Chinese demand rises as policy shifts loom: Implications for UK logistics

Chinese demand

Chinese firms have taken up more than 2 million sq ft of logistics space so far this year (Q1-3), more than double the total for the whole of 2024. The most active has been JD.com, which is rapidly scaling its UK operations following the soft launch of its Joybuy e-commerce platform earlier this year.

As highlighted in last month’s note, the US ending the $800 de minimis exemption for imports is reducing parcel flows into the US. This trend is now visible in the data: in August, cargo volumes from China and Hong Kong to Europe rose 11% year-on-year, while shipments to the US fell 5%. Freighter capacity that previously served transpacific routes is being redirected to Europe, signalling a structural realignment in global trade flows. 

This shift is likely to support demand for logistics services linked to UK import hubs, in particular East Midlands Airport and Heathrow. However, longer-term changes in global trade policy could see trade flows continue to adjust, and cargo movements and associated demand evolve further.

Pre-Budget jitters

There has been widespread reporting of expectations for next months Budget, to be held on 26th November. The Chancellor set a relatively late Budget date, creating a long window for “what-might-be” briefings and leaks. Meanwhile, borrowing and debt-interest costs are higher than previous expected. 

As reported in the Financial Times, the Office for Budget Responsibility is expected to reduce its productivity growth forecasts by around 0.3 percentage points, which could widen the fiscal gap. The Institute for Fiscal Studies estimates that each 0.1% downgrade adds £7 billion to projected borrowing, implying a potential £21 billion shortfall in 2029–30.

This fiscal squeeze has increased expectations of revenue-raising tax measures, weighing on business sentiment. Many investors and occupiers are delaying decisions pending greater clarity after the Budget.

De minimis demise

The Chancellor is expected to end the £135 customs-free threshold on small parcels at the Budget. Under the current system, overseas retailers can send packages under £135 to the UK without paying import duties, a loophole that firms such as Shein and Temu have used extensively. The British Retail Consortium estimates the value of such parcels reached £5.9 billion last year, more than 50% higher than in 2023.

As reported in the Financial Times last week, ending the exemption could raise around £600 million per year and would level the playing field for UK-based e-commerce retailers. It may also increase demand for UK storage and fulfilment, as overseas platforms shift from direct-to-consumer shipping to bulk importing and domestic distribution.

Business rates

Business rates are one area that could see changes announced in the Budget statement. The government has proposed  permanent lower multipliers for Retail, Hospitality & Leisure properties with a rateable value (RV) below £500k, to be funded by a new “high-value multiplier” on properties with RV greater than £500k. 

According to the latest data from VOA (2025), across England and Wales there are 17,370 properties that exceed this threshold, 4,360 of these are industrial properties. However, it is worth noting that such properties account for less than 1% of total industrial stock.

Across the (East and West) Midlands, there are 1,130 properities that could be impacted, in South East there are c.660, followed by 520 in the Eastern region and 500 across Greater London. Wales and the North East regions have the lowest concentrations, with 100 and 110 units respectiviely.

The Government is also exploring replacing the single-rate system with marginal rate bands.

With the 2026 revaluation resetting RVs to April 2024 market levels, assets and markets that saw strong rental growth in 2023–24 may be pushed over the £500k threshold. As research from the British Property Federation notes, the UK’s business property tax burden is already over double the OECD average, as such, further increases would reduce cost competitiveness, particularly for large industrial and logistics assets.

Supply side stimulus?

To support growth, the Government is likely to pair fiscal tightening with targeted supply-side measures.

Possible positive announcements that the Budget could include:

• Allocating funding from the previously signalled £725bn 10-year infrastructure programme, potentially accelerating selected strategic projects.
• Incentives for advanced manufacturing, EV supply chains, and green technology, which would boost demand for large-scale industrial real estate.
• Enhancements to Improvement Relief, which currently provides 12 months’ relief on rates increases from qualifying building improvements (for works completed after 1 April 2024). An extension, broader eligibility, or alignment with ESG/energy upgrades would strengthen the business case for refurbishment in logistics stock.
• Possible extension of the 100% first-year capital allowance scheme to include patents, licences, and software, which would support high-tech manufacturing and R&D occupiers.