AIR CARG O WEEK


MARKET FORECAST


SUPPLEMENT


UK RECESSION 2025? AIRFREIGHT’S ECONOMY-CLASS RIDE


T


“In challenging economic conditions, businesses may shift to less expensive modes of transport, such as sea freight, for non-urgent goods. This transition could reduce airfreight’s market share.”


he UK economy is expected to narrowly dodge a bullet in 2025 with regard to undergoing recession, though with growth projections of just 0.7% the year will be more about ongoing economic stagnation rather significant recovery.


than


For the British Chambers of Commerce (BCC), the key challenges include weak consumer spending,


low business investment and


stubborn inflation. While inflation is anticipated to stabilise around the Bank of England’s target of 2% by late 2025, high interest rates and subdued global demand are likely to constrain economic expansion Persistent structural issues - such as low productivity growth


and limited labour supply—remain significant hurdles. Additionally, geopolitical uncertainties and evolving trade policies post-Brexit exacerbate risks to economic stability. Airfreight players who might want to consider the factors


behind the UK’s recession fears will have to look at how, despite easing headline inflation, core inflation driven by wage growth and service prices poses challenges. High interest rates aimed at curbing inflation dampen consumer and business spending, limiting economic dynamism. Although disposable incomes are gradually recovering, consumer


spending remains below pre-pandemic levels, partly due to elevated living costs. This could lead to a dip in demand for airfreighted imports. Similarly, higher borrowing costs have stifled business investments in critical sectors like housing and infrastructure. According to the BCC, the UK is heavily exposed to global


economic conditions. Slowdowns in major trading partners and ongoing disruptions in


performance, further constraining GDP growth.


Implications for airfreight Economic stagnation or recession in 2025 would likely have a mixed impact on airfreight imports. Key considerations include lower household spending that typically leads to decreased imports of consumer goods, a significant portion of airfreight. Luxury goods and time-sensitive products, often reliant on air transport, may see reduced demand. However, of course, e-commerce seems to be on a global upward


trajectory that may yet come to airfreight’s rescue in bad economic outlooks. Weak industrial production, linked to constrained investment, could


lower the demand for imported machinery and raw materials. However, some critical sectors, such as pharmaceuticals or technology, may maintain steady airfreight volumes due to their essential nature. Companies may use airfreight to mitigate supply chain disruptions,


especially in a volatile global trade environment. This could partially offset declines in other areas, maintaining demand for expedited shipping solutions. Broader trends,


including capacity expansions and regional trade


shifts, influence airfreight volumes. For example, increased belly-hold capacity on passenger flights and evolving trade dynamics with Asia and the EU could shape the UK’s airfreight market.


8 supply chains have weakened export


Impact on air f reight tonnages In quantitative terms, the


International Transport to economic Air Association


(IATA) notes that global airfreight demand is tied


Recessionary closely cycles. pressures


generally lead to a decline in cargo tonnage, as reflected in historical patterns where global


cross-border


trade and industrial production fell in tandem. For the UK specifically, the extent


of the impact would depend on sector- specific dynamics. While consumer goods and automotive parts may see reduced tonnage, or


sectors challenging like medical


stable airfreight volumes. In


businesses may shift


economic to


less


supplies technology components could sustain


conditions, expensive


modes of transport, such as sea freight, for non-urgent goods. This transition could reduce airfreight’s market share. Changes in trade policies and agreements,


particularly with the EU, may impact import patterns.


For instance, further stricter customs


regulations or tariffs could reduce overall trade volumes, demand.


What does 2025 hold? While the UK is unlikely to experience a severe recession in 2025, the combination of subdued growth,


high interest Airfreight


expected to reflect with


potential rates imports declines lowering airfreight


and


global uncertainties poses significant challenges.


are


these conditions, in


tonnage


driven by weaker consumer demand and industrial activity. However, resilience in certain sectors and strategic adjustments in supply chain management may partially mitigate these effects. The airfreight sector will need to adapt by digitalisation,


leveraging optimising


capacity


utilisation, and diversifying its market focus to sustain growth amidst these challenges.


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