The UK’s exit from the European Union and the effects of the COVID-19 pandemic have created supply shortages, labour shortages, factory shutdowns and customs delays. This has heavily disrupted supply chains. These factors have made it difficult for producers and retailers alike to forecast inventory, set prices and meet customer demand.
The upcoming Christmas season is likely to exacerbate supply chain disruption, leading to toy and decoration shortages; inflated retail prices due to supply shortages and high shipping costs in Asia; and shortages of turkeys and pork due to Brexit-related labour shortages.
High shipping costs
Manufacturers of artificial trees, decorations and toys in Asia have recorded extensive COVID-19-related disruption, limiting retailers’ stocks. However, the soaring costs and limited availability of shipping containers needed to bring stock from manufacturing bases in Asia have become more pressing issues.
According to The Guardian in August 2021, shipping a 40-foot container from China historically cost approximately US$1,500 (£1,000). However, there are importers currently paying more than US$30,000 (£22,900) just to get the container onto the ship, according to Alan Simpson, chairman of the Toy Retailers Association.
Driver shortages
UK retailers are also contending with a shortage of lorry drivers when goods arrive in the country and severe congestion at British ports, causing further delays along the supply chain.
According to the Office for National Statistics (ONS), the number of heavy goods vehicle drivers declined from 320,100 in 2016 to 268,300 over the year through June 2021.
Although these problems could be combatted by retailers stocking up months in advance and increasing selling prices, insufficient warehouse availability limits their ability to do so.
Lacking labour
With Christmas approaching, food shortages are becoming increasingly concerning. The Meat Processing industry and the Poultry Meat Processing industry have been hit by Brexit-related labour shortages in processing facilities, skyrocketing gas prices and high consumer demand.
According to the British Meat Processors Association, 70% of workers in meat processing companies were from the EU in January 2019.
The UK’s new points-based immigration system, which came into force on 1 January 2021, has meant that many low-skilled EU workers have been unable to enter the industry, causing significant labour shortages. Moreover, reduced work opportunities during the COVID-19 pandemic led to many EU workers leaving the country and not returning, exacerbating labour shortages.
According to the British Poultry Council (BPC) in October 2021, British turkey producers have put down one-fifth fewer birds than last year due to concerns about finding workers to slaughter and process them.
To combat labour shortages, meat processing companies have focused on producing simple products that require less labour, resulting in supply shortages for more complex products such as three-bird roasts, ready-stuffed garnished birds and pigs in blankets.
Inflated meat prices
Record-high energy prices forced the temporary shutdown of CF Industries’ two UK fertiliser plants in September 2021, which usually generate 60% of the UK’s food-grade CO2. CO2 is used by food processing companies to stun pigs and poultry for slaughter. Therefore, limited availability of CO2 has constrained the production capacity of meat processing companies and is expected to result in higher prices for turkeys and pigs in blankets.
To combat shortages of CO2, the UK government offered three weeks of financial support to US firm CF Industries to resume production at its Billingham plant. Following the end of the three-week period, Business Secretary Kwasi Kwarteng temporarily suspended competition laws for CO2 producers to ensure deliveries to the food sector are met.
Chief executive of the BPC Richard Griffiths has said that supermarkets are expected to combat turkey shortages by importing them from Europe. Moreover, in the face of empty turkey shelves, many retailers are expected to start replacing turkeys with beef and lamb, all of which are slaughtered without CO2.
Rocketing retail sales
Supply concerns have resulted in consumers starting to mass purchase Christmas goods, exacerbating existing supply challenges.
According to The Guardian in October 2021, sales of frozen turkey have increased by 409% year on year while mince pie sales have increased by 10%.
The number of people who have already booked their Christmas grocery delivery with supermarket Waitrose has more than doubled on the year to 22,000.
John Lewis says sales of its Cotswold artificial trees increased by 1,300% year on year over the three weeks through 19 September 2021, with sales of neon lights growing by more than 2,000%.
Such high demand is expected to intensify supply challenges, potentially leaving thousands if not millions of Britons without the Christmas good they are used to.
Government present
The UK government has responded to labour shortages with the issuance of thousands of emergency temporary work visas available to the haulage and food processing industries. Under the temporary visa scheme announced by the government, a total of 10,500 three-month work permits will be issued by the Home Office in an attempt to address the aforementioned challenges.
An estimated 5,500 temporary visas are being created for poultry workers and another 5,000 visas will be made available for lorry drivers to come to the United Kingdom and start work from October until 2022, including 300 fuel drivers from overseas and 4,700 visas for foreign food truck drivers.
Only time will show whether these solutions will be effective. One thing is for certain, these top-down supply chain challenges and bottom-up spikes in demand are expected to raise selling prices for 2021 Christmas celebrations. According to the ONS, the rate of food inflation more than doubled year on year from 0.3% in August 2021 to 0.8% in September 2021.
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