Fuel crisis is ‘warning sign’ for UK economy as staff shortages spread – business live | Business

Hello and welcome to our continued coverage of the global economy, financial markets, UK supply chain crisis and business.

Britain’s supply chain crisis shows the public is losing confidence in the government’s ability to run the economy and deal with problems, according to Berenberg Bank today.

Berenberg lowered his growth forecast for the UK in the coming months and lifted his inflation forecast, citing the risks of lower real output in the near term caused by growing problems in the supply chain.

Kallum Pickering, that of Berenberg Senior economist, says panic buying at the pump is a “warning signal” for the economy – highlighting the “dismal state of affairs” and the risk of more serious results to come.

Pickering (like the government) points out that other European countries, and the United States, are also facing a shortage of truck drivers. But only the UK has seen panic buying – which it sees as evidence that the public is losing confidence.

As a result of these worsening supply problems, Berenberg now expects UK GDP to grow 1.4% in the third quarter, down from 1.5% previously, and then only by 0.8% in Q4 – half as fast as the 1.6% expected before.

For 2022, they lowered their growth forecast to 5% from 5.8%. But on the upside, they expect growth to reach 6.9% this year, driven by the strong second quarter 2021 performance.

Berenberg also warned that the spike in British inflation would peak at a slightly higher rate and persist longer than expected.

• We are increasing our Q4 2021 call to 4.0% against 3.9% as well as our Q1 2022 call to 4.1% against 3.9%.
• Subsequently, we raised our calls by 0.3 ppt over the forecast horizon. For our annual calls, we are increasing 2021 to 2.4% by 2.3%, 2022 to 3.2% by 2.9% and 2023 to 2.5% by 2.2%.

Pickering writes that the whole supply chain crisis begs the question of why the UK (again) seems to be hit harder than other economies?

In my opinion, the panic and hysteria in the UK partly reflects a growing lack of public confidence in the government’s ability to manage the economy and to fix problems when they arise.

The fuel crisis echoes the rush to stockpile toilet paper during the first wave of the pandemic. It’s troubling that panic buying can become a hallmark of the UK economy – which remains one of the richest and, at least until recently, well-run in the world.

Self-fulfilling fears of shortages of essentials are akin to a run on a bank when depositors suddenly lose confidence and attempt to withdraw cash in droves. The fact that the government remains comfortable with a 5 point lead over Labor in opinion polls suggests that the public thinks the official opposition would do no better.

Pickering adds that the government’s apparent shortcomings have hurt economic performance — citing the slowdown in business investment after the Brexit vote.

If mismanagement of the crisis translates into sub-optimal economic policy, Johnson could compound the damage from Brexit by weakening UK markets that are still competitive and flexible.

But the UK’s “highly competent civil service” might make some half-prepared policy initiatives more realistic.

The British comedy ‘Yes, Prime Minister’ is of course a parody. But every now and then it may contain a kernel of truth.

Which ties in with the Conservative Party conference, where the supply chain crisis is a hot topic. Yesterday Prime Minister Boris Johnson argued that the disruption of the supply chain – from queues on forecourt to threat of mass slaughter of pigs – was part of a post-Brexit transition

Johnson told the BBC:

When people voted for change in 2016 and when they voted for change in 2019, as they did, they voted to end a broken model of the UK economy that was based on low wages, low skills and chronic low productivity.

We are moving away from that.

Focus on wage growth, however, when rising inflation hits household budgets and income figures are skewed by the pandemic.

A Tory MP said he hoped the current shortage of heavy truck drivers would lead to the dismantling of supermarket supply chains.

Chris Loder caused a stir when he said the disruption “means the farmer down the street will be able to sell his milk in the village store like he did decades ago.”

The fuel supply crisis eased over the weekend. But there were still shortages and closures in London and the South East, where on Sunday morning up to 22% of service stations were dry and only 60% had both grades of fuel available, according to Petrol Retailers. Association.

Elsewhere in Britain, including Scotland, the Midlands and northern England, the crisis was “almost over,” the PRA said, with 6% of foreclosures dry.

Brian Madderson, president of PRA, warned:

“Fuel is still not going to the pumps that need it most in London and the South East.”

Military drivers are scheduled to hit the road starting today, driving tank trucks to gas stations running out of gasoline and diesel.

Agenda

• 9am BST: Spanish unemployment report for September
• 3 p.m. BST: US factory sales for August