How UK supply chains fell apart

British truckers and Chinese containers

When a shipping expert was recently asked to summarize the bottlenecks causing problems in the global economy, she replied concisely: “The ‘pinch point’ is the whole chain.

A prime factor in the events that prompted advice to buy Christmas toys as early as possible, and large retailers like Ikea to charter their own container ships to put the goods on the shelves, are the climaxes inflicted by the pandemic by global demand.

When the enormity of Covid-19 became apparent in the first months of last year, millions of businesses around the world responded by cutting production pending lower consumer activity , as humanity crouched down to weather the viral storm.

Instead, beyond the initial emergency, demand for goods – especially cars, electronics, and some pandemic winners such as exercise equipment – exploded as consumers flocked to a booming world of online retail.

Once stimulus packages are added to the mix, such as the $ 1.9 billion (£ 1.4 billion) pumped by the Biden administration into the world’s largest consumer market, the complex task to ship the large number of goods on order to those with open wallets has suddenly been out of balance.

To take just one example, a large number of freight containers – around 8 million – are currently on board ships or waiting in ports, forcing China to massively increase production of steel crates just to keep the trade going. .

Around the world, the average cost of shipping a standard 40ft freight container has risen to over £ 7,000, four times more than a year ago. The ‘spot rate’ for last minute bookings on the busiest routes, such as China to the US West Coast, has now reached £ 14,000. And even then, don’t expect to receive your goods quickly; the average door-to-door shipping time for a container has increased from 41 to 70 days in the past 12 months.

Once other factors are taken into account, such as the sight of the 400m-long container ship Ever Given crossing the Suez Canal for six days in March and thus blocking 12% of global daily trade, or the increase in cases from Covid in Vietnam which last month shut down most of its clothing factories, the result is a crowded and expensive global supply chain, before goods even reach UK ports.

Containers are unloaded from cargo ship in China (VCG via Getty Images)

The effects of this global disconnection between galloping demand and limited supply have been felt in several sectors, from patio furniture to ties.

One of the most surprising phenomena has been the reverse fact that in some cases almost new used cars sell for more than the list price of new cars. The reason is that while used cars are at least physically available in auction houses, many new vehicles remain only partially assembled, being in factories where production has been suspended due to the global shortage of semiconductor chips. A recent survey found that 52% of automakers in the auto industry experience “very significant” supply chain disruptions.

Even when new cars roll off production lines, manufacturers face the problem that has plagued both the UK economy and besieged government ministers for months: the uncomfortable fact that Britain has 100,000 drivers truck capacity below the level of transport capacity it needs to make deliveries. gently.

The debate will continue to rage over whether Brexit has exacerbated the supply problems of truckers. While it is certainly true that the UK is not alone in Europe suffering from a shortage of qualified HGV drivers, the seemingly lukewarm response from EU-based drivers to the government’s release of 5,000 three-month visas to alleviate the problem seems to be a deflating indication of the attractiveness of working in Britain for this cohort of skilled workers most in demand.

Others point out that the problem is not new. Think tank International Longevity Center UK pointed out last month that carriers, retailers and the entire economy are paying the price for failing to attract workers to a sector where the average age is now 53. years old, with only one in 50 truck drivers aged 25. or under.

He said the demographic time bomb was part of a larger problem of the inability to address the sustainable employment problems generated by an aging workforce.

Either way, it looks like the result is increasingly volcanic frustration in boardrooms across the country. Clive Black, a retail analyst for investment firm City Shore Capital, says some increasingly believe Britain’s problems are due to “economic mismanagement.”

As he puts it, “The government just hasn’t listened and only does things when it’s cornered. Not allowing fruit pickers, meat packers and truck drivers into the country was unbelievably stupid. The food industry has warned the government until it is blue and I have spoken to some business leaders who have simply given up on trying. They are totally disappointed with the government’s ability.

About Mike Stevenson

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