Driving towards higher costs

You don't need us to tell you there's a supply chain problem. Thankfully, our wholesalers and retailers are a resilient bunch. Here's our run-down on the subject...

In early September a Road Haulage Association survey of its members estimated there was a shortage of more than 100,000 drivers in the UK.

Before the pandemic, there were about 600,000 drivers and even then there was a shortage.

That was back in the days when there were tens of thousands of drivers from EU member states who were living and working in the UK.

But then came lockdown and travel was increasingly restricted as large parts of the economy shut down. So unfortunately many European drivers went home and not many have since returned.

On top of this, the pandemic created a crippling backlog of HGV driver tests so many of your customers' favourite products don't have a friendly driver to deliver them.

Then there's Brexit. Who voted for that? Probably not the drivers who could come and go without red tape when the UK was part of the single market. But hey presto, additional border bureaucracy makes imports (and exports) so much more difficult.

Pile on top of that a decline in the value of the pound against the euro since the Brexit vote, and the work is less attractive for EU nationals. Even if they could get a visa.

The UK government response? A temporary extension to driver hours. But wouldn't that compromise safety standards? And the transport industry is dismissive, saying it would do little to ease the problems it's facing.

The haulage companies want to ease the problem by allowing foreign drivers to qualify for a skilled worker visa, but the Government seems strangely reluctant to do this.

It's an issue in which larger companies such as supermarkets will throw their weight around to get product on shelves, leaving smaller independents to scrabble for their staples. Some large retailers have taken matters into their own hands by offering increased wages for divers or in some cases a hefty ‘joining bonus', but this makes it harder for smaller wholesalers.

And increased costs are usually reflected in increased prices at checkout.

Why there’s a labour shortage

The pandemic has permanently reshaped the economy and retail's labour shortage and supply chain issues could remain for many years, according to Charged Retail, part of the Retail Gazette group.

The Recruitment and Employment Confederation (REC September 2021) says shop workers, lorry drivers and warehouse staff could be in short supply for an extended period, putting even greater pressure on retailers struggling to keep shelves stocked and stores open.

REC's jobs tracker for the final week of August revealed that there were 1.7 million active job adverts in the UK as retailers, restaurants and logistics companies all scrambled to find new staff.

“Large numbers of people are finding new work post-pandemic as the economy reshapes,” said REC chief executive Neil Carberry. “But that realignment will take time, and there is good evidence to suggest that the market will remain tight for some years to come, even if the current crisis passes.”

Even the Government's own Business Insights and Conditions Survey (BICS) revealed that 40% of all businesses reported a decrease in the number of European workers at the end of the EU transition period.

This shortage of workers is threatening to disrupt stock levels at Christmas unless the government allows European lorry drivers to work in the UK under emergency visas.

The Office for National Statistics (ONS) reported at the end of August that 25% of retail and wholesale businesses were facing lower stock levels than usual. This figure rose to 27% in the food services and accommodation industry, while 23% of manufacturers also reported stock shortages.

The effect on prices

British Retail Consortium (BRC) research shows that UK shop prices rose in August by 0.4% with non-food items rising 0.6%. Driver shortages and the costs of Brexit red tape are blamed.

While shop prices remain below those in 2020, down 0.8% in August compared with the same month a year earlier, that still showed a slowdown in deflation from the 1.2% year-on-year fall recorded in July.

BRC chief executive Helen Dickinson says: “Food retailers are fighting to keep their prices down as far as possible. But mounting pressures - from rising commodity and shipping costs as well as Brexit-related red tape - mean this will not be sustainable for much longer, and food price rises are likely in the coming months.

“Disruption has been limited so far, but in the run-up to Christmas the situation could get worse, and customers may see reduced choice and increased prices for their favourite products and presents.”

Wholesalers and retailers give their views...