Lloyds UK Tracker

Labour shortages are continuing to impact the UK’s economic recovery from COVID-19, with the number of sectors reporting output growth falling to a six-month low in August.

Nine of the 14 sectors followed by the Lloyds Bank UK Recovery Tracker saw output rise month-on-month, down from 12 in July and the lowest number since February when the UK was still in lockdown.

Staff shortages and supply chain disruption caused the output of the transport, chemicals, and metals and mining sectors to each fall for the first time six months.

The output of transport businesses was most acutely affected by recruitment challenges, with firms saying their ability to complete orders was significantly reduced by the shortage of haulage drivers.

Overall, the haulage driver shortage combined with global supply issues causing lead times at UK manufacturers to lengthen to the greatest extent since the peak of the coronavirus pandemic in April 2020.

Elsewhere in the UK economy there were better figures, with consumer-facing businesses in particular reporting strong month-on-month performances.

The output of tourism and recreation firms and food and drink manufacturers rose most sharply, which can be attributed to more people taking holidays in the UK during peak season.

Inflation remained a concern for businesses in all sectors, with overall cost pressures at near record levels.

This is due widespread shortages of materials and higher wage costs.

Jeavon Lolay, Head of Economics and Market Insight, Lloyds Bank Commercial Banking, said: “Labour availability is critical to the UK’s recovery from COVID-19. August’s data shows how staff shortages in one sector have a ripple effect across the whole economy.

“The lack of haulage drivers pushed transport sector output into contraction for the first time in six months, with manufacturers that rely on logistics firms to deliver key inputs unable to complete their orders as a result.

“Manufacturers are already facing into a challenging environment. Key import markets are still struggling with the delta variant and vaccination rates, contributing to significant supply side delays.

“And, while input costs did fall slightly last month, the rate of inflation is still in record territory, and points to a further pick up in UK CPI inflation in the coming months.”

Key takeaways:

  • While the UK has largely recovered from the record-breaking breaking economic crisis of 2020, labour and supply shortages are continuing to cause problems for businesses
  • Consumer price inflation (CPI) is currently at 3.2% and rising at record levels
  • If you’re struggling with cashflow management or recruitment, head over to the UMi platform for tailored advice and support: https://www.weareumi.co.uk/webapp/running-a-business/building-a-great-business/

 

Richard Dawson
Article by Richard Dawson
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