Rail strikes and labor shortages hurt UK economy

The problem worsened on Tuesday as thousands of railway workers continued strike to demand better wages and working conditions — the biggest railroad walkout in 30 years — immobilizing a large part of the network. Further strikes are scheduled for Thursday and Saturday.

A separate strike by London Underground workers also disrupted Tube services.

Railway strikes could continue for months, the National Union of Railway, Maritime and Transport Workers has said, and teachers, nurses and other workers could leave as their wages fall behind skyrocketing inflation rates, which are now expected to peak above 11% later this year. Unison, a union representing 1.3 million public sector workers, said last week it was “ready to strike”.

Maggie Simpson, director of the Rail Freight Group, told CNN Business she expects between 30% and 40% less freight to move by rail during the week, critical goods including fuel and supermarket products, being given priority for delivery. She said she was “really worried” about a loss of confidence among businesses who were increasingly turning to the railways to ship their goods.

A summer of strikes would deal a heavy blow to an economy that has tipped in the opposite direction. But activity was already dampened in sectors such as aviation, hospitality and social services due to a record number of vacancies – 1.3 million at the last official count.

Mandira Sarkar, owner of Mandira’s Kitchen, a food delivery and catering business in the South West of England, describes the labor shortage as a “slow death” for her six-year-old business.

“It was a real nightmare… [we’re] literally on our knees because we just can’t find the staff,” she told CNN Business.

The gaping labor gaps between industries have limited companies’ ability to grow and lead to some companies to reduce services. Last week, Gatwick, an airport south of London, said it would cut its summer schedule by up to 13% in July and August because it could not find enough workers.

The airline industry has cut jobs during the pandemic as travel demand plummeted and struggled to hire and train enough workers to cope with a strong rebound in passenger numbers in recent months .
EasyJet (ESYJY)a low-cost airline, said on Monday it would cut its summer schedule to around 90% of 2019 levels due, in part, to the disruption at Gatwick.

But it’s not just a hangover from the pandemic. Brexit has ended the free movement of labor between the UK and Europe, making it much harder for UK employers to tap into a huge source of workers.

Sarkar said she “desperately” needs to hire two people to work full-time in her kitchen, and blames the dual impact of Brexit and the pandemic for driving workers away.

A staff shortage has forced it to turn away customers, so much so that Sarkar expects its revenue this year to be 40% lower than in 2021.

“All the people from Eastern Europe, all the people we had, who worked for the hospitality industry, are gone. [during the pandemic]leaving this huge, big gaping hole,” she said.

The “missing million”

The UK’s labor shortage is particularly acute among the world’s largest wealthy economies.

According to the Organization for Economic Co-operation and Development, the UK was the only “Group of Seven” country in which the share of working-age people in the labor force fell between 2020 and 2021.

The OECD also predicts that the The UK economy will stagnate in 2023, further distinguishing it from the G7 economies, all of which are expected to grow.

The Learning and Work Institute, a think tank, calculates that around one million Britons are “missing” from the workforce. Its CEO, Stephen Evans, told CNN Business that the country “weathered the storm relatively well in terms of employment at the start of the pandemic thanks to the furlough program and other supports.”

“But since then we have seen this drift in the labor market,” he added.

Evans said most of that million is explained by workers over the age of 50 and those with long-term health conditions who drop out. work. About one-third can be attributed to weak population growth – including lower net migration – and about one-fifth to young people staying in full-time education longer.

While unemployment in the UK has returned to its pre-pandemic level of 3.8%, this measure only reflects the number of people actively looking for work. Government policy has tended to focus on reducing that figure, Evans said, but should now shift to rehiring those who left work altogether.

Why comparable economies haven’t experienced the same exodus of workers isn’t yet clear, Tony Wilson, director of the Institute for Employment Studies, told CNN Business.

“[The UK is] one of the very, very few countries in the world to have seen what looks like a nice structural shift in turnout,” he said.

Wilson speculated that the UK’s pension freedoms – workers can tap into their pension savings from the age of 55 – could be a factor.

The Institute for Fiscal Studies found that retiring workers aged 50 to 69 were the main driver of the increase in economic inactivity, contributing two-thirds of the increase over the past two years.

Of particular concern is the growing number of people leaving the workforce due to illness, Wilson said. Whatever the reason, the trend shows few signs of improving.

“It’s really quite dark,” he said.

Brexit bites

It used to be that the UK had a pool of ready-made workers, but now it’s much harder for European workers to come through the door.

“The increase in labor market migration from Europe has helped to smooth [worker shortages] in the past…that doesn’t exist now,” Wilson said.

Ed Thaw, manager of Leroy, a Michelin-starred London restaurant, describes Brexit and the pandemic as a “catastrophic double whammy” for its business.

He told CNN Business that hiring on the neighboring continent was no longer a realistic option.

“This European pool seems to have really disappeared,” he said.

As of January 2021, all EU nationals seeking employment must go through the same points-based immigration process as other nationalities. Around 211,000 fewer EU nationals worked in the UK between January and March compared to the same period in 2020, while the number of non-EU workers increased by 182,000, according to official statistics.

The elderly care sector, which has long suffered from staff shortages, has been particularly hard hit.

Dr Sanjeev Kanoria, co-founder and owner of Advinia Health Care, one of the nation’s largest care home providers, told CNN Business that the pandemic has masked the “true impact” of Brexit on his industry.

Kanoria, which employs around 3,000 people in 37 homes, said it had at least 10% vacancies at any given time.

This year he plans to pay recruiting agencies around £10m ($12m) to find permanent and temporary staff – more than three times what he would usually spend.

People from Eastern Europe traditionally made up about a fifth of its staff.

“It’s really gone down, it’s down to almost 0% now…we don’t have anyone from Europe anymore,” he said.

A government spokesperson told CNN Business that it had “made significant improvements to [its] employer sponsorship program, including reducing the time required to recruit overseas.

“That being said, employers should look to the domestic labor market rather than relying on overseas labor by investing in the UK through training, pay rises and employment options. career,” the spokesperson said.

Cost of living crisis

The price spike is also drive Britons away from jobs in the lowest paid sectors.

Nadra Ahmed, executive chair of the National Care Association, which represents about 800 home care providers, told CNN Business that the high cost of fuel is “starting to bite” for caregivers who travel for work.

“The cost of living crisis is starting to have an impact and people have to look for other roles where they could get better pay,” Ahmed said.

The average hourly wage for a private carer was £9 ($11) for the 2020-21 financial year, according to the Skills for Care charity.

Despite rising wages, the economy-wide average wage fell 2.2% year-on-year between February and April, after adjusting for inflation. It is the biggest drop in more than a decade, according to the ONS.

The Bank of England has warned workers against demanding higher wages to contain inflation. The central bank has raised rates five times since December in a bid to rein in prices.

Thaw said it was difficult to recruit in a “buyer’s market” for job seekers. He tries, in vain, to find a new sous-chef after the departure of the one he hired before he even started. At the same time, its input costs have increased.

“It’s fundamentally hindering any kind of growth that we can hope for,” he said.

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