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UK and Irish IKEA stores undergoing severe supply shortage


A recent BBC article makes a report of 22 of Ikea’s UK and Ireland stores undergoing shortages, with supply issues with 10% of its stock.


These shortages have also been seen all around the UK economy in different sectors. In the UK during 2020, only 16.2 billion kilometres have been driven by vehicles transporting goods. This is down 15% compared to 2019. Another market outside of retail that has been impacted is healthcare, with flu jabs having also been delayed. It is important to note that a delay in the flu jabs could have a detrimental effect on the vulnerable in society and the NHS, and so the issue will need to be addressed rapidly.


The Government has stated that they are working to address the various sectors experiencing shortages, however, they have not specified yet what their plans are.


Ikea was rather hopeful with the situation, apologising for the supply issues and saying that they hoped the situation would improve “in the coming weeks and months”, however, when looking at the causes of the problem, it seems that it will not easily be solved quickly.


The root of this issue is down to a shortage in HGV drivers, arising from Covid and Brexit. The situation is further magnified by a rise in the derived demand for drivers, as there has been a surge in online shopping during the pandemic. With both demand rising and supply falling, the market cannot adjust quickly enough without rising prices dramatically.


One reason behind the shortages is Brexit, with tax changes making it more expensive for foreign drivers to work in the UK.


As the UK workforce are unable/unwilling to fill these places, it seems that either a change to the taxation system or a Government-funded programme to incentivise UK workers to train as HGV drivers are needed to raise the supply of drivers to the levels of demand in the UK market.


Another impact of Brexit is the increased difficulty for migrant workers to find work, especially if they do not have the necessary qualifications for a Visa.


Logistic firms have been calling on the Government to fix this issue by allowing temporary work visas for lorry drivers in the short term.


This however would only provide short term relief to the ongoing problem the UK market faces, as the issue will return once the allowance of temporary work visas is ended.


However, countries throughout Europe have also been impacted by supply disruptions, suggesting that there is more than one factor causing this issue.


The Coronavirus pandemic has increased the magnitude of the labour shortage in HGV drivers.


Schemes such as Furlough may have resulted in some of the labour markets becoming voluntarily unemployed or making money through their own business/personal incomes as they seek a more fulfilling work.


Torsten Bell from the Observer discusses how the only solution to the supply crisis may be paying “more to fill [the] jobs- meaning higher prices- or [having] to accept lower levels or output”.


However, with a rise in the general price levels, inflation would occur. Causing household expenditure to also increase. Over the Coronavirus pandemic, household poverty has already risen from 18% (2019) to 23% (2021). This means that with added inflation, poverty may potentially rise dramatically. A rise in poverty may also damage the economy further, with lower levels of consumption and a higher dependency on the Government, aggregate demand may fall resulting in a fall in Real GDP.


From this, it seems that modern capitalism will not solve the problem and that the Government may have to directly intervene to resolve the supply shortages. Could this be a new way forward, with economies moving away from the free market structure due to the need for a rise in Government interference in the Economy?

 

Written by Charlotte Hurst

Research compiled by Jonas Theaker


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