By Jeph Ajobaju, Chief Copy Editor
Economic recovery in the United Kingdom is being hindered by staff and supply shortages caused by skill gaps and pandemic restrictions and absence from work.
These have taken their toll on economic recovery this month, according to a closely watched survey reported by the BBC.
The IHS Markit/CIPS Composite Purchasing Managers’ Index (PMI) for August hit a six-month low of 55.3, falling from 59.2 in July.
Any reading above 50 indicates growth, but the bounce-back from the pandemic is losing momentum, said researchers.
CIPS group director Duncan Brock told the BBC the figures were “a stark warning” and the “abnormally large slowdown in overall activity” suggested that the accelerated levels of growth seen earlier in the summer were “not sustainable”.
“The worst shortages of staff and materials on record are mostly to blame,” he added.
“Despite Covid-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages,” said IHS Markit economist Chris Williamson.
“Supplier delays have risen to a degree exceeded only once before – in the initial months of the pandemic – and the number of companies reporting that output had fallen due to staff or materials shortages has risen far above anything ever seen previously in more than 20 years of survey history.”
Self-isolation
The BBC reports that firms have complained that self-isolation requirements for contacts of people with Covid have made it hard for them to maintain staffing levels.
However, those rules were dropped from August 13 for people who have been doubly vaccinated.
Kieran Tompkins, assistant economist at Capital Economics, said the latest survey showed that the recovery was slowing more than previously thought.
“The economy struggled to gain fresh momentum in August, despite the apparent easing of the ‘pingdemic’,” he said.
This posed “a downside risk” to forecasts that the economy would return to its pre-pandemic level by October, he added.
Meanwhile, another survey showed manufacturing output growth easing in the three months to August, but remaining firm by historical standards.
However, stock levels weakened to a new low for the third consecutive month, according to the latest monthly CBI Industrial Trends Survey.
“Early signs from the data suggest that growth in activity may have peaked,” said CBI lead economist Alpesh Paleja.
Worker shortage triggers business closures
By late July, historical shortage and pandemic-induced absence from work were already threatening business operations in the UK despite enthusiasm that lifting most coronavirus restrictions on July 19 would provide fillip for the economy.
Job vacancy numbers surpassed pre-pandemic levels in the second quarter of 2021 (Q2 2021), according to data from the Office for National Statistics (ONS).
There were 862,000 jobs on offer between April and June – 77,500 higher than Q1 2020 – driven by vacancies in hospitality and retailing.
The twin main drivers of the vacancies are a lack of skilled workforce, and Brexit which has reduced the number of British workers born in the European Union (EU).
UK-born workers are fewer, too, and immigration to the country has become more difficult.
The number of people on payrolls grew in June, showing the biggest rise since the start of the pandemic. It increased by 356,000 in June to 28.9 million, the data shows, as reported by the BBC.