An ageing workforce Environmental policies leading to modal shift, the introduction of electric vehicles

and better utilisation of delivery capacity Online retailing leading to greater interaction between the sector and end

customers – this requires improved customer service skills The introduction of new technologies such as RFID and QR codes that workers

within the sector need to be familiar with.

Turning to skills-specific priorities, in its 2011 strategy document DfT identified the following skills priorities for the logistics sector:

Tackling the poor image of the sector amongst potential employees; Establishing a Logistics guild covering all sub-sectors; Management skills – including sector specific technical skills (O licence) Analytical skills – Driver hours (digital tachograph), fuel monitoring Driving Skills – eco-driving, longer lorries Legislative and regulatory knowledge Contract and client relationship management (3PL) Planning skills – vehicle utilisation, supply chain Intermodal strategic planning Financial and budgeting skills Forecasting and research skills Customer service Marketing skills Carbon reduction skills Electrical engineering skills

13 UKCES, Logistics Sector briefing paper, October 2012

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Appendix A: Definitions used to produce this report

SIC Codes Land transport and transport via pipelines (SIC code 49) Water transport (SIC code 50) Freight Air transport (SIC code 51.2) Warehousing and support activities for transportation (SIC code 52) Postal and courier activities (SIC code 53)

EFA tier 2 subject areas Warehousing and Distribution

SFA tier 2 subject areas Warehousing and Distribution

Apprenticeship Frameworks Aviation Operations on The Ground Carry And Deliver Goods Driving Goods Vehicles International Trade and Logistics Logistics Operations Management Logistics Operations Mail Services Storage And Warehousing Warehousing & Storage Wholesale Distribution Warehousing And Storage

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