By James Davey and Kate Holton

LONDON (Reuters) – Warehouses in Britain are having to pay up to 30% more to recruit staff after a chronic shortage of workers exacerbated pressure on already buckling supply chains and threatened to derail the run up to Black Friday and Christmas.

According to the UK Warehousing Association and an agency that recruits in the industry, they have difficulty replacing European employees who arrive during the Christmas period to work in warehouses or distribution centres.

Clare Bottle, the CEO of UK Warehousing Association said that members have reported increasing their pay rates by 20-30% to get workers in entry level positions.

There are approximately 200,000 workers in warehousing. She stated that the problem was huge. We are tens to thousands short, I’d say.

Jordan Francis is the commercial director at Prodrive, a recruitment agency that supplies 35 warehouse businesses in Southern England. He said there were around 100 vacant positions that he had to fill.

For a warehouse operator position, he is offering a 25% raise in salary. Although he is able to secure more employees at the same rate, he stated that overtime was less common for workers who are paid higher wages.

He said that he had never witnessed a “market like this” and added that many of his European former workers have chosen to move to France or Germany where visas are not required.

The shortages in Britain’s logistics network come on top of a spike in European prices and a post-Brexit and COVID shortage of truck drivers that has left the world’s fifth-largest economy reeling.

One senior executive from a large British retailer spoke under anonymity. “I can’t really think of any time in the past 20 years that labour intensive UK industries have faced problems like this.”

This is why temporary warehouse workers are critical. The critical problem is temporary warehouse labour. Retailers require workers who can work from September to help them deal with Black Friday or Christmas.

Part-time job opportunities were created by COVID-19 victims who had been furloughed. The furlough program will close at the end September.

Due to the retail industry’s move away from physical shops, more workers are required in warehouses.

Particularly in the areas that have a high concentration of warehouses or distribution centres (e.g. Milton Keynes, Northampton and Northampton) is this crunch being felt.

Totaljobs lists thousands of open warehouse positions in the region. Comparing to the national minimum wage in Britain of 8.91 Pounds ($12.19), entry level positions were offered for as little as 23 pence per hour. The evening hours offered an additional 60-pound bonus.

IMPLICATIONS FOR SHOPPERS

Executives said Britain’s major supermarket groups and blue chip general merchandise retailers would cope better than others due to their deep pockets and higher levels of automation but smaller players would struggle.

According to a senior retail executive, online shoppers could have standard delivery times extended by up to 7 or 10 days. It is possible that next-day premium delivery services will be discontinued.

Executive said that online retailers could rationalize their product offerings, dropping lower-value products which require too much warehouse labor.

Executive said “If your work is manual, and you haven’t invested in automation at all,” and that customers could see longer delivery times, and items being unavailable online from November. If the situation does not improve, consumers might also be subject to higher shipping costs.

Even though there are specific problems in Britain, the pay rises do not apply only to Britain. According to Reuters, Amazon.com Inc (NASDAQ) increased the average American starting wage and intends to add 125,000 workers in warehouse and transport.

FedEx Corp., a U.S. shipping company (NYSE) said that there had been a $450 million increase in staff costs year over year due to elevated wages and overtime and increased spending on third parties transportation services.

The warehouse sector in Britain warned that prices would rise and operators have already experienced low margins.

The trade association Bottle stated that there is very little margin in warehouses. “Most companies, especially the small ones, keep their overheads very low and have very flat management structures. A large proportion of the costs they pass along are labour costs.”

“If labor costs increase, there are no other options.”

($1 = 0.7311 pounds)