Post-Brexit Britain faces a difficult winter

Empty shelves that normally store bottled water at a Sainsbury supermarket, Greenwich Peninsular, on September 19, 2021 in London, England.

Chris J Ratcliffe | Getty Images

Experts have warned that the UK has emerged from the Covid-19 pandemic to find itself facing an onslaught of new economic crises that have left the country in an “uneasy situation”.

A perfect storm of labor shortages, soaring natural gas prices and global supply chain constraints have left the country in a prime position for a difficult winter. Rising demand as economies reopen has led to similar problems around the world, but economists argue that Brexit has exacerbated these issues for Britain.

labor shortage

The shortage of workers affects a large number of industries across the country.

Britain has an estimated shortage of 100,000 truck drivers, which transport organizations have largely attributed to the post-Brexit exit of EU citizens. A shortage of truck drivers has disrupted deliveries, leaving empty store shelves and a backlog of work at ports and dry gas stations, sparking a weeks-long September buying panic.

Other sectors have also warned of a worsening labor shortage that is expected to hit the availability and prices of goods in the run-up to Christmas.

The National Pig Association in Britain has warned that up to 120,000 pigs are being culled within weeks due to a shortage of butchers and slaughterhouse workers.

In a statement on Friday, the deputy chair of the UK National Farmers’ Association said labor shortages across the food supply chain remained acute, while the UK Storage Association chief executive said in September that industries including warehousing, engineering and transport were all suffer badly. shortage of workers.

At the end of September, the Confederation of British Industry – which represents 190,000 companies – said its latest data showed that 70% of companies were planning to raise wages in an attempt to tackle the labor shortage.

The UK government has issued thousands of temporary visas to truck drivers, butchers and farm workers, but some critics have argued that this is not enough to attract foreign workers.

risk to future growth

Riccardo Crescenzi, professor of economic geography at the London School of Economics, has expressed some skepticism about the solutions offered by the government.

Three month show [visas] It may not succeed while the rest of the EU is thriving due to the injection of allowed resources to the recovery plan, he told CNBC in a phone call. Where do the drivers come from in the local economy.”

It is hard to tell if the problems are temporary, Cresensei said. “Some of these deficiencies can become structural, and this is a problem that could seriously constrain future growth.”

Sam Roscoe, Senior Associate Professor of Operations and Supply Chain Management at the University of Sussex, warned that shortages will continue in the UK unless there are fundamental changes to the country’s immigration system.

“Brexit has been sold as a vote on UK immigration and labor market independence and making sure everyone in the UK has jobs to go to, but the problem is we have 5% unemployment,” he said by phone. “We’ve lost access to 27 member countries and the pool of labor that was available there, especially in terms of so-called low-skilled labor. I think that definitely puts us in a precarious position.”

Roscoe said it would take years to train and license enough Britons to drive heavy goods vehicles. “In the meantime, the reality is that we will face a labor shortage unless visa rules change.”

Spending power is under threat

In a note on Thursday, economists at Credit Suisse warned that UK consumers “face headwinds in the next few months”, including rising inflation, tighter supply and tighter monetary policy.

The authors of the note predicted, “We believe that real disposable income for the UK consumer could decline by about 1.5% in 2022, the largest decline since 2011.”

Helen Dickinson, head of the British Retail Consortium, told ITV News Thursday that three out of five chief executives said they would have to raise prices by the end of the year due to supply chain problems. About 10% said they had already done so.

Charalambos Pissouros, head of research at JFD Group, said he believed panic buying and supply shortages in the UK could also affect purchasing power by hurting the value of the pound.

“I see the risk to the future of the British pound tilting to the downside,” he told CNBC. “The severity of any further stumbling may depend on how long the situation remains unresolved. Quick responses such as the involvement of the British army could restore economic performance sooner than envisaged and halt the fall of sterling, and this may also allow the Bank of England to move forward freely with her tougher plans.

Government response to crises ‘alarming’

It comes at a time when Britain is also facing an energy crisis. Several UK energy suppliers have collapsed since September as wholesale gas prices hit record levels. While the problem has affected markets around the world, the UK is particularly vulnerable due to its dependence on gas. More than 22 million households are connected to the British gas network.

Meanwhile, in Europe – which is also battling rising prices – the European Commission on Wednesday published a “toolbox” that member states can use “to address the immediate impact of the current impacts.” [gas] Increasing prices, further enhancing resilience to future shocks.”

Cresensee told CNBC that the EU can rely on the strength of its single market, “which means that global shocks such as the gas price crisis can be dealt with more effectively while providing more room for maneuver.”

He added: “Post-Brexit, the UK can still coordinate its response to the crisis with its most important trading and investment partner to ensure the best possible protection for its businesses and citizens.” “However, the actions taken by the UK government remain unclear, let alone a strategy to coordinate with external partners. This is concerning.”

Relations between the European Union and the United Kingdom have been strained in recent weeks amid disagreements over the Northern Ireland Protocol, a special trade deal introduced to avoid the difficult border between Northern Ireland and the Republic of Ireland. Officials publicly argued on Twitter about the proposals – which Brexit Secretary David Frost called the “biggest source of mistrust” between the two sides – and met to discuss the proposed changes in Brussels on Friday.

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