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Food prices predicted to rise, wholesalers warn


The current shortage of lorry drivers, which is affecting both the UK and EU, is predicted to cause food prices to rise in the future, wholesalers have warned.


The EU is currently experiencing a mass shortage of 400,000 lorry drivers while the UK is seeing one of about 100,000 workers, the BBC reports.


Many businesses, such as Ikea, have been complaining about the shortage, and James Bielby, who is the Chief Executive of the Federation of Wholesale Distributors, said there were "chronic" staff shortages throughout the food and drink supply chain, with up to half a million vacancies.


Whether this shortage is due to Brexit is up to debate as the EU is also severely affected, however, David Josephs, owner of All Greens Wholesale, said Brexit had been the biggest cause of additional costs for his business.


Nevertheless, the massive surge in demand for online shopping during the COVID-19 pandemic is one likely factor that is contributing to this shortage.


This is because free markets cannot respond to changes in demand instantly, lag times between factor inputs can be lengthy as it takes a while for individuals to gain the correct licensing to become lorry drivers.


The BBC reports that Sam Waine is looking to become an HGV driver, however, the process of becoming one is complicated as she has seen hurdles in her application since January.


This means that, because it takes a long time for supply to respond to the change in demand, the price elasticity of supply of lorry drivers is likely to be more inelastic than elastic.


Despite this, it is likely that the available vacancies of lorry drivers will begin to decrease as incoming heavy vehicle drivers are incentivised by the recent wage hike of 40%.


The BBC reports that Tom Reddy, who has been driving lorries for more than 15 years, has seen his pay increase from £17.50 an hour to £24.50.


Yet despite this pay, Tom states that he wishes to leave his profession to do something more fulfilling, a factor which may actually lead to the labour shortage being exacerbated as the lack of low skilled migration into the UK, due to Brexit, which has increased migration barriers, means that the UK no longer has access to lower-skilled labour and individuals which are willing to do such work.


James Bielby also stated that “Under these circumstances, it is inevitable that some of these cost increases will be passed through the supply chain, which will lead to food price inflation.”


The past trend of food prices within the UK has been deflationary during the pandemic, meaning that a rise in the price of food would be a great reversal in the previous trend.

So, if food prices were to rise, and if this rise in price was to persist for an extended period of time, certain UK customers would likely find themselves in a tough position.


This is because food is an essential item, meaning that it is likely to be price inelastic.


This means that, if the price of food was to rise, many families would be forced to pay extra due to the lack of alternatives, which, for some, maybe very harmful.


This is because food poverty rates are already very high in the UK as during the COVID-19 pandemic, the UK’s biggest food bank, the Trussell Trust, had experienced a 33% increase in food parcel deliveries to a total of 2.5 million.


Therefore, food inflation will lead to reduced purchasing power for UK households, meaning some UK consumers will have to cut back on normal goods to prioritise inferior ones, and, in some cases, this inflation may increase food poverty rates as many in the UK already have to rely on food banks.


This combined with gas prices tripling in Europe will also make this issue even worse as the incoming winter will force some UK households to cut back heavily as they struggle to make it from paycheck to paycheck or may lead to more debt being acquired by consumers as some will have to live off credit cards to ensure that they can still survive and sustain their living as prices of necessities rise.

 

Written by Hubert Kucharski

Research compiled by Jonas Theaker





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