Staff shortages and supply disruption threaten to derail recovery – BCC
Britain’s economic recovery is expected to slow over coming months thanks to staff shortages and supply chain disruption, according to a new forecast from a leading business group.
Official figures show UK GDP grew by 4.8% in the second quarter but the British Chambers of Commerce (BCC) predicts this will slow to 2.8% in the third quarter and 1.6% in the last three months of 2021.
The BCC also warned of the “real danger” that the £12bn National Insurance hike announced this week could further stifle Britain’s bounce back.
Bank of England governor Andrew Bailey said he feared worker shortages could persist
The warning about the impact of labour shortages comes a day after Bank of England governor Andrew Bailey said he feared the problem could persist.
HGV drivers and meat processing workers are among the areas where shortages have been identified.
Supply issues have affected a number of well-known businesses including Ikea, McDonald’s, Greggs and Wetherspoons.
The BCC’s forecast comes on the same day as a new report from the Recruitment and Employment Confederation (REC) showed recruiters and employers faced an unprecedented decline in the availability of candidates for roles.
According to the BCC’s new forecast, Britain will still post annual growth of 7.1% for 2021 as a whole, which would be the strongest on records going back to 1949.
However the slowdown in the pace of the recovery – after last year’s pandemic-driven recession – means it is now not expected to reach pre-COVID levels until the first quarter of next year.
Suren Thiru, head of economics at the British Chambers of Commerce, said the economy remained “on course for a historic revival” this year thanks to the release of pent-up consumer demand as well as higher government spending.
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“However, our latest outlook also points to a loss of momentum in the coming months as staff shortages, supply chain disruption and rising cost pressures limit output from many sectors,” he added.
“A prolonged period of acute supply and staff shortages could derail the recovery by forcing firms into a more permanent reduction in their operating capacity, eroding their ability to fulfil orders and meet customer demand.”
Hannah Essex, the BCC’s co-executive director, said: ”There is a real danger the National Insurance increase announced this week could stifle the recovery.”
The forecast came as the monthly UK report on jobs from the REC and KPMG showed a further rapid increase in hiring in August, spurred by improved confidence in the economic outlook.
At the same time a lack of availability of workers spurred sharp increases in starting salaries.
Neil Carberry, Chief Executive of the REC, said: “The number of staff available to start jobs fell at another new record rate, deepening the current labour shortage.
“Recruiters are working around the clock, placing more people into work than ever as these figures show.
“Switching the entire economy on over the summer has created a unique demand spike, and a short-term crisis.
“But it would be a mistake for businesses to think of this as only a short-term issue.
“A number of factors mean that the UK labour market will remain tight for several years to come.”
Rishi Sunak will meet leading Conservative Party donors on Monday evening as he seeks to mobilise financial support for the surprisingly timed general election campaign he triggered last week.
Sky News understands that the prime minister will have dinner with a small group of long-standing and more recent donors as the Tories target millions of pounds in fresh contributions to fund their push to retain power.
This weekend, Lord Spencer, the City billionaire, said he was giving £250,000 to the Conservative campaign, although a leaked party memo reported by The Times on Monday suggested it was so far struggling to raise money.
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The dinner will take place as Labour prepares to unveil a list of senior business figures who are endorsing the party ahead of the 4 July election.
A draft letter circulated to private sector bosses late last week, and reported by Sky News, accused the Tories of presiding over an economy “beset by instability, stagnation, and a lack of long-term focus”.
Labour refused to comment on the identities of those who had signed the letter prior to its publication, although there was speculation that Sir Jim Ratcliffe, the Ineos founder and Manchester United Football Club joint-owner, had been invited to do so.
One Labour official denied that Sir Jim, a Monaco resident who this month said he thought that Sir Keir Starmer would do “a very good job at running the country”, was among the list of signatories.
Sir Jim Ratcliffe is speculated to have been invited to sign a business leaders’ letter backing a change of government
The draft letter, designed to aid Sir Keir’s bid to reposition Labour as the natural party of business, said the UK “has the potential to be one of the strongest economies in the world” but added: “A lack of political stability and the absence of consistent economic strategy has held it back.”
“Labour has shown it has changed and wants to work with business to achieve the UK’s full economic potential,” it added.
“We should now give it the chance to change the country.”
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A number of FTSE-100 chiefs, some of whom have traditionally signed pro-Conservative letters in the run-up to elections, are understood to have been approached to sign it.
One said it was “too political” for him to sign, but Labour allies insisted on Monday that the party had assembled an “impressive” list of signatories.
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Sky News revealed last week that the Tories have contacted business leaders since Mr Sunak called the election, asking them to take part in broadcast media opportunities, provide quotes in support of manifesto pledges and host events and visits for cabinet ministers.
It was unclear on Friday whether the Tories would seek business signatures for a public letter similar to the one being prepared by Labour.
A Conservative Party spokesman declined to comment on Monday’s dinner with the prime minister or to identify those he was meeting.
One of Britain’s biggest housebuilders is exploring a £1bn takeover bid for Cala Group, a rival player in the sector which has been put up for sale.
Sky News has learned that Persimmon, which has a market value of £4.74bn, is leaning towards submitting an offer for Cala ahead of a bid deadline next week.
City sources said it would be a strong contender to buy Cala, whose homes have a significantly higher average sale price than those of Persimmon.
Insiders expect Cala, which is being auctioned by Legal & General (L&G), to command a price tag of about £1bn.
If Persimmon is successful in the auction, it would mark the York-based company’s biggest acquisition for years.
Under Roger Devlin, its chairman, and chief executive Dean Finch, the company’s share price has rallied by over 20% in the last year.
In a trading update last month, Persimmon said it was on track to deliver growth in new home completions this year to up to 10,500.
The Cala auction comes amid a general election campaign in which new home provision is expected to figure prominently.
Both main parties are likely to set out new policies to stimulate housebuilding growth, according to sources.
Analysts said this weekend that other housebuilders were also expected to consider bids for the L&G-owned company.
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These could include, they said, Persimmon’s larger rival, Taylor Wimpey, and Avant Homes, which is owned by Elliott Advisors and Berkeley DeVeer.
Persimmon is the UK’s third-largest housebuilder by market capitalisation, behind Taylor Wimpey and Barratt Developments.
Both Persimmon and Taylor Wimpey were among eight housebuilders named by the Competition and Markets Authority in February over suspicions they had exchanged commercially sensitive information.
A takeover of Cala by another major housebuilder would underline fresh momentum in the industry’s consolidation, after Barratt Developments unveiled a £2.5bn deal to acquire rival Redrow.
The prospective sale of Cala represents the first significant strategic move by its new chief executive, Antonio Simoes.
Bankers at Rothschild are overseeing the auction.
Mr Simoes described Cala as “a very strong business” during an earnings call earlier this year on which he was quizzed about the housebuilder’s future ownership.
L&G took full control of the business in 2018.
Cala reported a slide in half-year profits last autumn, citing a “challenging market”.
The company has a long-term goal to build 3,000 homes annually.
Persimmon and L&G declined to comment on Saturday.
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