Staff shortages and supply disruption threaten to derail recovery, say BCC

The latest economic forecast from the British Chambers of Commerce highlights the impact of recruitment and supply problems - and also warns of potential damage from the government's National Insurance hike.

Britain's economic recovery is expected to slow over coming months thanks to staff shortages and supply chain disruption, according to a new forecast from a leading business group.

Official figures show UK GDP grew by 4.8% in the second quarter but the British Chambers of Commerce (BCC) predicts this will slow to 2.8% in the third quarter and 1.6% in the last three months of 2021.

The BCC also warned of the "real danger" that the £12bn National Insurance hike announced this week could further stifle Britain's bounce back.

The warning about the impact of labour shortages comes a day after Bank of England governor Andrew Bailey said he feared the problem could persist.

HGV drivers and meat processing workers are among the areas where shortages have been identified.

Supply issues have affected a number of well-known businesses including Ikea, McDonald's, Greggs and Wetherspoons.

The BCC's forecast comes on the same day as a new report from the Recruitment and Employment Confederation (REC) showed recruiters and employers faced an unprecedented decline in the availability of candidates for roles.

According to the BCC's new forecast, Britain will still post annual growth of 7.1% for 2021 as a whole, which would be the strongest on records going back to 1949.

However the slowdown in the pace of the recovery - after last year's pandemic-driven recession - means it is now not expected to reach pre-COVID levels until the first quarter of next year.

Suren Thiru, head of economics at the British Chambers of Commerce, said the economy remained "on course for a historic revival" this year thanks to the release of pent-up consumer demand as well as higher government spending.

"However, our latest outlook also points to a loss of momentum  in the coming months as staff shortages, supply chain disruption and rising cost pressures limit output from many sectors," he added.

"A prolonged period of acute supply and staff shortages could derail the recovery by forcing firms into a more permanent reduction in their operating capacity, eroding their ability to fulfil orders and meet customer demand."

Source: Sky News