Ocado Hit by Driver Shortage in Brexit-Squeezed Labor Market

(Bloomberg) -- Ocado Group Plc is struggling to find drivers to deliver Britons their groceries as Brexit puts a further squeeze on the U.K.’s tightest labor market on record.

The online grocer on Thursday reported a slowdown in sales growth, saying it was held back by a shortage of drivers. Investors took relief from that explanation amid fears that growth in the U.K.’s online grocery market had tailed off significantly. Ocado’s shares rose as much as 4.9 percent in London, reversing an early decline.

“There is tightness in the labor market, particularly in the southeast of England,” the area around London, Ocado Chief Financial Officer Duncan Tatton-Brown said by phone. “In certain locations we have found it more difficult to hire drivers.”

The shortage comes amid a plunge in the number of migrant workers arriving in the U.K. from the European Union as the country prepares to leave the bloc. That has made it more difficult for Britain’s shop owners to find the temporary workers they need during the holiday season, driving up wages for some retail jobs.

Ocado’s not the only company citing shortages. Diageo Plc is concerned that U.K. retailers will lack workers to sell the company’s gins and whiskies as the available labor pool shrinks on fewer arrivals from the EU, the distiller’s corporate relations director, Dan Mobley, said in a parliamentary hearing on Wednesday.

“Brexit now makes imperative that bigger companies and smaller companies start to upskill younger British people, unemployed British people,” Mobley said.

EU nationals make up two-thirds of the permanent workforce in the U.K.’s food and drink supply chains, according to the British Retail Consortium. Tesco Plc Chief Executive Officer Dave Lewis has warned that agricultural labor shortages are among the biggest Brexit-related risks facing the U.K.’s largest retailer.

Ocado’s gross retail sales growth slowed by 2.7 percentage points to 11.6 percent for the quarter ended Dec. 3.

Sigh of Relief

The company declined to cite Brexit as a reason for the driver shortage and said the problem has largely been resolved for now. In some locations the company increased wages to attract more candidates, Tatton-Brown said.

That explanation came as a relief to some Ocado investors after data from researcher Kantar Worldpanel this week showed that growth in the U.K.’s online grocery market had slowed significantly to 2.8 percent over the last 12 weeks. The company’s growth is “reassuring” in light of downbeat market expectations, according to Morgan Stanley analyst Francois Halconruy.

Ocado last month announced a landmark technology licensing deal with French supermarket operator Casino Guichard-Perrachon SA, its first major client outside the U.K. Tatton-Brown said he’s confident Ocado will be able to sign more agreements in the medium term and that the company is focusing its efforts on striking new deals in developed European markets and North America.

--With assistance from Thomas Buckley

To contact the reporters on this story: Sam Chambers in London at schambers7@bloomberg.net, Eric Pfanner in London at epfanner1@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John J. Edwards III

©2017 Bloomberg L.P.