As a result of workforce shortages and transportation disruption caused by COVID-19 and Brexit, Britain's economy has been thrown into a supply chain crisis, with major retailers' stock levels at their lowest since 1983. Warehouses in Britain have to pay up to 30% more to recruit staff after a chronic shortage of workers exacerbated pressure on already buckling supply chains and threatened to derail the run-up to Black Friday and Christmas.
The warehouse trade group and a recruitment firm for the industry both claimed they were having difficulty replacing European workers who used to come in for the holidays to work in warehouses and distribution centres. Clare Bottle, the CEO of the United Kingdom Warehousing Association, claimed her members have increased compensation by 20% to 30% to attract people for entry-level positions. However, she stated that warehousing employs roughly 200,000 people. According to her estimation, the issue is significant, and they might be short by tens of thousands.
Jordan Francis, the commercial director of Prodrive, a recruiting service that supplies approximately 35 warehouse companies in southern England, said he already had around 100 openings to fill. For a basic warehouse operative position, he is giving a 25% wage raise. While he could secure more workers at that rate, higher pay meant workers were less willing to do overtime. His former European employees had chosen to relocate to France or Germany, both of which do not require visas.
The shortfalls in the United Kingdom's logistics network come on top of a jump in European natural gas costs and a post-Brexit and COVID scarcity of truck drivers, all of which have left the world's fifth-largest economy in shambles. Temporary warehouse labour is a critical problem. Retailers require staff to start as early as late September and labour for four weeks to four months to deal with the two busiest shopping seasons of the year, Black Friday, and Christmas.
Last year, part-time work was taken on by persons who had been laid off because of the COVID-19 outbreak. The furlough programme, however, expires at the end of September. The change in retail from physical stores to online means that warehouse workers are in higher demand than ever. The crunch is particularly felt in areas with a heavy concentration of warehouses and distribution centres, for example, Milton Keynes and Northampton in central England.
The COVID-19 pandemic caused disruption, which is affecting countries worldwide, is contributing to worker and material shortages, according to business executives and employment experts. Still, the United Kingdom is particularly vulnerable following the implementation of stricter migration laws following Brexit. Thousands of warehouse jobs are posted on the Totaljobs website in that region.
Compared to a national British minimum hourly wage of 8.91 pounds (S$ 16.50) that entry-level roles would have previously been offered at or around for over 23s, jobs were offered at between 9 and 13 pounds per hour, with evening work offering a 60-pound bonus. Executives said Britain's major supermarket groups and blue-chip general merchandise retailers would cope better than others due to their deep pockets and higher levels of automation, but smaller players would struggle.
The senior retail executive said that standard delivery times could be extended from around five days to seven or ten days for online shoppers. It is possible that premium next-day delivery services will be phased out. According to the CEO, retailers might also streamline their online product lines by eliminating low-value items that need disproportionate warehousing labour.
Despite the specific challenges in the United Kingdom, wage raises are not limited to that country. Amazon.com Inc. has raised its average starting wage in the United States and aims to hire an additional 125,000 warehouse and transportation staff.
Meanwhile, the United States delivery firm FedEx Corp said staffing problems had resulted in a USD 450 million (S$ 698 million) year-on-year increase in costs due to higher wage rates and overtime, increased spending on third-party transportation services, and shipping glitches. In addition, Britain's warehouse industry warned that operators already had low margins, and price rises would need to be passed on.
According to the trade association's Bottle, there is very little give in those margins. Most warehouse companies, particularly the smaller ones, keep their overheads very low. They have highly flat management structures, and labour costs account for a large amount of the expenditures they pass on. Therefore, if the labour costs go up, there is nowhere to go. It is expected that there will be pressures in logistics, food manufacturing and hospitality as Christmas comes closer, and hiring for this period has already started in many companies.