Brexit Has Made Shortages Worse, Government Told In Budget Analysis
4 min read
Brexit has made supply chain "bottlenecks" worse in the UK, according to the independent financial watchdog that provides the government with data.
The Office for Budget Responsibility (OBR) has said shortages that have affected a range of sectors including food and retail, have in the past few months been "exacerbated" by post-Brexit immigration rules and new barriers to trade with the European Union.
Ministers have been reluctant to admit that leaving the EU has contributed to recent supply chain disruption, which is set to continue in the run-up to Christmas and beyond.
Delivering his Budget today, Chancellor Rishi Sunak said disruption would persist for "months" but did not cite leaving the EU as a reason for shortages of lorry drivers and other workers.
While a global phenomenon, labour shortages are particularly acute in the UK, with post-Brexit immigration rules that make it harder for foreign workers to join the workforce adding an extra layer of disruption.
But in the OBR's analysis, which the government uses to inform the Budget, the watchdog said the UK's economic rebound from the coronavirus pandemic had been frustrated by "supply bottlenecks have been exacerbated by changes in the migration and trading regimes following Brexit".
Labour shortages and disruption to supply chains, combined with soaring energy prices, "can be expected to hold back output growth in the coming quarters, while raising prices and putting pressure on wages," the OBR said.
Shortages of lorry drivers, worsened by Covid-19 and Brexit, have led to delays across the supply chain which in turn have resulted in shortages in supermarkets and household names like McDonald's, Greggs and Ikea. Elsewhere, a dearth of meat processors has led to thousands of healthy pigs being culled on farms, while a shortage of pickers has left vegetables rotting in fields.
The government has created temporary visa schemes for lorry drivers, poultry workers and butchers in an attempt to abate the labour crisis.The scheme for overseas drivers has been criticised by industry groups who say it is too short to attract significant numbers of applicants.
However, ministers insist that relaxing immigration is not the best way of tackling labour shortages and that the answer lies in businesses hiring more homegrowns staff, as well as improving pay and working conditions.
Elsewhere in its analysis, the OBR said the latest evidence suggested the UK's recent trade with the EU had suffered more than its trade with the rest of the world due to Brexit.
While the country's goods trade with the rest of the world had recovered to 7% below 2019's pre-pandemic levels, goods trade with the EU was 15% down, the OBR said.
The watchdog said it was too early to reach definitive conslusions about Brexit's impact on the economy because the UK's trade deal with the EU had yet to be implemented in full.
The government has not yet introduced post-Brexit checks on goods entering the UK from Europe, having delayed them twice, with the first wave of paperwork not kicking in until the start of 2022.
Kirsten Oswald MP, the SNP's deputy leader in Westminster, said Sunak "completely ignored the Brexit elephant in the room" when he revealed the Budget on Wednesday.
She told PoliticsHome: "Rather than using his Budget to deliver a meaningful a a multi-billion-pound Brexit Recovery fund to face head on the devastating impact Brexit has had on the economy, households, trade and businesses, Rishi Sunak shamefully turned his back on it.
"The OBR makes clear that Brexit has 'exacerbated' the supply chain crisis facing the UK — with severe staffing shortages, empty supermarket shelves, rotting food in fields, and the rising cost of goods and services."
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