Quarterly growth slows as shortage of workers and goods hold activity back

ITV News Business and Economics Editor Joel Hills reports on how Britain’s recovery from its third Covid-19 lockdown slowed sharply over the summer

Economic growth in September was stronger than expected but there are signs that the recovery is fading. A surge in face-to-face visits at GP surgeries, as restrictions lifted, drove output in the month to 0.6% but the ONS now thinks the economy performed less well in July and August than previously thought. Growth of 1.3% for the period July - September is less than the Bank of England had forecast and leaves the UK economy 2.1% smaller than it was before the pandemic began

Rishi Sunak said 'we're on the right path' when it comes to economic recovery. He spoke at the COP26 climate conference last week. Credit: PA

The road ahead looks harder. Activity is being held back by a combination of persistent, global supply chain disruption and labour shortages. Both are generating inflation, both will play out differently over time. Car factories are cutting production because they can’t get components, restaurants are closing on Mondays and Tuesdays because don’t have the staff to cook or serve meals. As the chief executive of Next, Lord Wolfson, put it last month: “something is going seriously wrong in our economy”. “We’re on the right path,” insisted the chancellor, Rishi Sunak, this morning. Although, he also spoke of “global challenges ahead”. The word “global” is deliberate, important and in many senses perfectly correct. Many of the problems the UK faces are indeed being faced elsewhere in the world. But many British companies will tell you that the labour shortages they are experiencing are particularly acute here.

Car factories are cutting production because they can’t get components due to shortages. Credit: PA

This week, the chief executive of Associated British Foods (which owns Primark) told ITV News it is “easier to find an HGV driver in Europe than it is in the UK". The chief executive of Marks and Spencer said recruitment problems have been “exaggerated” in the UK, due to Brexit. That’s not how Rishi Sunak sees it. “I talk to finance ministers all around the word, not just from Europe, where indeed the last set of intelligence that was published said there was about 400,000 vacancies for HGV Drivers across Europe,” the Chancellor told ITV News. “There’s also a problem in the United States. I think it’s not fair to say there’s a particular problem here”. The government has taken action to accelerate the training of HGV drivers but companies report that they are struggling to hire in a number of different areas. Warehouse packers, bar staff, welders, driving instructors, fork-lift truck drivers, care workers, prison officers and secondary school teachers are all in short supply.

The CEO of Primark's parent company told ITV News it is easier to find an HGV driver in Europe than it is in the UK. Credit: PA

Since May, businesses have been urging the government to loosen post-Brexit immigration policy and make it temporarily easier to bring in the people they need from abroad. In September - when news of a shortage of fuel tanker drivers triggered panic buying at petrol stations - the government finally agreed to a limited Temporary Worker Scheme. Rishi Sunak denies the government has been slow to respond. “The Transport Secretary and others have been looking at this issue. We want to make sure we get the right policy intervention and [temporary visas] is one of a suite of things that we’ve done,” he insisted. “When we can make a difference, even though these are global challenges, we will act”. Going forward, persistent shortages, rising energy bills and tax increases are likely to leave household and businesses feeling less flushed. Come the Spring, the feel-good factor that the vaccination rollout and end of lockdown generated may well have dimmed. The bounce-back appears to be losing its bounce at the very moment that the government is threatening to trigger Article 16. Now is not a great time for a full-blown trade dispute with the European Union.

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