ong after the end of the Second World War, Britain was still having to cope with shortages, thanks largely to government-imposed rationing. The UK’s post-war balance of payments position was decidedly weak, one reason why consumers weren’t allowed to buy what they wanted. Sheer bad luck also played its part. A very wet summer in 1946 followed soon after by a horrible winter frost destroyed much of Britain’s wheat and potato supplies.
Rationing finally came to an end in 1954, when meat could finally be purchased freely. A year earlier, confectionery came off the ration, doubtless leading to a boom in demand for dentistry in the years that followed. Thereafter, only the occasional oil-related hiccup has rocked the boat (petrol was rationed in the aftermath of the 1956 Suez Crisis and close to being rationed after the 1973 Arab oil embargo).
Queues haven’t entirely disappeared, of course. If you’re offering free healthcare, for example, there really isn’t any other alternative. For the most part, however, we’ve become accustomed to a world in which our demands are largely easily met: we have benefited from being part of a complex but effective global supply chain.
Until now. Something very odd is happening in our economy. In London, we’re experiencing strikingly unfamiliar shortages. Try booking an Addison Lee taxi on your phone app and — if my recent experience is anything to go by — you’re likely to receive a message saying: “Sorry, but we are fully booked in your area for this time.” If you’re planning on eating in your local restaurant on a Monday or Tuesday night, you may well find that its doors are closed thanks to staff shortages. When you do manage to bag a table, you may notice that, for much the same reason, service is slow. Pop along to your supermarket and you will probably discover that shelves are a lot emptier than they used to be. In late August, Steve Murrells, the Co-operative Group’s chief executive, admitted that “the [supermarket] shortages are at a worse level than at any time I have seen”.
Across the nation as a whole, it’s not too difficult to work out what’s happening. There were approaching one million vacancies in the three months to July, three times higher than at the mid-pandemic low in early summer last year. More importantly, vacancies are higher now than at any other point since records began 20 years ago. There are notable labour shortages in construction, hotels, restaurants, arts, entertainment and recreation. At the same time, wages are rising more rapidly than usual: it’s what happens when companies compete for scarce workers. Output may not yet be back to where it was before the pandemic but there’s no doubt that parts of the labour market are seriously hot.
Yes, some of this is pandemic-related. Some people may have decided to give up working in restaurants, worried about excessive exposure to Covid-19. Others may have opted to work from home. To pretend, however, that our shortages are purely driven by the pandemic is an act of foolishness.
We know, for example, that a lack of HGV drivers owes a lot to Brexit: many European drivers simply went home, responding to Brexit uncertainty and higher taxes. And, without enough hauliers, shortages are springing up elsewhere. We also know that many restaurants depended on hiring staff from all over the EU, a process that has become a lot more difficult since Brexit.
On holiday in Cornwall the other week, I popped into a beachside restaurant in the hope of having a bite to eat. I was told that, although those who had pre-booked would be fed, those without a booking would only be served beverages. The restaurant was suffering from staff shortages. A little later, I asked the manager why the shortages had occurred, thinking that the pingdemic was the culprit. The answer was simple: typically, the restaurant was able to source casual workers from Spain for the summer but, this year, that had proved impossible.
Many people fear that immigrants “will take our jobs”. For the most part, however, they don’t. Their availability allows businesses to expand, services to improve and customers to be happy, one reason why London has become such a vibrant and prosperous city in recent decades. Put the whole process into reverse and you end up with the opposite: businesses shrink, services deteriorate and customers become grumpy. Rationing is one thing. Economic self-harm is something else altogether.
Stephen King (@kingeconomist) is HSBC’s Senior Economic Adviser and author of Grave New World