The fuel crisis is a “warning sign” for the UK economy as staff shortages spread – business | Companies
Good morning and welcome to our ongoing coverage of the global economy, financial markets, UK supply chain crisis and business.
The UK supply chain crisis shows the public is losing confidence in the government’s ability to manage the economy and deal with problems, so Berenberg Bank today.
Berenberg has lowered its forecast for UK growth in the coming months, raised its inflation forecast, citing the downside risks to near-term real production due to growing problems in the supply chain.
Callum Pickering, Berenbergs The senior economist says the pump panic buying is a “warning sign” for the economy – highlighting the “dire situation” and the risk of more serious outcomes.
Pickering (like the government) points out that other European countries and the USA are also facing a shortage of truck drivers. But only the UK has seen panic buying – which he sees as evidence that the public is losing confidence.
With these worsening supply problems, Berenberg now expects UK GDP to grow 1.4% in the third quarter, down from 1.5% earlier, and then only by 0.8% in Q4 – only half as fast as that 1.6% expected beforehand.
For 2022, they have lowered their growth forecast from 5.8% to 5%. On the other hand, however, due to the strong performance in the second quarter of 2021, they expect growth of 6.9% this year.
Berenberg also warns that UK inflation spike is peaking at a slightly higher rate and lasting longer than previously expected.
- We are increasing our call in the fourth quarter of 2021 from 3.9% to 4.0% and our call in the first quarter of 2022 to 4.1% from 3.9%.
- We then raised our calls by c0.3ppt over the forecast horizon. For our annual calls, we will increase from 2.3% to 2.4% in 2021, from 2.9% to 3.2% in 2022 and from 2.2% to 2.5% in 2023.
Pickering writes that the entire supply chain crisis begs the question, why does the UK seem (once again) to be hit harder than other economies?
In my opinion, the panic and hysteria in the UK partly reflects a growing lack of public confidence in the government’s ability to manage the economy and solve problems as they arise.
The fuel crisis reflects the rush to store toilet paper during the first wave of the pandemic. It is worrying that panic buying could become a feature of the UK economy – which remains one of the richest and, at least until recently, well-run in the world.
The self-fulfilling fears of a shortage of essential goods are like a run on a bank when depositors suddenly lose confidence and try to withdraw cash en masse. That the government is a comfortable 5ppt ahead of the Labor Party in opinion polls suggests that the public believes the official opposition would do no better.
Pickering adds that the government’s apparent flaws are hurting economic performance – citing the slowdown in business investment following the Brexit vote.
Should poor crisis management translate into suboptimal economic policy, Johnson could exacerbate the Brexit damage by weakening the UK’s still competitive and flexible markets.
Photo: Berenberg Bank
But the UK’s “highly competent public service” could make some half-baked policy initiatives more realistic.
The British comedy “Yes Prime Minister” is, of course, a parody. But every now and then it can contain a core of truth.
https://t.co/cP0JREc2xe UK UPDATE: BUY MORE PANIC, FORECAST REVISIONS #ukeconomics #economics #macro #ukmacro
October 4, 2021
That leads to the Conservative Party convention, where the supply chain crisis is a hot topic. Yesterday Prime Minister Boris Johnson argued that the disruption of the supply chain – from queues in forecourt to threatening mass slaughter pigs – was part of a post-Brexit transition
Johnson told the BBC:
When people voted for change in 2016 and when people voted for change in 2019, they voted, as they did, for the end of a broken model of the UK economy based on low wages and low skills and chronically low productivity.
We are moving away from that. ”
However, the focus on wage growth when rising inflation weighs on household budgets and when income numbers are skewed by the pandemic.
Feels like a, um, “brave” call to the government to raise wages so much as the political dividing line given the near-term inflation outlook.
It’s hard not to see real wages falling in the months ahead.
October 4, 2021
A Tory MP said he hoped the current shortage of truck drivers would lead to supermarket supply chains being dismantled.
Chris Loder caused a stir by arguing that the disruption “means that the farmer on the street can sell his milk in the village shop just like decades ago”.
I’m confused. I thought supermarket chains were national heroes full of important key workers feeding and washing and supplying the UK with toilet rolls while a pandemic was raging and it felt like the world was going to end.
Now are we at war with supermarkets?
October 3, 2021
The fuel supply crisis eased over the weekend. But there were still bottlenecks and closings in London and the south-east, where on Sunday morning up to 22% of gas stations were dry and only 60% had both types of fuel available, according to the Petrol Retailers Association.
Elsewhere in the UK, including Scotland, the Midlands and Northern England, the crisis is “practically over,” said the PRA, with 6% of forecourt dry.
Brian Madderson, chairman of the PRA, warned:
“The fuel is still not flowing to the pumps that need it most in London and the South East.”
Starting today, military drivers are supposed to take to the streets and drive tankers to gas stations that are short of petrol and diesel.
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