UK economy slows sharply as staff shortages reach record levels, says survey

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Britain’s economy slowed sharply in August as the staff shortage reached its worst level ever, leaving companies unable to keep up with surging demand, according to a closely watched survey.

Company managers reported the slowest pace of growth since the closing peak in February. IHS Markit’s Purchasing Managers’ Index (PMI) came in at 55.3 in August – well below the 58.7 economists had expected. PMI surveys are viewed as a good indicator of future economic growth. Any reading above 50 indicates that the economy is expanding.

Duncan Brock, group director at CIPS, which helps compile the survey, said. “It was the slowest production expansion in six months, and most of the blame rests with the worst shortages of staff and recorded materials.”

Chris Williamson, chief business economist at IHS Markit, said there were “clear signs that the recovery is losing momentum” in the third quarter. “Rising virus case numbers are deterring many forms of spending, particularly by consumers, and have hurt growth by worsening staffing and supply shortages.”

The number of people testing positive for Covid in the UK rose 13.5 per cent to 227,391 in the past week, as of Sunday, according to the latest official figures. The latest data comes as food companies seek to recruit prisoners to solve a deepening employment crisis.

Supply problems have forced Nando to temporarily close outlets across Britain, and food industry chiefs have warned that more restaurants could close in the coming weeks.

Sector heads said Brexit is to blame for the country’s supply chain problems – with the industry struggling to deal with production workers returning to their EU countries and an acute shortage of truck drivers able to come to the UK. The food industry also suffered from a long-running labor shortage predating the pandemic and Brexit.

Nick Allen, chief executive of the British Meat Processors Association, said the sector had been struggling to get many production lines to supermarkets and restaurants – with the UK meat-producing workforce down as much as 20 per cent.

“The supply issues come from the underlying business problems that have been happening since Brexit…it’s definitely related to Brexit, but it is also the immigration decisions that our politicians have been making since Brexit,” Allen said.

He added, “Nandoz is the tip of the iceberg. I think we’ll see more and more [closures]. Some people are still trying to open their restaurants – but they are struggling to get staff and they are struggling with delivery.”

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