UK’s lorry driver shortage ‘could push food prices up’, as supply chain crisis hits confidence – as it happened

Graeme Wearden

from on 2021-08-26 16:49 (#5NSN0)

Rolling coverage of the latest economic and financial news

Latest: UK's lorry driver shortage could push food prices higher'
ONS: 7% of firms couldn't get materials and staff in last fortnight
Transport and storage firms lagging in the recovery
UK labour shortage hits consumer-facing firms
UK car production slumps to lowest July since 1956
UK farm sector worried by labour shortages

5.48pm BST

Time to wrap up, after another day dominated by concerns over the UK's supply chain problems. Here's a quick summary:

Supermarkets and hauliers have warned that the lorry driver shortage gripping the UK could push up food prices in the shops.

Certainly drivers' pay is increasing, often by quite substantial amounts.

This in turn is a cost that will need to be passed on, and given the tight profit margins of most haulage operators that means their rates to customers will have to go up.

The chaos hitting supply chains is of the Conservatives' making. Their failure to keep their promise to cut red tape for businesses, which are struggling with more paperwork and higher costs, combined with worker shortages, has created a perfect storm.

Whether it's production grinding to a halt in our car factories, shelves emptying in supermarkets, or restaurants running out of food and drink, businesses are ringing the alarm and saying these problems are only going to get worse.

5.43pm BST

The Guardian's latest Covid Crisis watch report shows that Britain's economic recovery from the winter lockdown is showing signs of stalling, amid shortages of workers and supplies due to the double whammy of the pandemic and Brexit.

Despite the easing of most government pandemic restrictions, consumer caution appears to have crept higher in the past month as the Delta variant fuels a persistently high infection rate. In the meantime, UK businesses have come under pressure from global supply chain disruption and staff shortages.

The Covid crisis has led to huge changes in how economic activity takes place. Some of those will last; some will be beneficial. But they are not magic bullets targeted at the big economic challenges the UK faces. If we want some positive change to come from the pandemic we need to make, not wish for it, to happen. The pandemic has highlighted the inequalities scarring Britain - but also shown this Conservative government that acting boldly can make a huge difference, as with furlough.

The insecurity at the bottom of our labour market can be tackled with new rights and proper enforcement to make them a reality. We can level up by keeping the 20 a week increase to universal credit that one in three working-age families in red wall" constituencies rely on. We can properly fund our further education colleges if we want to tackle disgraceful gaps in education.

4.58pm BST

In the City, the FTSE 100 has ended the day 25 points lower at 7124, a dip of 0.35%.

Mining companies were the weakest sector, as a strengthening US dollar hit commodity prices. Gold producer Polymetal fell 3.6%, while copper miner Antofagasta lost 2.7% and Rio Tinto fell 2%.

#fechamento
26/8/21 12:55
Fechamento Europa
DAX 15.789,40 -0,45%
FTSE 100 7.126,41 -0,33%
CAC 40 6.666,03 -0,16%
EuroStoxx50 4.169,85 -0,27%

Powell may say something significant during his appearance tomorrow which sends shockwaves through the markets. He may suggest the Fed is committed to tapering despite the softness that's appeared in the data and the spread of the delta variant across the US that threatens to weigh on economic activity in the coming months.

He may also suggest that recent events have necessitated more patience on tapering and that a decision on that this year now seems unlikely. Both would get very different reactions in the markets. But they would also be out of character for the Fed Chairman and while he may lean more towards the dovish side of the argument on this, policymakers since the last meeting have erred more on the other side.

4.51pm BST

New listings of fossil fuel companies would be immediately banned on the London Stock Exchange as part of a proposal by the Liberal Democrats that the party's say could help the UK become a leader in tackling the climate emergency.

Under the plan outlined to the Guardian by the Lib Dem leader, Ed Davey, another immediate policy would be to stop new bonds being issued in London to finance oil, coal or gas exploration.

The reality is that no matter how much governments spend, it's going to be totally dwarfed by the amounts banks, private equity and hedge funds invest every day.

So if you're going to really take on climate change you've got to get that private capital to switch from dirty into clean. And this is a fundamental role for Britain in global leadership on climate change."

4.18pm BST

Dallas Fed President Robert Kaplan has declared that the U.S. economy is still on track for the Federal Reserve to begin reducing its stimulus programme in October, or shortly after.

In a sign that he would support tapering the $120bn/month bond buying scheme this autumn, Kaplan told CNBC that he didn't see evidence to hold off for longer, downplaying the impact of the Delta variant of COVID-19.

Based on everything I am seeing I don't see anything at this point that would cause me to materially change my outlook.

Based on all that it would continue to be my view that when we get to the September meeting we would be well served to announce a plan for adjusting purchases and begin to execute that plan in October or shortly thereafter.

Well that explains that. pic.twitter.com/OyABKfdZVT

US recovering somewhat after Kabul explosion news#DOW 35384.46 -0.06%#SPX 4482.94 -0.29%#NDX 15308.6 -0.39%#RTY 2239.38 +0.00%#VIX 18.44 +1.65

3.53pm BST

With the end of lockdown restriction encouraged more people back to the gym, the UK's largest gym chain is considering a stock market float to help fund an expansion.

PureGym has appointed advisers to work on a potential initial public offering to back a global expansion as it taps the post-pandemic interest in fitness.

3.40pm BST

Away from worries about food inflation or shortages in the shops, conditions are brightening in the world of exclusive private members clubs after lockdowns ended.

Membership Collective Group, the owner of Soho House, has reported a robust recovery", the FT flags, with revenues doubling that its venues are reopened.

Total revenues jumped 118% to $124m in the quarter to July 4, the New York-listed group said on Thursday, compared with the same period last year when the majority of its private members' clubs were closed. Net losses narrowed from $77.8m to $57.1m.

Nick Jones, MCG's chief executive, said the waiting list for membership to Soho House, which counts the reality star Kendall Jenner and supermodel Kate Moss among its clients, had reached record highs".

Soho House owner shows robust recovery' but lockdown fears remain https://t.co/QrAYrfBGWc

3.33pm BST

Our economics editor Larry Elliott has analysed the latest weekly healthcheck on the UK (as covered earlier) - and seen a clear message: the recovery is losing momentum.

Card payments: flat. Job adverts: flat. The number of seated diners: flat. Retail footfall: down slightly. Ship visits to the UK: down slightly. Daily flights: up a bit.

Supply chain problems are part of the story, with 7% of UK firms reporting difficulties obtaining raw materials, products or services in the past week. That figure rises to 15% for construction, the worst affected sector.

2.31pm BST

Supermarkets and hauliers have warned that the lorry driver shortage gripping the UK could push up food prices in the shops.

Bosses at the Road Haulage Association have told the PA news agency the substantial" pay rises offered by firms in need of new drivers could force supermarket bosses to pass the costs on to customers, meaning long-term higher prices for food.

Certainly drivers' pay is increasing, often by quite substantial amounts.

This in turn is a cost that will need to be passed on, and given the tight profit margins of most haulage operators that means their rates to customers will have to go up.

Paying drivers more, in itself isn't the solution as it is resulting in them making choices about the level of working hours and balancing reduced hours along with weekend working.

It will also create more inflationary pressure in the sector, which no one clearly wants.

EXC: Driver shortage could push food prices higher, warn hauliers and supermarkets. Up on @PA and here: https://t.co/TebDudKZDQ

Hauliers and supermarkets are warning that the issues with HGV driver shortages are systemic. This is not a short term problem, and is likely to lead to higher salaries along the supply chain, which will be passed onto customers.

2.00pm BST

The number of Americans filing new claims for unemployment benefit has risen slightly, but remains near its pandemic lows.

Around 353,000 fresh initial claims' for jobless support were filed last week, the Department of Labor reports, up from 349,000 the previous seven days.

Initial jobless claims came in at 353,000, ticking up for the first time in five weeks.

The median estimate from economists surveyed by Bloomberg was 350,000.https://t.co/RBeFZkEDcX pic.twitter.com/pzzEWrmYOm

US jobless claims climb for first time in 5 weeks, to 353,000: Continuing claims, which count Americans receiving unemployment benefits, sank to 2.86 million, setting a pandemic-era low. https://t.co/pcjRfarAXm pic.twitter.com/lEiVRxQ7Fc

NSA UI claims fell last week to 415K (298K UI initial claims NSA + 118K PUA claims), with UI claims falling below 300K for the first time during the crisis.

Claims continue to improve, albeit slowly, despite concerns about Delta.#joblessclaims 1/ pic.twitter.com/wSNn1QkJib

On a seasonally-adjusted basis, initial UI claims rose slightly to 353K, a small bump from the previous week, but a small, one-week bump is too small to be worried about the downward trend reversing.#joblessclaims 2/ pic.twitter.com/pYzka0c1mr

1.48pm BST

The Commerce Department says the US economy grew slightly faster in the spring than initially reported. Revised figures show GDP grew at an annual rate of 6.6% in the second quarter, up from 6.5% initially estimated. https://t.co/5Iv34SVABy

1.48pm BST

Just in: The US economy grew very slightly faster than first thought in the last quarter.

US GDP rose at an annualised rate of 6.6% in April-June, updated figures from the Bureau of Economic Analysis show, up from 6.5% first estimated.

The second estimate of second quarter GDP had a minor upward revision of one-tenth to 6.6 percent and matched market expectations. pic.twitter.com/8bmdX8mzAk

The increase in second quarter GDP reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic.

In the second quarter, government assistance payments in the form of loans to businesses and grants to state and local governments increased, while social benefits to households, such as the direct economic impact payments, declined.

Upwardly revised GDP data show U.S. economy expanded 6.6% in second quarter https://t.co/V36zLrbB9g

US GDP growth confirmed at 6.6% annualized in Q2 - there's a huge range of private-sector forecasts for Q3, but the Atlanta Fed tracker suggests growth will be weaker than the consensus forecast pic.twitter.com/1cOXGefA7t

1.18pm BST

Worryingly, the broader supply chain crunch caused by the pandemic doesn't appear to be getting better, with bottlenecks looking more persistent than hoped.

Bloomberg points out that the increase in Delta variant cases in Asia has caused disruption to shipping, and also caused new problems for factory production. So with raw materials and parts in short supply (as we've seen in the UK this morning), manufacturers generally face higher costs.

We can't get enough components, we can't get containers, costs have been driven up tremendously," said Christopher Tse, chief executive officer of Hong Kong-based Musical Electronics Ltd., which makes consumer products from Bluetooth speakers to Rubik's Cubes.

Tse said the cost of magnets used in the puzzle toy have risen by about 50% since March, increasing the production cost by about 7%. I don't know if we can make money from Rubik's Cubes because prices keep changing."

Port congestion and a shortage of container shipping capacity may last into the fourth quarter or even mid-2022.

If the pandemic cannot be effectively contained, port congestion may become a new normal."

Global shipping snarls look to linger well into next year https://t.co/C6p9xhrLau

12.25pm BST

The new leader of one of the UK's biggest trade unions is meeting a boss of Uber today to take forward a groundbreaking deal on workers' rights.

Gary Smith, the general secretary of the GMB, said he wanted to end the exploitation" of more than 200,000 drivers in the industry.

The ground-breaking deal between GMB and Uber was the first step towards a fairer working life for millions of people.

Today we take the next step in our commitment to ending the exploitation of hundreds of thousands of ride-hailing app drivers. https://t.co/tmzmll7eSH

12.20pm BST

Production of UK car engines also fell sharply in July, as the wider supply chain problems hit the sector.

UK engine production falls -27.5% in July

factories made 127,922 engines
fall artificially heightened by comparison to last year when production was recovering volumes lost due to the pandemic
YTD manufacturing -31.6% lower than the 5-year averagehttps://t.co/1XGtMVt82S pic.twitter.com/gMplWnMxss

The decline in engine production in July must be looked at in context against the same month in 2020 which saw production artificially inflated as the sector looked to recover lost units due to the pandemic.

It is unsurprising that the number of engines produced so far this year remains below the five-year average with the global shortage of semiconductors continuing to impact the ability of manufacturers to produce vehicles, leading to a fall in demand for engines.

11.37am BST

The Labour party are urging ministers to act on the UK's supply chain crisis, before the problems hitting manufacturers and supermarket chains get worse.

Seema Malhotra MP, Labour's Shadow Minister for Business and Consumers, says the government should heed businesses (who are pleading for temporary visas for EU workers to address the HGV driver shortage)

The chaos hitting supply chains is of the Tories' making. Their failure to keep their promise to cut red tape, combined with worker shortages, has created a perfect storm.

They need to step up to the plate and sort out this crisis immediately

11.23am BST

The UK's shortage of HGV drivers appears to be forcing some transportation and storage firms to suspend trading, according to the latest weekly healthcheck on the UK economy under the pandemic.

The Office for National Statistics says that, in 9 to 22 August 2021, 82% of transportation and storage business were currently trading. That's the lowest across the UK economy -- on average, 90% of firms polled said they were currently trading.

The high percentage of paused and not permanently ceased traders is partly driven by the freight transport by road industry and the unlicensed carriers industry. It has been reported that this industry has been experiencing a shortage of lorry drivers.

Almost half of businesses not permanently stopped trading reported their debt repayments have increased from normal expectations over the last month.

However, more than three-quarters have high or moderate confidence they'll meet their debt obligations https://t.co/jc6JurYH0t pic.twitter.com/IKrJqxAWCm

10.47am BST

Around 7% of UK companies weren't able to obtain the raw materials, products or services they needed from within the UK in the last two weeks, as the supply chain crisis chewed on.

The Office for National Statistics reports that the construction industry was worst hit, with 15% of builders unable to lay their hands on materials and/or find enough workers in the last fortnight.

The accommodation and food service activities industry reported the largest percentage of businesses that indicated stock levels were lower (27%), followed by the wholesale and retail trade; repair of motor vehicles and motorcycles industry (25%) and the manufacturing industry (23%).

Figures from @exactEarth show there was an average of 298 daily ship visits in the week to 22 August 2021, a 3% decrease from 307 in the previous week

In the same week, the average number of daily cargo ships visits decreased by 5% from 94 to 89 https://t.co/ROHRn2b6J7 pic.twitter.com/mPedg1wbuE

10.03am BST

The number of flights in the UK rose by 4% last week to 3,256, as the recent relaxation of travel restrictions allow people to jet off for their summer holidays.

But, that's still almost 50% below its pre-pandemic levels, showing that quarantine rules continue to dampen demand (the government is expected to update its green, amber and red travel lists today)

The 7-day average number of UK daily flights in the week to 22 August 2021 increased by 4% from the previous week, according to @eurocontrol

This was at 49% of the level seen in the equivalent week of 2019 https://t.co/L06iWOYVeq pic.twitter.com/VwQ0J14ZjG

Overall UK retail footfall in the week to 21 August fell by 2% to 80% of the level seen in the equivalent week of 2019, according to @Springboard_

This was the first week where retail footfall across the UK fell since the week to 19 June 2021 https://t.co/6ycsguttS5

9.36am BST

European stock markets have dipped this morning, with the drop in Germany consumer confidence weighing on investors' minds.

The UK's FTSE 100 and Germany's DAX index are both down around 0.3% in early trading.

Rates are on the move, with the German 10-yr bund at a month-high. All eyes are on Fed chair Jay Powell on Friday, though markets seem relatively comfortable that either course he takes will ultimately not create a taper tantrum - we will see.

Minutes from the last FOMC meeting clearly stated that most participants expect to be tapering this year. This does not mean the Fed needs to send a clear message to the market this week. Powell can keep some dry powder and wait for the September FOMC meeting at least.

9.24am BST

Recruitment firm Hays has failed a dramatic" recovery in the UK jobs market, while warning that there are shortages of qualified workers in some industries, which is pushing up wages.

Hays reported that its fees (earned by finding staff for companies) jumped 39% in the three months to the end of June, after a quick recovery in the global jobs market boosted its income.

Overall, the strength of the recovery has been dramatic. We now see a clear route back to, and then exceeding, pre-pandemic levels of profit, faster than we envisaged even six months ago.

Across all our regions there are clear signs of skill shortages and wage inflation in certain industries, particularly Technology and Life Sciences.

Recruitment company Hays has warned over clear signs" of skills shortages worldwide. It it emerged earlier this week that Amazon is paying 1,000 golden hellos" to new warehouse workers.https://t.co/klb06KZy3H

9.03am BST

UK commercial property firm British Land is focusing its attention on research and technology parks, and retail and fulfilment centres, as it looks to recover from the pandemic.

In a capital activity update, British Land says it has recently bought and sold 350m-worth of property. Key purchases include Peterhouse Technology Park, in Cambridge for 75m, and The Priestley Centre, at the Surrey Research Park in Guildford, for 12m.

We are delighted with the momentum we are delivering across our business as the economy reopens.

Leasing activity at our London campuses has been strong, with a significant amount of space going under offer to a broad range of occupiers in the last two months.

Today we've announced a capital activity update. These recent acquisitions align to our strategic themes, and we will recycle disposal proceeds into opportunities that allow us to maximise our competitive advantage in asset management and development https://t.co/9kMX3hwJtO

This underground car park is close to the Broadgate campus and provides an excellent opportunity to create a last mile logistics hub in the City of London where supply for last mile logistics is highly constrained.

British Land signs deals worth up to $481 mln https://t.co/uRDJgblLpT pic.twitter.com/0dttAdaOuI

8.39am BST

Rising prices, and the increase in Covid-19 cases, have knocked consumer confidence in the eurozone's largest economy.

The mood among German consumers has darkened, in the face of accelerating inflation and rising Covid infections, the GfK institute reports.

Significant higher incidence values, a slowdown in vaccination momentum, and discussions about how to deal with unvaccinated individuals in the future have caused noticeable uncertainty among consumers in Germany.

They fear that restrictions could even be tightened again. This is obviously depressing consumer sentiment right now."

Prices have been rising rapidly since the middle of this year. This dampens consumer sentiment, as experience has shown. While these are primarily one-off effects stemming from the VAT cut in the second half of 2020, given the ongoing low-interest phase, households perceive inflation rates as even more threatening to their purchasing power."

#German consumer morale falls by more than expected.

GFK consumer confidence index fell to -1.2%.

Consensus estimates pointed to -0.7 after falling -0.4 in the previous month#EURUSD 0.05% #Dax 0.31%#MarketUpdate

RW: 79.32% of retail clients lose money.

8.21am BST

Shortages of raw materials and staffing pressures are likely to continue in the coming months, warns packaging and labeling company Macfarlane Group this morning.

The Glasgow-based firm predicted that these supply chain problems will keep pushing up its costs, in its latest financial results:

We expect the second half of 2021 to be challenging as we anticipate further inflationary pressure on input prices, continuing supply constraints on most raw materials and operating costs increasing due to staffing pressures.

Despite ongoing difficult operating conditions due to Covid-19, significant inflationary pressure on input costs and supply shortages of some materials, the business has produced a strong profit performance.

Macfarlane #MACF H1 results look good,. PBT more than doubled, divi up. Recent acqns also performing well.

Some challenges e.g. input costs, supply constraints, but.

'the Board expects the Group will exceed its previous expectations for the full year'https://t.co/L3LZyW1Kji pic.twitter.com/YGGClYE2WY

8.01am BST

British car factories produced the fewest cars for any July since 1956 as they struggled with worker absences and the global shortage of computer chips, my colleague Jasper Jolly explains.

UK carmakers made 53,400 vehicles in July, a 37.6% drop when compared with the same month in 2020, according to data from the Society of Motor Manufacturers and Traders (SMMT), the industry's lobby group.

Production volumes damaged by global chip shortages, pingdemic' and summer shutdown timings.https://t.co/wge5i75dBr pic.twitter.com/Mq23xrZLC4

"These figs lay bare the extremely tough conditions car manufacturers continue to face. While the impact of the pingdemic' will lessen as self-isolation rules change, the worldwide shortage of semiconductors shows little sign of abating"@MikeHawesSMMT https://t.co/wge5i75dBr pic.twitter.com/MDlKlfZCoV

7.53am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It's clear that the service sector has performed well over the three months to August, revealing strong volumes and profits growth in our latest survey as the economy reopened over the summer. However, the outlook between sub-sectors is set to diverge over the quarter ahead, with a deterioration in prospects expected in consumer services.

Firms in sectors such as hotels, restaurants and travel, do not expect this strength to persist into the next quarter, reflecting the pressure that consumer services firms continue to face.

U.K. Labor Shortage Leaves Consumer Businesses Gloomy, CBI Says - Bloomberghttps://t.co/HApfyun31A

Worker shortage? No.

Wage shortage.

While the impact of the pingdemic' will lessen as self-isolation rules change, the worldwide shortage of semi-conductors shows little sign of abating,"

The British people repeatedly voted to end free movement and take back control of our immigration system. Employers should invest in our domestic workforce instead of relying on labour from abroad."

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