Where is everyone?

At the start of the month Tim Martin’s reported appeal for a ‘more liberal immigration system’ to fill staff shortages as Weatherspoon’s bars reopened was covered widely by journalists keen to mock the notorious Brexiteer. Martin has since denied that the chain is struggling to fill vacancies beyond their usual seasonal strains.
There have however been a slew of other sectors announcing labour shortages in addition to hospitality, including in care, construction and food processing. A common thread: these sectors are fuelled by minimum wage jobs, or close to, and involve work that posed a particularly high risk to workforces during the pandemic. Care, construction and chef work were three of the deadliest occupations.
Brexit is of course the other factor at play and for many companies, labour supply issues pre-date Covid. Food manufacturers like as Bakkavor and Cranswick have been recording labour shortages as a risk since the referendum result, when over a third of UK food manufacturing jobs were held by EU migrants. In 2020 Cranswick’s reported that in response it would be reviewing ‘relationships with third party agency providers’ and seeking to employ more ‘permanent members of staff’. A positive outcome perhaps. Labour saving technologies are also being explored. Unsurprising given that food processing is the least automated of the manufacturing subsectors and investments in tech by UK companies lag behind European competitors.
How are companies in other sectors responding? Rather than materially improving care jobs (which would threaten profit margins and put care home rent obligations under strain) care chain operators are instead lobbying the Government to extend the EU visa scheme to care assistants (it currently includes only managers).
Meanwhile global hotel giants like IHG and Marriot have set up ‘alumni networks’ – meaning they fired people during lockdowns with a loose hope of keeping in touch and rehiring people when demand picked up. However, the massive labor shortage in U.S. hotels (they are 600,000 employees off pre-pandemic levels according to the U.S. Labor Department) suggests the companies did not fully grasp the risks posed by laying off workforces and crossing their fingers that they can rehire them later. Hotel workers, it appears, are taking their skills elsewhere.
Compass PLC, the global outsourcing and catering company with a workforce of half a million, reported it would address ‘labour shortages and salary cost pressures’ by implementing ‘recruitment and retention strategies’. Raising wages is the most obvious recruitment and retention strategy, but it feels unlikely that these chains, whose model has been based on low pay and high staff turnover, will take this step. The more radical option is simply to reduce services where there simply isn’t enough labour.
As always, there are some knotty issues for investors here. Market reality ought to be that limited supply increases price, and in many ways workers are simply playing catch-up after a long period in which their hand was weak. A shift in the relative rewards available to labour and capital may be on the cards.

Leave a Reply

Your email address will not be published. Required fields are marked *