UK plunges towards supply chain crisis due to staff and transport disruption

Photograph: Neil Hall/EPA

Britain’s economy has been plunged into a supply chain crisis, with major retailers’ stock levels at their the lowest since 1983 as a result of worker shortages and transport disruption caused by Covid and Brexit.

In a development that suggests recovery from the pandemic could be at risk, the Confederation of British Industry (CBI) said stock levels in relation to expected sales fell to their lowest level in August since it began tracking retail industry trends almost four decades ago.

It blamed global supply chain disruption triggered by the pandemic and worker shortages in several key industrial sectors, compounded by Brexit disruption as the UK emerges from lockdown.

Andrew Sentance, a former member of the Bank of England’s monetary policy committee, said shortages of workers and materials were the most acute in decades and painted a worrying picture for the British economy.

“It’s quite striking, I don’t think we can dismiss this as a flash in the pan,” he said. “Now that lockdown has been eased, we’re seeing a truer reflection of the impact of Brexit and issues building up before the pandemic.

“We could see this persisting for longer than people expect. Skills shortages could go on for a few years, the impact of Brexit on our ability to attract workers from the EU is not going to go away quickly and the process of training was quite significantly disrupted by the pandemic, when people were not working and furloughed.”

Employers are scrambling to hire workers. The recruitment site Indeed said the number of job ads offering joining bonuses had increased by 66% between April and 20 August, and that most of the increase had come since July as the economy reopened after lockdown.

Amazon said it would offer joining bonuses of up to £1,000 at various UK sites to attract new permanent and seasonal workers, and other warehousing, transport and logistics firms such as DHL and Whistl have similar plans.

In a sign that the labour shortage has spread beyond logistics to other sectors, Specsavers said it will pay as much as £10,000 for optometrists in some of its locations, British Gas £3,000 for gas engineers, and G4S £500 for security officers and managers.

Pets at Home is offering £1,000 signing-on bonuses for warehouse staff, Ocado £500 for new warehouse workers and delivery drivers, and AO.com hopes to attract “night shunters” to help load and unload trailers in its warehouses in the run-up to Christmas by offering a £1,000 joining bonus.

Although only 0.5% of job ads mention bonuses, Indeed said the surge suggested more employers were using them to get ahead in the competition for staff.

A national shortage of lorry drivers and workers for food processing plants has led to disruption for food outlets and warnings of empty supermarket shelves.

McDonalds has been forced to take milkshakes and bottled drinks off its menus, and Nando’s has announced the temporary closure of 45 outlets because of a shortage of chicken wings.

“The anecdotal evidence is not very reassuring when you hear problems in supply chains associated with shortage of lorry drivers, meaning McDonald’s is running out of milkshakes and Nando’s out of chicken. It’s all a little bit unnerving,” Sentance said.

Business leaders and employment experts said Covid disruption affecting countries around the world was playing a role in shortages of workers and materials, but that the UK was particularly exposed after launching tougher migration rules after Brexit.

According to the CBI’s latest snapshot, the proportion of imported deliveries from suppliers fell at one of the fastest rates in the survey’s history, reflecting disruption to international trade.

It said grocers were being hit hardest by supply shortages among retail firms, and that wholesale suppliers of building materials, household goods and office machinery were also struggling with low stock levels.

Business surveys have shown disruption to supply chains and staff shortages in several other countries, including the US, Germany, and New Zealand. Toyota said last week that it would cut global production by 40% as a result of a worldwide shortage of microchips and other components.

Andrew Kuyk, the director general of the Provision Trade Federation, which speaks for the dairy and pig meat trade, said there was no shortage of produce from UK farms, and that gaps on shelves were instead the result of a shortage of staff and difficulties in the supply chain.

“Food is still being produced on farm and in factories, but it’s getting it to the consumer that is proving the challenge in lots of different ways. There is a lack of lorry drivers, warehouse staff, staff in retail distribution centres, in the supermarket to put it on the shelves,” he said.

“Our supply chains are really quite sophisticated, there are lots of different moving parts. It is a bit like a watch mechanism, it works as long as all those parts are there and acting normally in relation to each other.

“But if you take out one cog, then it throws the whole mechanism out, and particularly for fresh products there is a timing issue.”

Official figures show millions of workers have come off furlough in recent months as the economy reopens, unemployment has fallen and job vacancies have reached a record high.

Nevertheless, almost 2 million jobs remained furloughed at the end of June according to the latest data from HMRC, and economists forecast unemployment could rise once the scheme closes at the end of September.

It comes after businesses were hit by “pingdemic” staff absences earlier this summer as rising coronavirus infections and people being alerted by the NHS Covid app forced hundreds of thousands of workers to self-isolate, causing widespread disruption across the economy.

Alpesh Paleja, the CBI lead economist, said changes to self isolation rules earlier this month had eased the pressure on firms.

“But ensuring continued progress on vaccine rollout for younger cohorts is crucial. This will also boost confidence as we move on to a new stage in the pandemic, namely living with the virus,” he said.