Bad news piles up for UK economy before Christmas

LONDON: Britain is suffering from a wave of Brexit-and-Covid-induced crises, from runaway energy prices to shortages of goods, drivers and motor fuel while unemployment is predicted to jump before Christmas.

Last year, a huge surge in Covid cases and hospital admissions forced the government to slap restrictions on social mixing indoors, ruining festive season plans.

Since then, a rapid vaccination programme has helped to lift restrictions but the economy is flatlining faced with a fierce global supply crunch, the surging cost of raw materials and other simmering inflationary pressures.

Logistics

A shortage of lorry drivers has translated into partially empty shelves in supermarkets and shops, with many companies unable to transport sufficient amounts of goods.

US burger giant McDonald’s recently ran out of milkshakes, restaurant chain Nando’s shut some outlets owing to a lack of chicken, while hotels were forced to stop serving certain beverages.

Reports meanwhile suggest retailers may struggle to source enough Christmas trees, toys and turkeys for the upcoming festive period in December.

There has been a drop in the number of EU nationals working in logistics and lorry driving throughout Britain after the country’s exit from the European Union and due to Covid.

Such jobs have tended to be shunned by Britons because of low pay and antisocial working hours.

Britain has a shortage of about 100,000 lorry drivers, which has ironically pushed up wages for many British drivers, which the government is keen to see following Brexit.

Motor fuel

Motor fuel pumps are running dry after reports of shortages triggered panic-buying, causing the government to place the army on standby to potentially help out with deliveries.

Desperate motorists are queuing up at petrol stations, prompting calls for the government to use emergency powers to give priority access to healthcare and other essential workers.

Prime Minister Boris Johnson’s Conservative government says a lack of tanker drivers to deliver fuel and unprecedented demand is also behind the crisis.

Natural gas

Wholesale natural gas prices in Britain have scaled record highs, sparking fears of rocketing domestic energy bills as demand peaks during the upcoming northern hemisphere winter.

About 1.5 million UK consumers have seen their domestic energy suppliers go bust in recent weeks as a result of chronic turmoil in the market.

The country is particularly exposed to Europe’s ongoing energy crisis due to its reliance on natural gas to generate electricity.

The price of European gas futures has more than doubled since May.

High energy costs have created also a shortfall of carbon dioxide.

CO2, vital as a coolant in the food, nuclear and health industries, is a byproduct in the production of fertiliser.

Fertiliser production relies heavily on natural gas and was halted until the state offered assistance last week.

Employment

The UK government’s furlough jobs support scheme, which has kept millions of private sector workers in jobs during the pandemic by paying the bulk of their wages, ends on Thursday.

And many economists argue that this move risks a spike in unemployment. The furlough scheme has supported jobs at a cost of around £70 billion ($95 billion, 82 billion euros).

Analysts argue that workers coming off furlough will not necessarily wish to fill the many vacancies in road haulage and hospitality.

Inflation

The Bank of England (BoE) warns that UK annual inflation will top 4.0 per cent — more than double its target — in the fourth quarter of this year.

The Consumer Prices Index soared in August to 3.2 per cent — the highest level since March 2012.

Economists warn surging prices will hinder the global economic recovery from Covid. The UK economy grew at just 0.1 per cent in July compared with 1.0 per cent in June.

The BoE argues, however, that high inflation is echoing forecasts by the US Federal Reserve and European Central Bank.

The pound, meanwhile, fell by more than one per cent against the dollar on Tuesday.