Why is there a supply chain shortage ? 11/2021

For some time one of the most controversial issues has been why is there a supply chain shortage, especially in Europe, the United States and the United Kingdom, but one of the countries that suffers the most from this problem is the United Kingdom after leaving the EU .

This generalized problem can be seen both in the European bloc, as in the United Kingdom, and also on the other side of the Atlantic where it also affects the United States.

As we already know at the beginning of this year, Britain took the decision to leave the European Union with the long-awaited Brexit! Everything that at first would seem idyllic to the United Kingdom due to immigration control may have come back to bite them. How supply chain affected by covid-19 ?

Problem latent

COVID-19 covered or at the time a problem that was already latent, but with the restrictions due to the pandemic, it would have not been so evident since the British economy worked at half gas.

With the opening of the market, it has or has not been able to disguise, and we see in many forums and publications daily news in which we are informed about problems in the replenishment of stock in shopping centers and stores or even transporters struggling to be able to fill their diesel tank…

Even major UK chains such as Nando’s have closed some of their stores temporarily, or globally important chains such as McDonald’s have reported that bottled soft drinks and smoothies will not be served until further notice.

Why is there a supply chain shortage ?
Supermarket supply chain problem

Supply chain & labour shortage Global

The truth is that the lack of labour is a globalised problem in all sectors, and the closure of borders with the European Union has not helped. This is due to the fact it has caused foreign labour to return to their country, or no new immigrants to enter the United Kingdom as they do not have the four freedoms they were entitled to before. It is estimated that after the pandemic some 200,000 EU citizens left the country and have not returned for the time being.

This point has caused many sectors to have a shortage of employees or not to find the necessary workforce to work in the areas in which Britain has difficulty attracting indigenous people, those jobs that the British do not want to occupy. Jobs as transporters, butchers, caretakers, warehouse staff, hospitality… these are, for example, a few of the many sectors where there were labour shortages.

That is, there are too many Britons available to take on these jobs due, in part, too unattractive working conditions, hard work, long hours, low wages and in the case of truck drivers, for example, lonely days.

As for this last sector mentioned, it is estimated, to put figures, that transport needs approximately 400,000 professionals in our continent alone to cover all the needs of transport companies.

Warehouse supply chain problem
Warehouse supply chain problem

Supply chain & labour shortage in UK

In Britain alone around 20,000 truck drivers left the island during the pandemic and have not returned, and some 55,000 in the last 18 months have left the industry, due to working conditions or retirement. The Industry and companies have long been warning of the demographic problem faced by this sector in which the average age is 55 and less than 20% is below 35, according to official statistics.

And the forecast that in the segment of fewer than 35 years new lorry drivers will leave in the medium or long term is not very optimistic, since for the young this transport sector, is not that it is not appetising, it is that it is directly undesirable. It is enough to look at the training courses subsidized by public administrations or by the industry of the sector itself where we see that the demand for this job is almost non-existent.

So, in this particular sector, we see how Brexit and Covid-19 have triggered the perfect storm!!

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In its day the United Kingdom had the possibility of raising salaries to attract new British personnel but decided to choose the easy solution and look towards the eastern countries. Labour is cheaper and thus fill the lack of personnel, maintaining the same cost and even being more competitive.

This quick fix, although arguably not very favourable to British employees was good for the economy, as the jobs least sought after by the natives were thus covered.

Two decades later we see that the easy solution has led the country to the overutilisation of foreign labour. And, after the exit from the EU and the reactivation of the post-pandemic economy, it has become clear that hiring foreign hands just to be more competitive was not the best solution they could have made.

The data indicate that, during the permanence of the United Kingdom in the European bloc, Great Britain became the country with more dependence on foreign labour during its 45 years in the European Union, and particularly this dependence was accentuated more as the EU expanded to the East, for the already mentioned above cheaper labour.

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Conclusion

The resolution of this issue is not expected to be in the short term since both the EU and Great Britain would have to develop a strategy where the sectors in difficulty would be more attractive to today’s youth and the next generations. How?

  • Generating interest in jobs, with wage increases;
  • Improving working and travel conditions (rest areas, restaurants, motels, etc. );
  • lliving conditions (family allowances, insurance, social security contributions, etc. );
  • With more flexible contracts.

Conditions that, although they show, as we have said, a more aggravated problem within the United Kingdom, are repeated together in all the most developed countries. Training policies would be another possible solution, but in reality, a mason, for example, cannot become a waiter from one moment to the next.

To cite an expert in the field, for example, it should be noted as De la Torre indicates in El Confidencial that we would have to train and/or adapt many more to unemployed people for the needs we might have, talking about Spain, but we could perfectly extrapolate it to the EU or the United Kingdom.

Maritime transport cuts - Supply chain
Maritime transport cuts – Supply chain

In this sense, if these were not enough to generate attraction to labour, there would be no choice but to increase wages, which would have an impact on the price of the final product and on the entire chain of processing and industry. Of course, the employers themselves report that “If everyone pays more for their employees and carriers, it will end up moving to the consumer.”

The latest communiqués issued in this regard, in the case of the United Kingdom, indicate that 5000 temporary visas are to be generated for the transport sector.

Even so, it can be considered that this measure is still a patch or a blindfold that covers the eyes in the face of a problem that, as we have said, is much more complex and profound and deals with the very foundations of the economy and the labour market.

So everything indicates that it would be much more realistic to attack this issue from the root with deeper reforms and in view of attacking the root of the problem without resorting to temporary solutions that mask it in favour of an immediacy that will cease to have an effect sooner rather than later.

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To which it should be added that this is a very sensitive issue that, obviously, from what we have commented, does not have an easy and immediate solution but that beyond Brexit and that has been manifested with greater intensity in the United Kingdom, it is something that the rest of the countries have to focus on not only in relation to immigration policies (an issue so booming and with speeches).

Increasingly radical for a few years but with the internal labour market of each country and the quality of it. And more in a system that every day tends more towards globalization and what this entails and whose gaps begin to be pressed since the beginning of the pandemic.

Where is the boundary or midpoint between a global economy and its virtues and dependence on other countries and their disadvantages to maintaining a welfare state without ups and downs?

 

Sources:

  1. https://www.elconfidencial.com/mundo/europa/2021-10-03/la-pospandemia-revienta-el-mercado-laboral-europeo-la-falta-de-mano-de-obra-asusta-a-la-ue_3299870/
  2. https://www.lainformacion.com/economia-negocios-y-finanzas/falta-mano-obra-europea-pone-jaque-industria-reino-unido/2847563/
  3. https://www.bbc.co.uk/news/business-58249337
  4. https://www.marketwatch.com/story/fed-beige-book-finds-labor-and-supply-shortages-are-cramping-the-u-s-economy-11634754507
  5. https://www.dailymail.co.uk/news/article-10144547/McDonalds-runs-chicken-legends-blames-supply-chain-issues.html
  6. https://www.cnbc.com/2021/10/04/truck-driver-hgv-shortage-in-uk-could-soon-hit-the-rest-of-europe.html
  7. https://www.euronews.com/2021/09/25/uk-mulls-easing-visa-rules-for-lorry-drivers-amid-fuel-supply-problems
  8. https://www.salaryexpert.com/salary/job/heavy-truck-driver/germany
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