Will labour be Johnson's undoing?
As parliament resumed this week the prime ministerial in-tray will have been piled unusually high with issues of national importance.
Any one of coronavirus, Afghanistan or social care alone are weighty enough to give most prime ministers sleepless nights, but perhaps the most enduring challenge Boris Johnson will face in his remaining years as leader is how to tackle the unfolding crisis in UK supply chains.
The summer was punctuated by frequent stories of critical shortages in labour and stock, most commonly concerning the food supply chain. Empty shelves, closed restaurants, vast volumes of food waste and the looming threat of price spikes are rarely vote winners.
A report commissioned by the NFU in association with 11 other trade bodies including UKHospitality identified over half a million posts that need to be filled across the entire supply chain from farming, food production and distribution, through to retail and hospitality.
Growers in Scotland reported having to destroy an estimated 3.5 million broccoli crowns and 1.9 million cauliflowers because of staff shortages.
Farmers face having to destroy nearly 100,000 pigs because of a post-Brexit shortage of butchers to work in slaughterhouses.
Wagamama has revealed it is struggling to hire chefs across a fifth of its restaurants, while hotels across the UK have been forced to limit bed linen changes and delay guest check-ins due to a shortage of staff in the laundry supply chain.
Even charitable distribution is suffering the effects of the labour crisis with the ongoing shortage of HGV drivers and haulage capacity resulting in up to half a million meals not getting to people who need it most, according to Fareshare. The redistribution charity would normally expect to receive an estimated 125 tonnes of food each day, but due to the ongoing issues is currently only receiving about 100 tonnes.
The pandemic, and in particular the so-called ‘pingdemic’, has undoubtedly contributed to the crisis. However industry leaders are in little doubt as to the root cause of the problem. “The labour crisis is a Brexit issue,” said British Poultry Council (BPC) chief executive Richard Griffiths after Nando’s was forced to shut some of its UK stores in August due to a lack of chicken. The poultry sector is currently facing a serious shortage of production operatives and processing staff, according to the BPC, with businesses reporting an average vacancy rate of over 16% of their total workforce.
It would be easy for those opposed to Britain leaving the EU to use the labour crisis as the ultimate proof of Brexit as a flawed project. Certainly, many of the risks highlighted prior to the end of the withdrawal period are now coming to pass.
Yet the current crisis is arguably more a product of government mismanagement of Brexit than of the vote to leave itself. Labour in the food supply chain prior to Brexit was hardly a model of sustainability. The food economy as we know it is characterised by low wages and flexibility (or insecurity depending on your perspective) to the benefit of pretty much everyone – consumers, retailers, suppliers – save for those people, including many farmers, who actually contribute their labour.
A ready supply of EU, often seasonal labourers on farms and in factories prepared to do hard work in often challenging conditions for poor pay and benefits has helped keep supply chains costs artificially low for decades. As the FT journalist Sarah O’Connor recently wrote in an astute column: “The story of Britain’s empty shelves, like that of its unpicked strawberries and unprocessed chickens, is the story of how migration combined with a weakly regulated labour market and hugely powerful retailers have allowed some goods and services to become unsustainably cheap.”
The mistake the government made was not to aspire to a different labour supply model – one where employers make long-term investments in a largely domestic workforce so that a career in the food sector becomes an attractive proposition in terms of pay, conditions and prospects. It was to have no plan in place for the transition from one model to the other.
Industry leaders have been calling on the government to introduce a 12-month ‘covid-19 recovery’ visa, which would enable EU citizens to work in the UK. It would be a sticking plaster but a necessary one to plug critical worker shortages that have led to some HGV drivers commanding 40% higher wages. So far the government has ignored the pleas, maintaining that more free movement from the EU is not the answer.
Yet anyone with a passing interest in the food supply chain could have predicted that switching off the tap of EU labour would spell disaster. It was always fanciful to believe that domestic jobseekers would suddenly flood into the fields and factories to work long hours in often oppressive conditions for little pay.
Indeed, the high profile ‘Pick for Britain’ campaign, launched last summer, resulted in a wave of applications. However, only 11% of 2020’s seasonal workers were UK residents, according to the NFU. “To be honest, EU citizens and those keen to work here are far more productive than the domestic labour force," one vegetable farmer told the BBC.
They also lack skills in disciplines such as butchery, which require training and on-the-job experience. Part of the reason why pigs face being culled is that the Home Office has failed to include butchers on a list of shortage occupations, which would allow EU workers to enter the UK on a skilled worker visa.
Compare the approach to labour with that concerning farm subsidies where direct payments to farmers under the EU’s common agricultural policy (CAP) are being phased out over a seven-year period before payments under the UK’s new environmental land management scheme kick in to allow for as smooth a transition as possible.
Why is labour considered not in need of its own transition plan? The obvious answer is that immigration was a key and contentious battleground in the Brexit debate in a way agricultural subsidies were not. Any relaxation of rules on EU labour, no matter how temporary, risks reopening divisions within the Conservative party that, on this subject at least, Johnson has largely patched up. By pursuing a brand of ideological absolutism to keep hardline Brexiteers happy in the short-term, Johnson risks exacerbating the structural challenges that are already impacting supply chains.
And the situation is poised to get worse. From October 1st, new administrative requirements are due to come into force for imports from the EU of meat, dairy, and various other types of produce. Then from January 1st 2022, physical checks will begin on shipments of those same products at UK border control posts.
The EU has had these same requirements in place since the start of this year, contributing to a crash in value of exports of more than a quarter since the first half of 2019, according to the Food and Drink Federation. Even a relatively marginal impact on the flow of imports would have severe repercussions for availability and prices.
The Grocer reported last week that Marks & Spencer executives were damning in their assessment of the UK’s readiness for the new trading protocols. “It is clear from the information you have shared with us, as well as our own intelligence, that neither the UK government nor EU member state authorities are going to be ready,” said M&S Food commercial director George Wright in a letter to suppliers seen by the trade magazine.
Wright went onto warn of risks of disruptions and delays which could lead to “significant food waste across the sector, reductions in range and availability, and inflationary pressures”. Little wonder that reports this week suggest the government is once again preparing to delay checks on imports which have already been pushed back six months from the planned start date of April.
There is no sign yet, however, that warnings over labour have prompted a similar rethink within Number 10. Johnson may feel he has bigger issues to worry about. But he should proceed with caution: after all, there are few more visible signs of a failing government than empty shelves and soaring food prices.
*This blog was first published by Footprint Media.