British recovery is being held back by record levels of disruption in supply chains, as backlogs hit and staff shortages take a toll on multiple industries. The Confederation of British Industry’s (CBI) latest Industrial Trends Survey found that manufacturers are suffering the worst stock shortages on record, with supply chains upended by escalating shipping costs and impact of the pingdemic on staffing levels.
Meanwhile, a business index published by IHS Market and the Chartered Institute of Procurement and Supply (CIPS) showed the UK’s rebound continued to lose momentum this month. The flash composite purchasing managers’ index (PMI) for August fell sharply to 55.3, from 59.2 in July, a six-month low.
IHS Markit said the number of companies reporting that shortages of staff and materials were hurting growth was a record 14 times the normal level. Among the worst affected by product availability in August, were electronics manufacturers as the industry suffered from semiconductor shortages that have been devastating the automotive sector.
Lead economist at the CBI, Alpesh Paleja warned that ongoing disruptions “could choke off future manufacturing growth.” He said, “It’s therefore vital that businesses and the Government continue to work together to smooth over some of the frictions in supply chains and the wider sector, until activity settles back down to normal levels.”
Chief business economist at IHS Markets, Chris Williamson said, “Rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages.”
Kieran Tompkins, an economist at Capital Economics, warned the slowdown presented twin risks to the economy. He said, “First, that the economic recovery might be slowing a bit faster than we had thought, posing a downside risk to our view that the economy will return to its pre-pandemic level by October. Second, that materials and staff shortages might feed into second-round effects of rising wage growth, meaning that inflation is higher for longer.”