First written 30th September 2021
Shortages
It has been a strange week, hasn’t it? I have been building up to writing something about this, but me being me, I need to do some research first to get some background knowledge and facts together, rather than just ranting. I have also been stuck in a long queue for fuel it is frustrating.
This time last week, BP announced that it had “temporarily closed some of its petrol forecourts in Britain after its ability to transport fuel from refineries was hit by an industry wide shortage of truck drivers.”
Exon Mobil’s Esso also announced that a small number of its 200 Tesco alliance forecourts were also impacted. (Source Reuters).
This announcement by the fuel companies had to be made. This is because listed companies need to declare if profits or performance are likely to be different to those they have forecasted to the market. This allows shareholders and investors to make decisions on the market. Unfortunately, the information could not have been withheld as some over the last week have suggested they should have done. Similarly, if they had not announced the closures and you had turned up to the garage with an empty tank, how would you have reacted after being told that even though they were aware of issues, they were not going to tell anyone? But, I digress. The point is that market regulations meant that the oil companies had an obligation to announce issues with fuel deliveries, with the reason being a shortage of HGV drivers. There is no shortage of fuel at the refineries or an inability to get the fuel out of the refineries, such as the UK saw in 2000 / 1 during the fuel protests and blockades, when shock horror, fuel prices were heading to £1 per litre.
So how did the announcement by two oil companies stating a small number of their forecourts were struggling with deliveries escalate into where we are now with massive queue and apparent selfish behaviour? Sheffield University carried out research along with Royal Holloway in London during the early stages of the pandemic in 2020 to try and understand the mentality of panic buying. The hypothesis being humans have evolved from a forage and store mentality. However, the results showed that the reasons were actually varied and those most likely associated with “women and those living in higher income households with children, or having a recent or expected loss in income; supporting the natural animal-foraging survival strategies people employ during times of crisis.” However, it also showed that those who had a strong sense of community were also more likely to panic buy and here lies the irony of it all.
It is all interesting stuff. It also means that even if companies, governments and authorities say there is no need to panic buy and provide evidence it is unlikely this advice will be heeded. We therefore may need to get used to seeing panic buying during times of crisis.
Anyway, back to the subject. Shortages.
It is rare that a day goes by without someone saying there is a shortage of something somewhere. HGV drivers, hospitality staff (which I shall talk about shortly), food, agricultural workers, energy supplies, the list goes on. Of course, the reasons for these shortages are long and complex, but what we are seeing is a moment in time where all these factors are coming together as catalysts in history. I talked about this in a previous post about September 11th. Recent events such as Brexit, the covid pandemic and long running issues ( of which there are plenty) with HGV drivers, spikes in wholesale gas prices have all come to head and are now being felt by us, the consumer. Generally speaking, in the West, we have got used to cheap consumer goods and commodities due to the ease of transportation, labour and materials. It is only now, when it has been highlighted the amount of effort and resources needed to grow, manufacture, refine, store and distribute all we need that we actually stop to think about who are involved and how the logistics work. For a while the UK has been working on a “just enough” mentality for storing goods. This was evident at the start of the pandemic when PPI equipment quickly ran out and we are seeing now with lack of gas storage. (Those big metal gas holders you see in cities are no longer used). This works fine if the supply chain (a phrase we have heard a lot of recently) is unbroken. Once there is a kink, you start to see some problems and when the chain is broken (e.g. lockdown) then there are really big problems.
In order to try and resolve the problems the UK Is facing at the moment, the government has had to make some rather embarrassing U turns, namely relaxing visa requirements to get HGV drivers and poultry labourers from outside the UK so that we can all enjoy our Christmases. However, poultry farmers are saying it is too late as they have not bred enough turkeys based on the previous forecast of the labour they would have available. Cue a shortage of turkeys at Christmas (don’t blame me for the panic buying). However, this is extremely short sited as it lasts only until 31st December.
What will happen after then? Well the government is hoping that will allow enough time for domestic workers to be trained up and fill the gaps in the supply chains. Unfortunately I feel whilst this is ambitious it may turn out to be fruitless. Why? Well the government keeps saying it wants to have a high wage, high employment economy. All very good in theory. However, the government also describes jobs as low skilled or high skilled and this immediately creates a flaw in their plan. How can a high wage be justified if you have low skills? How can low wages be justified if you have high skills (looking at you front line civil servants)? How can farmers afford at least £10 per hour to employ labourers when they get paid less for the crops, milk, animals they produce? How can HGV drivers be recruited when the conditions and pay are bad? Who will be attracted to these jobs? How can a hospitality venue afford a high pay to a pot cleaner, this will in effect lead to pay rises for the chefs, bar tenders, etc. who have more responsibility in that place of work.
There is also a mentality of entitlement in this country. I bumped into a friend the other day whilst I was out shopping. They said that they were having to make some changes at their pub to ensure they could keep their high level of services, which they pride themselves on, as they could not recruit enough staff. I said surely there must be loads of teenagers out there looking for work (I know a lot of us had part time jobs back in the day). My friend said yes, but they all want manager roles and do not want to start at the bottom and work their way up. It got me thinking. That is a sad state of affairs to be in, not just for the pub, but also for young people has a whole as their expectations will not meet reality.
If we all look back at the jobs we started out with, they would have been “low skilled” (a phrase I loathe as to do any job well, you need to be skilled in it) and low paid. I started as a paper boy and was paid per paper I delivered. It wasn’t much, but enough for me to understand the value. Then I got a job at Tesco. My first rate was £2.98 per hour. Unimaginable now, but back then I worked all day Saturdays and Friday nights to warrant what I thought was a generous wage every month. That of course went up as I got older and more experienced. I progressed from pushing trolleys around the car park, to checkouts, shelf stacking, home shopping home deliveries and working in the garage. All skills I gained through motivation and time.
This was then repeated as I started my career in finance by first working as an intern in Brussels before landing my first salaried job after I graduated and then working up the ladder, changing departments and eventually companies before ending up where I am now. Nothing was instant and it all required hard work and motivation. A sense that even the perceived crappy jobs need to be done in order to progress.
Has this been lost on young people today? It is a major question that will need to be answered if the government wants to achieve its aim of employing and relying on domestic workers to fill the gaps of those who are retiring or gone back to the EU post Brexit or during the pandemic.
So, shortages – easy to come by and create, a lot more difficult to resolve, but if we all work together, accept that changes are needed, maybe all our goods will cost more from now on if labour costs are to increase and be accepting of what our future has in store for us we will succeed.
Above all, try not to panic. Right, “google local farm Christmas turkey.”