The UK forklift truck market grew by 2.5% last year, despite profound political and economic uncertainty. Just over 35,400 trucks were sold, according to the British Industrial Truck Association. That’s almost double the numbers sold in the post crisis slump of a decade ago.

Materials handling equipment is integral to many of the UK’s most critical industries, from construction and aerospace, to food and beverage and manufacturing. But the remarkable resilience that the sector has displayed has been driven, overwhelmingly, by the unrelenting rise of e-commerce. 

E-commerce transactions reached £137.4bn in the UK alone last year, representing 16% of all retail sales, compared to 12% in 2012, according to the Office for National Statistics. Globally, e-commerce sales are expected to come close to a staggering $5trn by 2021.

Online retail has now infiltrated almost every sector. The apparel e-commerce market was worth $525bn last year and is expected to grow at 10.3% per annum to reach a total market size of $872.6bn by the end of 2023. 

Indeed, the Amazon effect has proved transformative to just about every industry, as consumers grow used to delivery within hours and fast and efficient returns policies. The knock-on implications for forklift truck demands have been considerable.

‘Cutthroat competition means manufacturing, distribution and retail businesses everywhere are having to invest in their warehousing and logistics in order to hold onto market share.’ 

Many warehouses are now running triple shifts. Fewer pallets and bulk orders are being shipped, with more emphasis instead on individual items. Warehouse aisles are getting narrower and shelves higher. Meanwhile, a growing number of smaller, regional warehouses designed to cater for last-mile delivery and micro-fulfilment are in turn driving demand for equipment that suits these specific requirements.  

The biggest companies are beginning to invest in automation. British online grocery retailer Ocado, for example, uses over a thousand robots to process 3.5 million items, or around 65,000 orders every week 5, while DHL is investing $300m to quadruple the number of robots in its warehouses in 2019.

Indeed, the need for efficiency and increased productivity in e-commerce and elsewhere is being met with other rapid technological advancements, including progress in battery technology resulting in growing popularity in electric forklifts – offering a high efficiency and environmentally friendly alternative to traditional fuels. 

“Cutthroat competition means manufacturing, distribution and retail businesses everywhere are having to invest in their warehousing and logistics in order to hold onto market share,” says Investec’s head of materials handling finance, Andrew Woodward. “That means more and better materials handling equipment is needed, along with the flexible financing tools that can support the investment required.”

Materials handling financing typically involves fixed or minimum-term rental agreements, where the bank buys the machinery from the supplier on day one, hiring it to the end-customer and collecting  a bundled rental of finance and maintenance with the maintenance element being passed back to the supplier. 

“Having the right financing partner in place can be critical to a supplier building a strong relationship with their customers and maximising the sales opportunity,” Woodward adds. 

Robust customer relationships are more important today than ever.

After all, while technology and rapidly changing consumer behaviour are both positive forces for the forklift truck market, there is no avoiding the political and economic instability that all industries are facing across the UK.

Materials handling can represent a significant expenditure for any business and justifying substantial financial commitments is notoriously tough in the current environment. “Brexit and business confidence are undoubtedly UK materials handling’s  nemesis right now,” says Woodward. “The uncertainty that the sector’s end-customers are facing has inevitable implications for the manufacturers and sellers of the forklift trucks themselves.” 

Indeed, while short-term contingency stockpiling buoyed demand for warehousing and associated equipment, the ultimate impact of Brexit on UK industry remains unclear. Many buying decisions are currently on hold while companies wait to see how political manoeuvring plays out. The materials handling industry is only as robust as its end-customers. 

Furthermore, materials handling accounts for some of the biggest imports and exports in the UK, representing £55bn annually. Half of that trade currently takes place within Europe. Any export and import duties imposed, as well as logistical burdens and exchange rate swings, will create significant challenges for the industry.

Faced with a volatile economic environment and weak business confidence, manufacturers and suppliers of materials handling equipment are being forced to work harder than ever to get orders over the line.

The ability to offer seamless service is increasingly critical to the sales process and working with a flexible and experienced financing partner, has never been more important. 

Ultimately, financing partners can be differentiated by the level of service that is provided. Suppliers should have full confidence in fast and efficient delivery, even on complex deals, as well as in the quality of ongoing service that follows the initial transaction.

The underlying growth fundamentals for the materials handling sector are resoundingly positive, both globally and here in the UK. But the UK clearly faces significant challenges in the coming months and years. 

Manufacturers and suppliers of forklift trucks will need to work hard to build and maintain deep relationships with prospective and existing clients. Selecting a financing partner that can reinforce the strength of those relationships is imperative to encouraging customers over the line and, therefore, to a suppliers’ long-term success.