UK tries to kick 25-year imported labour habit By Reuters
© Reuters. FILEPHOTO: This sign informs customers that the fuel supply has been exhausted. It was taken at an Esso fuel station, London, Britain. October 4, 2021. REUTERS/Hannah McKay/File Photo
LONDON, Reuters – Brexit and COVID-19 have ended the 25-year-old British model of importing labour cheaply. They are sowing seeds for a winter in discontent reminiscent of 1970, complete with wage rises, shortages of workers, and spiralling wage demand.
The chaos of the worst public health crisis for a century and the exit from the European Union have pushed the fifth largest economy in the world into an abrupt attempt to stop its dependence on cheap import labour.
Boris Johnson, Prime Minister of the United Kingdom’s Brexit Experiment is a unique example among large economies. It has further tightened supply chains that are already struggling globally for all things pork, poultry and medicines.
Prices and wages will rise.
Uncertain are the long-term implications for growth, Johnson’s political fortunes, and Britain’s ongoing relationship to the European Union.
Johnson (57) said that he would not return to the failed model of low wages and low skills supported by uncontrolled migration when Johnson was asked about the shortages.
Johnson stated that Britons had voted to support change in 2016’s Brexit referendum, and in 2019, after Johnson became the most powerful Conservative prime Minister since Margaret Thatcher.
According to Johnson, stagnant wages must rise. This is for some the economic logic behind Brexit. Johnson made it clear to business leaders that they should pay more for workers in closed meeting.
Johnson’s “Leave” campaign won a narrow victory by emphasizing that “taking back control” over immigration was its key message. Later, he promised to defend the country against the EU’s “job-destroying machines”.
Johnson refers to his Brexit gamble simply as “adjustment”, though critics say that he uses a lack of labour as a chance for workers who want to see a rise in their earnings.
However, limiting immigration is a major change to the United Kingdom’s economy policy. This was right after the pandemic that triggered an unprecedented 10% contraction in 2020. It was the worst since more than 300 years.
Following the 1989 fall, Europe expanded its eastward expansion and Britain, along with other European countries, welcomed millions from Poland and other European nations.
It is not known how many arrived: the British government stated that it had received 6 million settlement applications from EU-nationals in 2021. That’s more than the total number of applicants it believes were there in 2016.
The government gave up giving preference to EU citizens after Brexit over other people.
Brexit caused many Eastern European workers to flee the country, along with around 25,000 truckers. Meanwhile, around 40,000 truck licensure tests were stopped due to pandemic.
Britain has a shortage in truck drivers, which is causing queues at gas stations as well as worries about getting food to supermarkets.
Craig Holness is a British trucker who has 27 years of experience. “Wages will need to go up. So prices for everything that we deliver and everything that you purchase on the shelves will also have to rise.”
The wages have risen already: A heavy goods vehicle (HGV), Class 1 driver position was advertised at 75,000 Pounds ($102,500 per annum), the most expensive the recruiter has ever seen.
According to the Bank of England, CPI inflation is expected to increase to 4% in late 2012 “largely because of developments in energy prices and goods prices”. The case for increasing interest rates has strengthened from its historic lows.
The Bank cited evidence to show that recruitment difficulties were becoming more prevalent and more acute. Agents at the Bank attributed this “to a mixture of factors”, including a faster recovery of demand and reduced availability of EU workers.
Johnson’s ministers dismissed repeatedly the suggestion that Britain could be heading for “winter discontent”, similar to what brought Thatcher into power in 1979. This would have seen spiralling wage demand and inflation, as well as power shortages.
Johnson declared on Sunday that “our country has been operating at a relatively low rate of wage increase for a while – basically, stagnant wages, and completely stagnant productivity. This is because we have chronically failed to invest into people and equipment, and wages have remained flat.”
However, he didn’t explain why wage stagnation would not be resolved by lower immigration combined with higher wages which fuel inflation that eats into actual wages.
The impact of higher prices on an economy driven by consumers and more dependent upon supply chains, whose antennae extend across Europe and beyond, was not clear.
Some people believe the United Kingdom has made a complete circle: It was the European sick man in the 1970s and it is leaving, as many European politicians seem to hope.
Johnson’s legacy depends on the ability to prove them wrong.