Economy Recovery Slows | What May Be Causing This?

15 September 2021|Related :

The UK, along with the rest of the world, is still trying to recover from the effects of the COVID-19 pandemic. Whilst things initially looked optimistic as restrictions started to ease, the economic recovery is rapidly losing momentum.

The purchasing managers’ index (PMI), which tracks the health of the services and manufacturing sectors, fell by 4.5 between June and July from 62.2 to 57.7, dropping to a four month low.

Why is Economic Recovery Slowing Down?

Over the last few months, businesses all across the country have experienced severe staff shortages due to rising COVID-19 cases, the ‘pingdemic’ and Brexit. 

Chris Williamson, chief business economist at IHS Markit claims Britain’s recent economic growth spurt has been “stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages.”

The transport industry in particular has seen a drastic shortage of more than 100,000 lorry drivers in the UK as a result of many European drivers returning home due to covid restrictions, tax changes and Brexit. It has also been incredibly difficult for people looking to enter the haulage industry as a result of a backlog of HGV driving tests.

This has led to a bottleneck in the supply chain and almost all businesses have been affected with many complaining that delays in transportation had resulted in shortages of stock and therefore a loss of business. 

After the driver shortage resulted in 48 tonnes of food being scrapped due to there not being enough drivers available to deliver it, John Allan, chairman of Tesco, has said that he expects there to still be food shortages at Christmas and has urged the government to bring in more drivers from outside the UK.

He said: “At the moment we’re running very hard just to keep on top of the existing demand and there isn’t the capacity to build stocks that we’d like to see. So, in that sense, I think there may be some shortages at Christmas.”

All 22 UK Ikea stores have also been affected by the shortage of drivers, with a spokesperson for the company saying:

“What we are seeing is a perfect storm of issues, including the disruption of global trade flows and a shortage of drivers, which have been exacerbated by the pandemic and Brexit.”

The Impact of the ‘Pingdemic’

A number of sectors were also impacted by the ‘pingdemic’, after 689,313 self-isolation alerts were sent to those who had been identified as coming into contact with someone who had tested positive for coronavirus in the space of a single week.

The hospitality sector was hit especially hard as roughly 3 million hospitality employees nationwide were forced to isolate and many pubs and restaurants closed when whole teams were ‘pinged’ at once. 

Now that the rules around self-isolation for fully vaccinated people have changed there should be far fewer members of staff taking time off to self-isolate and operations can hopefully return to as close to normal as possible. This is especially important in the weeks leading up to Christmas, as this is the most lucrative season of the year when sales increase dramatically.

To keep up-to-date with the latest financial news, why not check out our other helpful articles and guides in our blog or get in touch with our team to discuss how we can help your business to recover post COVID-19.

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