The UK transport sector’s hurdles and hope for 2025

From the rise of Chinese EV competitors to growing pressure for stronger cyber security, many UK transport businesses face another trying year in 2025.

Trade challenges are also brewing, and the economy remains tough, which all means that insolvency rates in the sector are likely to remain high, by historic standards. But there are some bright spots and sources of growth. 

Transport is a large and diverse sector, so this article will focus on automotive, haulage, and aerospace.

Automotive struggles with EV transition and competition

The automotive sector continues to navigate its ongoing transformation and slow recovery. After an 11% drop in 2024, UK car production is forecast by Oxford Economics to grow by just 2% this year. 

The transition to electric vehicles remains the sector’s primary challenge. Despite heavy discounting in 2024, BEV registrations (19.6% of all new car sales) fell short of the government target of 22%. The 2025 target is higher again, at 28% of new car sales. That will require EV car sales to hike 46% year on year if the total market volume remains flat. 

Trade rules are another hurdle for manufacturers. Tariff-free trade between the UK and EU means a growing proportion of components must be sourced locally, putting pressure on British manufacturers. In the US, the new administration's proposed trade barriers could further limit competitiveness.

Meanwhile, Asian exporters such as China's BYD are proving increasingly competitive, attracting hard-pressed consumers with more affordable vehicles than many rivals.

The dealership market remains under particular pressure. This is driven by a continued decline in used car prices as the availability of new vehicles normalises. Heavily leveraged dealerships that are financing slow-moving stock may struggle to retain healthy margins as debt servicing costs stay high.

Haulage under pressure from rising costs

In the haulage sector, rising wages, vehicle replacement expenses, and potential fuel price increases continue to squeeze margins. Growth is expected to slow to 2.5% in 2025 after a stronger recovery in 2024.

Sustainability efforts will remain a priority in 2025, with haulage companies transitioning to electric vehicles and warehousing businesses focusing on reducing emissions. These shifts require significant upfront investment, which will further stretch resources in the coming months.

Cybersecurity remains a critical issue for haulage firms in particular. Attacks have highlighted vulnerabilities in the sector - among them the malicious publication of Owens Group’s internal data on the dark web in 2023. 

At the same time, private equity firms are beginning to divest investments made during the Covid pandemic, driving M&A activity in the sector.

Aerospace offers hope amid broader challenges

Aerospace is a rare bright spot in the transport sector. Supply chain issues are beginning to ease, and order backlogs for large commercial aircraft are at a record high, which is expected for production to grow by 1.6% in the UK this year, after falling 2.5% in 2024. In addition, government support will help to strengthen the sector, namely the five-year investment of £975 million announced in November.

Crucially, demand for air travel is on the rise. More people are planning holidays abroad in 2025 than last year: 41% of UK consumers plan to take an overseas holiday of at least five days, up from 35% in 2024, according to data from RSM. 

However, there are some sources of concern. Ongoing supply chain delays have already led to some flight cancellations in 2025, and airlines risk losing business to competitors – such as we’ve seen with Emirates picking up cancelled BA routes to Abu Dhabi.

Sustainability is also in focus for aerospace. In particular, the UK’s Sustainable Aviation Fuel (SAF) Mandate came into force on New Year’s Day, meaning 10% of all jet fuel must be sustainable by 2030. While this adds to costs in the medium term, it offers growth opportunities in the future.

Take action to minimise insolvency risks 

As we’ve seen from homing in on just three parts of the UK transport sector, firms face mixed fortunes this year. But overall, insolvency risks will remain high across the transport sector. This highlights the need for companies to continue to closely monitor the financial health and payment behaviours of trading partners. 

Watch for the warning signs, such as late filings or director resignations, and be wary of businesses that aren’t well enough diversified. Trade credit insurance offers an effective way to safeguard against bad debts, ensuring cash flow stability while reducing the burden of in-house monitoring.

Staying informed and proactive will be key to managing risks and seizing opportunities in 2025 and beyond.