Labour isn’t working…
What times eh!
A year ago the prevailing narrative was that the UK was facing an unemployment crisis, some suggesting that the rate could double and even treble to levels not seen for a generation; 9-10% was mentioned in despatches.
Certainly, there were grounds for real concern as the UK and global economies entered genuinely new terrain, a British economy that contracted by 10% in 2020. To mitigate a mountain of unemployment the British Government, to its credit, introduced a new common term to the vocabulary, furlough, which has been a Godsend for many households.
The Coronavirus has ran rings around public policymakers, first of all exposing systemic failure in the governance of the UK not so much politicians but the advisors, the civil servants and the media, going on always to stay one step ahead. So last summer, as lockdown 1.0 looked like it was working the Kent variant emerged. Then with the vaccination coming through, protecting the most vulnerable, the Indian variant came through.
Now, with hospitalisations and fatalities, thankfully, down, and an immense debt of gratitude to front line health and care workers, I am not so sure GPs deserve the same pat on the back, the UK seems to be close to the last leg of the unlocking programme; full release in mid-July 2021.
Perhaps encouragingly, the education and health ministers for England also seem to be applying a more balanced and pragmatic approach that hopefully respects this terrible bug but recognises other risks and challenges that need some attention too.
So, whilst all this public health work has been in-tow the liquidity infused (printing money) British economy has been bouncing back strongly, very strongly. The Governor of the Bank of England told me that it could be back to pre-Covid levels before Christmas 2021, albeit losing the growth that otherwise would have occurred. We all would have taken that in late March 2020.
“…unemployment is less than 5.0% and falling fast….. the UK amazingly is facing a labour crisis with three million people still on some form of furlough or another…..The British Government has been inflexible to the requests of a food industry short of drivers, pickers, cleaners and factory floor operatives.”
More to the point unemployment is less than 5.0% and falling fast. Indeed, with a generation of education failure, particularly skills training, many European workers returning home post the UK-EU referendum, and new border controls limiting low wage immigration, the UK amazingly is facing a labour crisis with three million people still on some form of furlough or another. Remarkable!
The Government wants higher wages and at 5.6% including bonuses in May 2021 it has it. Many firms are chronically short of people and it looks like wage-cost inflation is building. Alongside higher oil prices, rising freight costs, upwards packaging costs (DS Smith talk of 5-10% for cardboard) to name but just three, real input and producer price inflation is emerging.
The British Government has been inflexible to the requests of a food industry short of drivers, pickers, cleaners and factory floor operatives. As such operational consequences, service levels, as well as costs can be expected to deteriorate and rise respectively until matters change for the better. Maybe the end of furlough will balance the labour books somewhat as some businesses fold and let folks go as the state aid ends?
Maybe, but without policy changes the cost of labour is going to remain a problem with millions of Britons seemingly unemployable; hence the disconnect between the unemployment rate and the need for labour.
Within these contexts the strong demand of the UK and global economy is going to encourage more automation as the returns compared to the deployment of labour adjusts in favour of machines. With the Chancellor’s tax incentives to invest in capital to April 2023, a step change in automation is in the offing, with the corresponding labour implications to follow.
In this context Coriolis’ time has come as it is an experienced feet on the ground advisor that measures, diagnostic tests, listens, watches and changes things for the better in manufacturing businesses, culturally and practically; having done so effectively for the UK and international food industry for many years. The present labour crisis necessitates a fresh look at the practices and processes of business and Coriolis is exceptionally well positioned to add value and help from within to engineer beneficial change.
The summer months are likely to see more and more talk of the failings and otherwise of the British labour process. I wish you well in the face of these challenges. If you are able, I also wish you a lovely summer holiday, hoping that another new variant does not keep the bug one step ahead.
Dr Clive Black
Senior Advisor
Coriolis
July 2021
