Staffing crisis slams brakes on growth
Shortage of lorry drivers and isolation rules take toll
BRITAIN’S staffing and supplies crisis was laid bare yesterday as fresh data showed the pandemic recovery losing momentum.
A closely watched index of activity in the services sector, which includes everything from restaurants to banking, hit a six-month low of 55.5 in August as businesses complained of staff shortages and delays in getting supplies.
Any reading above 50 indicates growth. And the score in the manu- facturing sector hit a five-month low of 60.1 amid a shortage of raw materials and high-tech chips used in everything from cars to mobile phones.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which compiles the purchasing mangers index (PMI) with IHS Markit, said: ‘An abnormally large slowdown in overall activity in August offers a stark warning to the economy that the accelerated levels of growth we’ve seen earlier this summer are not sustainable. It was the slowest output expansion for six months, and the worst shortages of staff and materials on record are mostly to blame.’
For several months, businesses have been hiring workers at the fastest pace on record. But even so, incidents where firms had to slash their output due to staff or materials shortages were 14 times higher than usual in August, and the largest since records began in 1998, IHS said.
A huge shortage of lorry drivers, coupled with staff absences caused by the ‘pingdemic’, has left suppliers of products and services struggling to meet demand as the economy roars back from the pandemic.
Shoppers have begun to spend again while factories rushed to churn out products after halting their machinery during the first lockdown, meaning demand for materials – from wood to steel – has soared. Now factories are being forced to shut their gates once more, reporting a lack of materials and shortages of staff due to self-isolation rules. And shops, pubs and restaurants have been struggling to keep their doors open as young workers were ‘pinged’ over the summer by the NHS Covid app.
Workers who are fully vaccinated no longer have to isolate if they test negative for coronavirus. But many young staff, who make up the bulk of the workforce in hospitality for example, are yet to receive both jabs.
Some workers still remain on the furlough scheme, which is due to end in September, meaning they will also be unlikely to look for work for another month – though the number has vastly reduced to around 1m from the peak of almost 9m last year.
The problems have been exacerbated by red tape since Brexit, making it more difficult for firms to get goods across borders.
Chris Williamson, chief business economist at IHS Markit, said: ‘Although the PMI indicates that the economy continues to expand at a pace slightly above the pre-pandemic average, there are clear signs of the recovery losing momentum.’
The staffing and supply issues are having noticeable repercussions, with prices rising and shops finding it difficult to source an array of products.
Last week, some firms admitted that the pandemic was still wreaking havoc. McBride, which makes cleaning products for Tesco, Sainsbury’s and Superdrug, said half-year profits had been wiped out by the chaos. Paving business Marshalls reported similar issues. Nando’s had to close some restaurants for days due to a chicken shortage, and pub chain Adnams said it was struggling to find wine.
Capital Economics had been forecasting output to bounce back to its pre-pandemic size by October, but it now said August’s PMIs had thrown up ‘two key risks’ to those projections.
‘First, that the economic recovery might be slowing a bit faster than we had thought,’ said assistant economist Kieran Tompkins. ‘Second, that materials and staff shortages might feed into second-round effects of rising wage growth, meaning that inflation is higher for longer.’
‘Recovery is losing momentum’