Johnson’s Brexit First Strategy Collides With Empty Shop Shelves

(Bloomberg) -- Boris Johnson’s reluctance to turn to the European Union to ease a supply chain crisis that has seen shelves in supermarkets run empty has highlighted his government’s priority: Brexit first.

For the prime minister, who spearheaded a campaign to leave the EU which vowed to “take back control” of the U.K.’s borders and secure more jobs for British workers, immediately turning to cheap EU labor to fix a national shortage of truck drivers would be politically fraught.

Doing so would amount to a tacit admission of an advantage of EU membership, said Julian Jessop, an economics fellow at the Institute of Economic Affairs, a free-market think-tank.

“They don’t want to admit that free movement of workers has brought some benefit to the U.K.,” said Jessop, who has been a public defender of leaving the EU. “That might look like a lack of confidence in Brexit.” 

But the shortfall –- only in part caused by Brexit -- is causing chaos for business and consumers. Nando’s Group has been forced to close some of its fast-food outlets amid a shortage of chicken, while McDonald’s Corp. ran out of milkshakes in Britain. The country’s hospitality and food industry has warned that shortages like these will worsen as demand increases later in the year.

“Brexit was always going to cause a tension in Tory philosophy between a commitment to free markets and a commitment to sovereignty,” said Tim Bale, professor of politics at Queen Mary, University of London. “In the end, they chose sovereignty.”

The key question for Johnson in coming weeks is whether he can stick to his line if the crisis deteriorates. The return of schools and the lifting of coronavirus restrictions will put greater pressure on supply chains. On Monday, the head of the country’s biggest business lobby group warned that labor shortages could persist in the U.K. for as long as two years.

U-turn looming?

But Johnson may yet hit a tipping point where it becomes politically expedient to change course, Bale said.

“If we get too many ‘Christmas is canceled’ headlines, we’ll probably see the government relent,” Bale said. “It would cause them a few bad headlines for a few days, but nothing like the kind of difficulties they would face if there were shortages of products on the shelves.”

With no immediate signs of a change of heart from Johnson, businesses will have to bear the brunt. An Office of National Statistics report published on Aug. 26 found 7% of firms were unable to source materials, goods or services they needed from within the U.K in the previous two weeks.

Despite repeated calls from the logistics industry for temporary visas for EU drivers to address the problem -- with the sector claiming there is a 100,000-shortfall of HGV drivers -- the U.K. government has consistently rejected the plea, urging firms to train and recruit more drivers locally, pay better wages and improve working conditions. 

Roots of Crisis

“We want to see employers make long term investments in the U.K. domestic workforce,” the Department for Business, Energy & Industrial Strategy said in a statement. “We’re working closely with industry to address sector challenges.”

To be sure, the roots of the shortage are complex and historic. Britain didn’t have enough truck drivers before Brexit, and low pay, antisocial hours, and lack of parking spaces and toilet facilities have long deterred potential drivers. A recent tax change has also made the career less lucrative.

While the U.K. isn’t alone in experiencing labor shortages and supply chain disruption, businesses are growing increasingly exasperated by what they see as Johnson’s standout position on EU migration. They point out that it can take up to six months to train new drivers -- but they need the labor now -- and that the shortages extend beyond truckers.

Other key roles in the food industry such as butchers, engineers and slaughtermen aren’t being filled, according to Richard Harrow, chief executive officer of the British Frozen Food Federation.

“There are shortages everywhere,” he said, attributing the bulk of them to Brexit. “There’s little flexibility to fill the gaps we’ve got.”

Despite the immediate disruption, there are sound political and economic reasons for Johnson to resist calls to tap EU workers, said the IEA’s Jessop. Granting temporary visas may reduce incentives for companies to increase pay and improve working conditions, he said. EU countries are also facing driver shortages, meaning the move may only have a marginal impact on the U.K. shortfall, he added.

Consumers, though, are already starting to feel the effect. The driver shortage, Brexit-related red tape, and higher shipping and commodity costs are all helping to push up prices in stores, according to August data from the British Retail Consortium.

The BRC, which last month called on the government to introduce temporary visas for EU drivers, said food prices are likely to rise in the coming months.

“Without government action, it will be British consumers who will pay the price,” BRC CEO Helen Dickinson said. “In the run up to Christmas, the situation could get worse.”

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