30.09.26 | taxes

Business confidence may be returning to the logistics sector, but rising fuel, wage, and operating costs mean healthy turnover does not necessarily translate into healthy profit. Here, Head of Tax at Beatons Group, Andrew Diver, explores why understanding exactly where the margin is being made – and lost – has never been more important.

There are encouraging signs coming from the UK’s logistics industry.

After a turbulent start to 2026, Logistics UK’s latest Performance Tracker suggests confidence is recovering. Financial health among logistics businesses rose to 7.5 out of 10 in the second quarter, its highest level since Q3 2023, while the business outlook improved from 5.8 to 6.5.

So far, so positive.

But behind those headline figures sits a rather different set of numbers.

Almost 70% of businesses reported increased transport costs during the quarter, while 79% expect fuel prices to rise.

Logistics UK’s distribution cost analysis also found vehicle operating costs increased by more than 12% in the year to April 2026. Diesel costs rose 36%, driver employment costs rose almost 8%, and vehicle insurance rose 7%.

For an industry accustomed to tight margins, those increases matter.

But perhaps the most important question isn’t simply “how much have our costs increased?”

It’s “do we know which work is still making us money?”

The £400,000 customer

Imagine a haulage business has a longstanding customer generating £400,000 of annual turnover.

On the face of it, that’s a valuable account. The vehicles are busy, invoices are going out, and the relationship may stretch back years.

But what if the price was negotiated 18 months ago?

Since then, fuel, employment, insurance, maintenance and finance costs may all have increased. Delays and waiting time might also be absorbing more paid driver hours.

Suddenly, £400,000 of turnover doesn’t tell you very much.

The important figure is what remains once the true cost of servicing that customer has been taken into account.

Don’t wait for the annual accounts

Annual accounts remain important, but they inevitably tell you about a period that has already passed.

For businesses operating on narrow margins in a rapidly changing environment, that can leave too much time between a problem developing and somebody spotting it.

Good management information allows businesses to ask much more useful questions.

Which customers generate the strongest margin? Which routes are most profitable? What does it really cost to put a vehicle on the road for a day? How much revenue does each vehicle need to generate before it contributes to profit?

And, crucially, how much have those figures changed since contracts were last negotiated?

The answers may prompt a conversation about pricing, efficiencies or whether some work remains commercially worthwhile.

Turnover isn’t the only measure

There is another consideration too. Cash flow.

A profitable business can still come under pressure if money isn’t coming in quickly enough.

Fuel needs to be bought, drivers paid, and vehicles financed, maintained, and insured regardless of when customers settle their invoices.

So what happens if a major customer’s payment period moves from 30 days to 45 – or 60? Can the business comfortably absorb the gap, or will additional working capital be required?

Understanding debtor days and modeling cash flow should therefore sit alongside profitability analysis.

More business isn’t always the answer

The latest confidence figures demonstrate the resilience of the logistics sector, and there will continue to be opportunities in an industry fundamental to virtually every part of the economy.

But growth should be profitable growth.

When costs are rising quickly, winning another large contract on the wrong terms can compound a problem rather than solve it.

So before chasing the next £400,000 customer, it may be worth taking a closer look at the £400,000 already on the books.

Sometimes the most valuable new business isn’t the next contract you win.

It’s discovering that the contract you already have needs to be repriced.

Want a clearer picture of where your business is really making money? Speak to the Beatons team about profitability and cash-flow planning. www.beatons.co.uk