Supply chain disruption could hinder UK economic recovery

CNC Robotics is a small company headquartered in Liverpool, designing automated processing systems, and it takes time to find engineers with the right combination of technology and soft skills. But according to the company’s managing director Philippa Glover, it will take longer to source the high-spec laptops that its latest recruiter needs to complete the job—no less than nine months.

this Global chip shortage This forced her to compromise on the equipment prepared for novices, which affected all aspects of the business, which has rapidly expanded from the initial production of props for movies and dramas to winning contracts in fields ranging from automobiles to defense.

“We have transformed from a company where you can rely on almost same-day delivery to always pay attention to supply issues and work with customers to solve problems,” Glover said. “We can’t hold a lot of inventory. We make to order, but we don’t know in advance what we need.”

British companies do not think they will relax immediately Supply chain disruption Since the beginning of this year, this situation has continued to deteriorate. The tightening of semiconductors, coupled with soaring transportation costs and raw material prices, has made it difficult for manufacturers around the world to meet the demand for recovery.

“It’s getting worse and worse-other things happen every two weeks,” said Steve Boyer, managing director of wastewater treatment plant supplier Marsh Industries. His main concern is the price he must pay to ensure the supply of scarce materials.

“We are tracking Indian ships with fiberglass containers and we found at the last minute that they were directed to Rotterdam… because they can find better prices in other markets.”

Steve Boyer of Marsh Industries © Marsh Industries

But in the UK, severe labor shortages affecting the service industry exacerbated these problems-July’s “Pingdemic”, When the surge in Covid cases forced many workers to self-isolate, and Brexit. Brexit has triggered a recruitment crisis in the transportation, hospitality and tourism industries. food processing This has pushed up logistics costs, forced some companies to shorten business hours and caused gaps in supermarket shelves.

McDonald’s milkshakes have been sold out, Greggs and Nando’s menus have gaps, Tesco warned that there may be “some shortages” at Christmas. In many companies Fight against interruption.

Economists are currently sticking to their forecasts to a large extent, but believe that these supply-side restrictions will delay the UK’s economic recovery from the pandemic. Ready to spend money.

A survey released this week by the CBI employers’ organization shows that manufacturers’ inventory adequacy ratios are at their lowest recorded levels in decades, as are the inventory levels associated with expected retail and distribution sales.

Respondents’ net balance line chart,

“This is more intense than we thought… The longer it lasts, the greater the impact on economic activity and the higher prices,” said Paul Dale of the consulting firm Capital Investment Macro. He added that supply constraints will not change the outlook for monetary policy in the short term, but “if there are still many problems and not alleviated by March next year, it will be very worrying.”

However, he and other economists agree with the Bank of England’s view that as the global supply chain gradually recovers and soaring shipping and material prices recede, the most severe disruption will be eased early next year.

Andrew Goodwin of the consulting firm Oxford Economics predicts that the current disruption will only have a “modest impact” on GDP growth, because the problems are concentrated in areas such as manufacturing and food production, which are affected by the UK’s output. The share is very small. He said that in a service-oriented economy, its impact will be “dwarfed by the reopening.”

However, the biggest question is how long the staff shortage will last, and to what extent this situation will be affected-some economists warn that in the long run, a permanent decline in the UK’s labor supply may hinder economic growth.

Unless the government succumbs to commercial requirements to relax immigration rules, it will not be able to resolve it quickly Lack of skilled heavy truck drivers, Even a salary increase will attract some veterans.

However, recruitment problems in the hotel industry and some other fields may ease relatively quickly, because next month’s vacation plan is about to end, and government support for self-employed people is also about to end.

Graphs of confidence in making hiring and investment decisions show that demand for workers will remain high

Barclays economist Fabrice Montagné pointed out that the industry with the most vacancies is also the industry with a high leave rate — which means that solving the problem of employee shortages “just a phone call, but the employer has no employees. “.

According to a survey conducted by the National Bureau of Statistics, as many as 2 million people were still on partial or full leave in early August, and some of them may soon find work.

Dan Tomlinson, an economist at the Resolution Foundation think tank, said that since the vacation schedule will end in five weeks, these numbers “should remind us all not to worry about the lack of workers hindering recovery, and more. More about many people facing higher risk of unemployment.”

But Sandra Horsfield, an economist at Investec, a financial services company, said that the “big elephant in the room” is the extent to which Brexit has caused the overall contraction of the British workforce is unknown-if it proves that a large number of EU-born The worker has left the country and will choose not to return.

Among the many companies facing supply disruptions, retailer Tesco warned that there may be “some shortages” at Christmas. © Tolga Akmen/AFP/Getty Images

Samuel Tombs of Pantheon Macroeconomics, a consulting firm, believes that as people return from vacations and vacations, recruitment difficulties will ease—but the supply of labor in the UK “will be forever if there is no pandemic. It will not return to the level it should have reached”.

He pointed out that compared with the average growth rate in the five years before the pandemic, the British labor force fell by 2.2% in June-partly due to the return of EU nationals, but also due to the continued education of young people and the elderly. The workers retire early.

Neil Carberry, chairman of the Federation of Recruiting and Employers, also predicted a long-term shift, with members reporting difficult recruitment conditions in many industries.

With long-term high employment, rising minimum wages, and few recruitment issues, given the size of the domestic labor force and the nature of immigration policies, the labor market is now “inevitable”. .. The government has the responsibility to deliver,” he said.

He emphasized that if companies and governments take a more strategic approach to labor planning, shortages are not inevitable, but he added: “After the pandemic, after Brexit, we will be in a different place for decades. NS.”

Brexit has triggered a hiring crisis in transportation, hotels and food processing, driving up costs, forcing some companies to shorten business hours and leading to gaps in shelves © Matthew Horwood/Getty Images

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