London:

The boom in online shopping and revived construction activity has led to record levels of investment in vans and trucks, as British businesses enlarge their fleets.

Finance for commercial vehicles on lease and hire-purchase agreements rose 10 per cent to £6.5 billion in the year ending in August, according to the Finance and Leasing Association, a trade body. The figures point to the broader economic recovery, as well as a shift in how consumers buy — and receive — goods.

Driving the growth was the buoyant retail sector and an increase in people setting up businesses, said BNP Paribas Leasing Solutions, with some of the strongest demand for vans coming from self-employed workers in the building and associated trades.

“It’s very easy to get vehicles financed on very competitive rates these days,” said Brian Templar, of logistics consultancy Davies and Robson. Following a drop in demand for trucks last year due to changes in legislation, registrations have jumped 36 per cent in 2015. The number of vans on the road has continued to rise thanks to online shopping, with 17 per cent more added this year, according to the Society of Motor Manufacturers and Traders.

This reflects how retailers and logistics companies are making fewer large deliveries to stores but more small deliveries to homes. Online sales account for a fifth of all non-food retail sales in Britain.

“Logistics is the next big battleground in eCommerce. [Retailers] have always delivered larger items like furniture but now they will be able to offer it even for smaller items,” said Anita Balchandani, partner at OC&C. The consultancy put the UK eCommerce market size at £42 billion last year and forecasts it will rise to £61 billion by 2018.

Argos challenged its online and bricks-and-mortar rivals last week as it became the first high-street brand to launch same-day deliveries seven days a week throughout the country. Amazon Prime Now offers shipments within an hour in Coventry and London, and has been introducing a similar service for frozen and chilled foods in parts of the capital.

Meanwhile Ocado, the upmarket online grocer, spent £12.5 million on vehicle leases in 2014, against £9 million the previous year. The need for expanded vehicle fleets was underlined on ‘Black Friday’ in November last year, when a number of companies were caught out by a record-breaking day of online shopping. Delivery delays resulted.

Evidence of the fierce competition in the parcel delivery market was seen when City Link collapsed into administration last Christmas Eve making about 2,400 staff redundant and laying off 1,000 self-employed drivers.

However, addressing the long-standing shortage of drivers will prove one of the biggest challenges for companies with delivery operations in the coming years, said Robin Byde of brokerage Cantor Fitzgerald.

— Financial Times