UK supply chain stresses and strains: four problems and a positive

Wed 6 Oct 2021
Posted by: Noelle McElhatton
Trade News

Political party conference season hit a crescendo today (Wednesday 6 October) with Prime Minister Boris Johnson’s barn-storming speech to the Tory faithful in Manchester, in which he cited many positive facts and figures. 

To broaden the picture, the Daily Update today scanned recent trade statistics and surveys to present readers with a summary of media-reported business and consumer confidence and sentiment.

1. Could Christmas Dinner be cancelled?

With Christmas almost three months away, more than half of British shoppers are worried they will not be able to get the food and drink they want in order to celebrate.

While retailers can expect “bumper sales” as Britons look to make up for last year’s lockdown Christmas, they are being warned of the need to communicate with consumers “to ensure purchasing behaviours do not hit the extremes of April 2020 when the pressures on the supply chain peaked”.

According to a poll by the Grocer and Lumina Intelligence, more than half (56%) of respondents expressed some degree of concern that the ongoing supply issues would affect their festive plans. A third of shoppers (34%) have already begun stocking up.

2. Pound under pressure

The Telegraph reports that the multiple crises striking the Boris Johnson-led government have not gone unnoticed by international investors, sending the pound to 2021 lows against the dollar. Currency volatility is at its highest since March.

Jane Foley, currency analyst at Rabobank, said the extent of the sell-off of sterling highlighted “something was going wrong”, likening the behaviour to that typical of an emerging market currency rather than a G10 one.

Analysts warn that continued goods and worker shortages are undermining investor faith in the government’s ability to sufficiently manage the economy.

3. Inflation worries

As price rises accelerate, concerns about inflation are increasing, with the Times reporting that businesses raised prices at the fastest pace on record last month.

While the IHS Markit/CIPS composite purchasing managers’ index (PMI) rose slightly from 54.8 to 54.9 in September, the first expansion since May, input costs rose sharply for service businesses.

Half of all PMI respondents reported an increase in average costs and only 1% signalled a reduction – the second-fastest rate of cost inflation since the survey began 25 years ago.

Another survey, this time by the British Chambers of Commerce and reported in the Guardian, revealed inflation expectations had risen to their highest since its records began at the end of the 1980s, with 62% of industrial firms planning price hikes over the next three months.

On the high street, the UK’s biggest bakery chain Greggs and confectioner Hotel Chocolat both reported growing price pressures, with Hotel Chocolat saying prices would rise by up to 9%.

4. ‘Business battered’

Shevaun Haviland, the BCC director general, said: “Businesses are being battered by a deluge of upfront cost pressures, including huge increases in the prices of key raw materials and shipping, as well as now facing a rise in national insurance contributions. At the same time, they are losing out on opportunities for growth due to the labour shortages.”

The latest official cost of living data from the Office for National Statistics showed the annual inflation rate rising from 2% to 3.2% in August – the largest one month jump on record. The Bank of England expects it to top 4% by the end of the year.

5. Exports up and fuel flowing

As covered in the IOE&IT Daily Update, better-than-expected UK export figures for Q2 have provided some good news. ONS figures for export growth were revised up from 3% to 6.2% on the back of a rise of 13.4% in exports of goods such as chemicals, machinery and transport equipment, and material manufactures.

Fuel also seems to be flowing a bit more easily, reports Sky. EG Group, which runs 400 forecourts with Esso, BP and Shell, has removed a £30 petrol cap it had introduced at the height of the problem.