The United Kingdom faces a “difficult winter”

Empty shelves that usually store bottled water at Sainsbury’s supermarket on the Greenwich Peninsula on September 19, 2021 in London, England.

Chris J Ratcliffe | Getty Images

LONDON – Britain has been embroiled in uncertainty as problems over gasoline, electricity and food prompted warnings of “a really tough winter” for the country.

A significant shortage of truck drivers meant that the deliveries of fuel and goods were insufficient.

In an attempt to entice people into the post, some employers have reportedly offered salaries of up to £ 70,000 ($ 95,750) per year, with membership bonuses of £ 2,000.

Speaking to ITV News on Thursday, Paul Scully, Britain’s Minister for Small Business, warned that “it’s going to be a really tough winter for people.”

“We know this is going to be a challenge and that is why we do not underestimate the situation we all find ourselves in,” he said. However, Scully told Times Radio on Friday that there was “no need for people to go out and panic to buy.”

Prime Minister Boris Johnson’s spokesman said earlier this week that there was no fuel shortage in the UK and people should continue to buy gas as normal. He also described the UK’s food supply chain as “very resilient”, but acknowledged that some companies in the sector were facing challenges and said the government was having meetings with representatives of the sector.

Gas station closures

As supplies of some essentials have dwindled, there have been reports of empty shelves and long lines of cars outside gas stations.

In an interview with the BBC on Friday, UK Transport Secretary Grant Shapps said people should continue to buy gasoline as usual, adding that military personnel would be brought in to drive trucks if that could improve. the situation.

Vehicles line up for fuel at a Sainsbury’s petrol station on September 24, 2021 in Weymouth, England.

Finnbarr Webster | Getty Images

Oil giant BP confirmed on Friday that it has temporarily closed a handful of its UK service stations due to shortages of unleaded petrol and diesel.

“These have been caused by delays in the supply chain which have been hit by industry-wide driver shortages in the UK, and many steps are being taken to address the issue,” said a spokesperson by e-mail.

“We continue to work with our carrier supplier to minimize any future disruption and ensure efficient and effective deliveries to serve our customers. We favor deliveries to motorway service areas, to main roads and to the most requested sites.

An Exxon Mobil spokesperson for Esso told CNBC that a small number of sites it operated in the UK had been affected by fuel shortages, but the company “was working closely with all of them. parts of our distribution network to optimize supplies and minimize any inconvenience to customers. “

In an emailed statement on Friday, a spokesperson for Tesco, the UK’s largest supermarket chain and operator of 500 petrol stations, said: ‘We have good fuel availability, with deliveries arriving. every day at our service stations across the UK “.

The company has so far only experienced temporary outages at two of its own gas stations. Some stations are owned by other operators but have a Tesco convenience store on site.

Competitor Sainsbury’s said it currently has no fuel supply issues but is monitoring the situation.

“Serious labor shortage”

Some food supplies in Britain have also been affected by delivery disruptions. But according to Ian Wright, managing director of the UK’s Food and Drink Federation, food and drink manufacturers across the country are experiencing “the same severe labor shortages seen across the chain. food supply ”.

“We urgently need the government to conduct a full investigation into the state of labor markets to understand the most pressing issues,” he said in an emailed statement.

“For example, workers may have returned to their respective home countries during the lockdown and not have returned [to the U.K.]. Some estimates put this number at over a million. If swift action is not taken, the impacts we are already seeing will worsen. “

A leftover drink is seen on a nearly empty shelf at an Asda supermarket in London, England on September 19, 2021.

Chris J Ratcliffe | Getty Images

In recent days, a severe shortage of carbon dioxide in Britain had raised fears that food production could take a hit and cut nationwide supply. US CO2 producer CF Industries recently shut down two UK sites that produce 60% of the country’s commercial supplies, blaming soaring wholesale gas prices.

While the UK government struck a deal with the company to restart production, the BBC reported that the country’s food industry could end up paying five times as much for gas under the deal.

Energy companies have also been strained, with at least seven suppliers collapsing since August after the price of wholesale natural gas soared 250% in less than nine months. According to the energy industry body OGUK, prices jumped 70% between August and September alone.

The UK has limits on how much suppliers can charge consumers for energy, with price caps reviewed by the government every six months. Some expect the current cap to be lifted when it is reviewed by ministers in April, meaning UK households will absorb some of the increased wholesale costs.

In a report on its latest monetary policy decision on Thursday, the Bank of England warned that the inflation rate was likely to climb to “slightly above” 4% this year, double its target level.

Positive growth prospects

An increase in demand following coronavirus lockdowns is seen as a factor behind these problems, along with labor and supply shortages accentuated by Britain’s complete departure from the European Union at the start of this year.

Speaking to CNBC in a phone call on Friday, Yael Selfin, chief economist at KPMG UK, said it didn’t look like the country’s supply chaos was going to be fully resolved until winter.

The labor shortages could take at least six months to resolve, Selfin said.

“We are a little vulnerable because there is already a lot of tension in the system. Any additional shock, like what we have just seen with gas prices, will only complicate the absorption of businesses and households,” he said. she declared. .

However, Selfin’s overall outlook for the UK economy remained positive.

“The good news is we’re pretty close to where we were before [the coronavirus pandemic]”, she said.” We expect the economy to reach its pre-Covid level by the third quarter of next year. Even with additional shocks, we might have weaker growth, but we still expect 6.2 percentage points to grow. “

“The main problem is that there is a very high demand that cannot be met. So it’s bad, but it could be worse if nobody wanted to buy anything,” Selfin added.

Andrew Goodwin, UK chief economist at Oxford Economics, also told CNBC on Friday that it would take time to resolve the shortage of delivery drivers.

“Training or recruitment of new heavy goods vehicles [heavy goods vehicle] drivers is not something you can do overnight, it will take some time. The industry is really going to have to work with what they have right now, ”he said over the phone.

However, Goodwin said he too remained “reasonably optimistic” about the state of the UK economy.

“Households have this big stock of savings to spend, but it’s going to start to shrink a bit just because of the bad news we’re having on things like inflation,” he told CNBC. “[But] Over the next year, we should definitely achieve much stronger GDP growth than we normally would, as we are still in the catching-up phase. “

“I suspect we’re going to find ourselves in a situation where the reality is a little bit disappointing compared to what we expected to say three months ago,” Goodwin added. “And it is simply because of these problems of shortage of supply, both in terms of limiting production and also with regard to the purchasing power of consumers.”

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