The impact of Boris Johnson's Brexit decision on the UK's fuel and food shortages has sparked concerns of an impending "Winter of Unhappiness," drawing parallels to the 1978/79 strike wave that brought down the British economy. The country is grappling with various challenges, including supply chain disruptions, price hikes for food and energy, and a labor shortage.
Among the affected major economies, UK is experiencing the most strain due to Brexit. The British government's approach to Brexit, which involves stringent immigration policies and the UK's exclusion from EU markets, increases the difficulty and cost of employing European workers for UK businesses, particularly retail and hospitality sector. These sectors are now grappling with a labor crunch, resulting in escalating business operation costs.
This predicament is compounded by Brexit-induced supply chain challenges. The supply chain disruptions have led to increased costs for food and fuel in the UK, as the country struggles to secure essential supplies from the EU. This has resulted in temporary closures of businesses in the food, hospitality, and logistics sectors due to labor shortages and delivery issues.
According to the Office for National Statistics, 1 million job vacancies were recorded in the UK between June and August. This has forced restaurants, bars, and supermarkets, including Nando's, to temporarily close some of their outlets due to workforce shortages or supply limitations in transporting necessary items.
Care England, a leading care service provider, mentioned that the elderly care sector is facing a "workforce crisis" and requires foreign labor to fill tens of thousands of vacant positions.
The supply chain problems have been further exacerbated by Brexit. The resulting fuel and food shortages have left consumers with higher living costs, even as measures to support the pandemic are being scaled back, such as wage subsidies and weekly income boosts.
The labor shortage crisis in the logistics sector has forced the British government to partly retreat from its strict Brexit immigration policy. Transport Minister Grant Shapps admitted that the Brexit contributes the fuel crisis and that the government plans to issue temporary visas for 10,500 foreign LGV drivers and workers in the poultry industry. Industry groups, however, have expressed their doubts about the impact of this measure, noting that it remains unclear whether EU workers would return to a country perceived as hostile.
Brexit has intensified the Fahrermangel, leading to thousands of EU citizens leaving their jobs in the UK and other professions. Johnson's decision to terminate worker free movement during the pandemic further hampers the return of Europeans to the UK.
Though many individuals have the right to stay in the UK, they often feel unwelcome, according to L. Alan Winters, Director of the UK Trade Policy Observatory at the University of Sussex. He cites the Brexit-related process as the root of this issue, with Covid-19 acting as the tipping point.
The labor shortfall is a significant challenge for many industries, with the EU having been reliant on continuous workforce inflow for more than four decades.
Richard McGregor-Smith, Chairman of the British Chambers of Commerce, stated that a contingency plan should have been in place from the beginning to ensure a seamless transition without interruptions in services and supply chains.
Next, a major British clothing retailer, warned that it might have to suspend operations before Christmas due to difficulties in recruiting seasonal warehouse and logistics personnel, unless the immigration policies are made more lenient.
The company added that "for months, there have been predictions of an LGV driver shortage."
The company further expressed its hope that the government will take resolute measures to address the looming workforce skills crisis in warehouses, restaurants, hotels, care homes, and various seasonal industries.
The Grant Thornton report, commissioned by the Food and Drink Industry, estimates that the sector has more than 500,000 job vacancies. Farmers and food manufacturers are forced to cut production or discard crops if the workforce is not sufficient. This has led to reduced selection in supermarkets and sometimes empty shelves.
UK's sectoral leaders shared their concerns in a recent announcement. Richard Griffiths, Chairman of the British Poultry Association, pointed out that the workforce problems have long been a topic of debate in the food and drink industry. Nick Allen, Chairman of the British Meat Processors Association (BMPA), revealed that many farmers abandoned turkey production due to the unstable labor force availability, along with the uncertainty over monetary rewards.
Data from the Shopping Technology Platform Adimo, which tracks consumer interest in 300 brands in UK supermarkets, indicates that the proportion of out-of-stock products has reached its highest level since March 2020, when consumers panicked and stockpiled groceries as coronavirus cases surged. Adimo expects Britons to face a greater food scarcity before December 1 than during the peak of the pandemic last year.
Adimo's head, Richard Kelly, stated that food and drink categories including alcohol, dairy products, meat, and frozen food will be most affected by the scarcity and price increase due to weak selection and rising supply chain costs. Allen added that wage increases in agriculture and food processing industries to attract more domestic labor will eventually lead to higher prices for consumers.
In addition to escalating food prices, the UK is grappling with surging energy costs due to reduced gas and power supplies. This hindrance is partly due to the cold spring weather at the start of the year, which amplified demand from China and reduced deliveries from Russia.
The collapse of a natural gas producer in the United States resulted in the halting of production in the UK, causing a break in the supply of CO2 used for livestock stunning, fresh food packaging, and carbonated beverages. This gas is also essential for preserving food, like prepared meals and frozen goods.
Although this issue isn't directly linked to Brexit, the minimal EU trade agreement negatively impacts the UK's ability to solve this issue as it leaves the country to tackle these challenges independently, as the agreement lacks energy pacts.
European countries are also grappling with escalating energy prices, although the situation is particularly acute in the UK. The country faces challenges due to the lack of large gas storage facilities, delays in repairs, and fires that damaged power lines in France, complicating gas delivery.
Economists warn that the prolonged upward pressure on prices due to labor shortages, supply chain disruptions, and soaring energy costs will hamper economic growth in the UK and drive up inflation, which is currently at its highest level since the 1990s.
The UK economy has still not recovered to its pre-pandemic size, with economists from Berenberg recently adjusting their rebound forecast for the second quarter of 2022. In contrast, S&P Global Ratings expects the EU to regain its pre-crisis level of economic activity by the end of the year, highlighting the contrasting trends since the Brexit vote in 2016.
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