Shop prices RISE amid driver shortage and global supply chain crisis

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Shop prices in Britain rose last month as the national shortage of lorry drivers and disruption to the global supply chain caused by the Covid pandemic and post-Brexit migration rules starts to hit households. 

The latest figures from the British Retail Consortium reveal a 0.4 per cent month-on-month rise in August driven by a 0.6 per cent rise in non-food prices. In particular, there was a sharp increase in the cost of electrical goods caused by shortages of microchips and shipping problems. 

While shop prices remain below those last year – down 0.8 per cent in August compared with the same month the previous year – that marked a slowdown in deflation from the 1.2 per cent year-on-year fall recorded in July.

It comes amid warnings that cost prices are expected to continue to rise this year, with Gwynn Milligan, commercial director of JoJo Maman Bebe, telling BBC Radio 4’s Today programme that customers are already starting their Christmas shopping as the supply chain crisis disrupts shipping of toys. 

Helen Dickinson, chief executive of the BRC, said: ‘There was a slight rise in prices on the previous month. There are some modest indications that rising costs are starting to filter through into product prices. 

‘Food retailers are fighting to keep their prices down as far as possible. But mounting pressures – from rising commodity and shipping costs as well as Brexit-related red tape, mean this will not be sustainable for much longer, and food price rises are likely in the coming months. 

‘Disruption has been limited so far, but in the run-up to Christmas the situation could get worse, and customers may see reduced choice and increased prices for their favourite products and presents.

‘The Government must act swiftly and rapidly increase the number of HGV driving tests taking place, provide temporary visas for EU drivers, and make changes on how HGV driver training can be funded. Without Government action, it will be the British consumers who will pay the price.’

Mike Watkins, head of retailer and business insight at research group NielsenIQ, which helped provide the data, said: ‘The good news for shoppers is that shop price inflation remains below consumer price inflation and any moderate increases in prices are being driven by wider economic conditions and seasonal supply changes.

‘With shoppers now returning from their summer holidays, many will be reviewing their household budgets.

‘So the next few months will be an important time for retailers to keep prices stable by absorbing as much of any increase in their supply chain costs as possible.’

Retail bosses have been warning that the industry faces a major shortfall of 100,000 lorry drivers as the impact of Covid pandemic and Brexit strangle supply chains and threatens a shortage of popular gifts and staple foods.  

Experts say the shortage is due to a combination of factors including EU employees returning home after Brexit and Covid restrictions causing the cancellation of 40,000 HGV tests. They also cited poor wages and the closure of a tax loophole for some drivers.   

The crisis is also hitting British tourism, as hoteliers and bar owners try to manage a surge in holidaymakers as people opt for vacations at home than abroad, and staff shortages caused by a rising number of Covid infections and a recruitment slump post-Brexit.  

Even schools are being warned to stock up on food for hot meals, with Federation of Wholesale Distributors communications chief David Visick warning September is going to be ‘incredibly challenging for food distributors who are struggling to find enough delivery drivers’.    

The indications of rising prices in Britain come as inflation in the EU surged to its highest level in a decade with mounting costs of energy, goods and services hitting household spending.

The statistics body Eurostat has estimated that eurozone annual inflation is expected to be three per cent in August, up from 2.2 per cent in July – the highest level since 2011, as inflation moves sharply above the European Central Bank’s target of two per cent. 

More than a quarter of food and hospitality firms have been hit by low stock levels in recent weeks as Britain’s mounting supply chain crisis takes it toll, according to new figures.

The Office for National Statistics said its recent business survey found that 27 per cent of food and accommodation firms have reported lower than normal stock levels – the worst-hit of all the sectors.

Low stock levels were also reported by 23 per cent of manufacturers and 25 per cent of firms in the wholesale and retail trade, repair of motor vehicles and motorcycles industry. 

The latest ONS fortnightly business poll revealed that firms across the UK have been struggling to get hold of materials, goods and services. 

More than one in seven construction firms – 15.4 per cent – said they have not been able to get the materials they need in recent weeks, while 9 per cent of hospitality firms also reported the same issue.

Nearly one in five manufacturing firms – 18.4 per cent – have had to change suppliers or find alternative ways to get materials, goods or services, with 16.5 per cent of construction firms and 11.4 per cent of food and hospitality companies reporting the same, according to the ONS.

It found less than half of builders and hospitality firms said they had been able to source all the materials, goods and services they needed without issues – at 42.1 per cent and 46.2 per cent respectively.

Just over half of manufacturers – 51.4 per cent – said they were able to get hold of the materials and goods they needed in the survey between July 26 and August 8.

However, Ministers have rejected business leaders’ plea to be allowed to hire more EU workers to solve problems with HGV driver shortages.

Businesses called for temporary visas to let European workers fill some of the half a million vacancies caused by the Covid pandemic and Brexit. But the Government wants employers to invest in UK-based workers rather than relying on labour from abroad.

Supermarkets and suppliers are struggling to meet demand following an exodus of drivers from EU countries, who returned to the continent during the pandemic and remained there.

This is coupled with the health crisis bringing DVSA testing centres to a standstill, creating a huge backlog of drivers taking their HGV test. A review of the Shortage Occupations list, which sets out jobs where overseas workers can apply for visas, is not due until next year.

Proposals had been floated for the Government to bring forward the review so HGV drivers could be included to ease the problems facing the supply chain.

But according to the Financial Times, Business Secretary Kwasi Kwarteng wrote to business leaders on Friday saying foreign labour only offered ‘a short-term, temporary solution’.

Mr Kwarteng urged employers to help the ‘many UK-based workers [who] now face an uncertain future and need to find new employment opportunities’.

His letter comes ahead of the UK’s furlough scheme ending on September 30.

According to the FT, Mr Kwarteng said in his letter to the British Retail Consortium and Logistics UK: ‘I am sure you would agree on the importance of utilising the strength of our domestic workforce and how our migration policies need to be considered alongside our strategies to ensure UK-based workers are better able to secure decent employment opportunities.’

A Government spokeswoman said: ‘We have a highly resilient food supply chain and well-established ways of working with the food sector to address food supply chain disruptions.

‘We recently announced a package of measures to help tackle the HGV driver shortage, including plans to streamline the process for new drivers to gain their HGV licence and to increase the number of driving tests able to be conducted.

‘However, most of the solutions are likely to be driven by industry, with progress already being made in testing and hiring, and a big push towards improving pay, working conditions and diversity.

‘We want to see employers make long-term investments in the UK domestic workforce instead of relying on labour from abroad and our Plan for Jobs is helping people across the country retrain, build new skills and get back into work.’

Several Government departments are liaising over the supply chain issues, including the Business, Energy and Industrial Strategy department, the Home Office, the Department for Transport, the Department for Education, the Department for Environment, Food and Rural Affairs, and the Department for Work and Pensions.

Home Office officials are said to be blocking the review being brought forward, amid concerns it could lead to other sectors demanding inclusion.

A source said: ‘It has been floated and seems like the obvious solution but there’s been a lot of pushback from the Home Office.’

HGV drivers are currently not included on the list but there is pressure from supermarkets to include them to help ease the shortfall while more UK drivers are trained.

The current average age of a UK HGV driver is 55 and ministers are concerned an ageing workforce needs replacing.

Government officials are working closely with the DVLA to increase the number of tests taking place and have vowed to streamline the process.

They have also increased funding for apprentices to get more workers into the industry but want to ensure the UK is less reliant on overseas drivers.

The shortages have hit several retailers and restaurant chains. Nando’s saw a shortage of chickens due to a combination of not enough drivers and fewer staff working in meat factories.

Other delays have also impacted McDonald’s, which said this week it had run out of milkshakes and bottled drinks as it prioritised deliveries of other products in the interim.

Organisations from the food and drink industry have recommended a 12-month Covid recovery visa to help firms recruit staff such as HGV drivers, and an expanded seasonal worker scheme for the horticulture sector.

National Farmers Union vice president Tom Bradshaw said it was ‘simplistic’ to argue that the end of the Government’s furlough scheme will lead to an increase in workers to fill the current high number of vacancies.

It comes as stores are struggling to replenish shelves with bread and other essentials amid the escalating delivery driver shortage that threatens Christmas.

Bosses at Iceland and the Co-op say cancelled deliveries are causing the worst gaps on shelves they have ever seen. Separately, the chairman of Tesco warned of some festive product shortages at Christmas, which could include gammons and pigs in blankets.