Global Challenges affecting vehicle production and supply

Posted
by
Gofor
on
January 9, 2023

We explore the main causes behind the global supply issues and how they've affected vehicle supply.

Global Challenges affecting vehicle production and supply

Staff Shortages: Covid, Brexit & Structural Economic Issues

Across the UK a large number of sectors areexperiencing staff shortages, with the hospitality, construction and haulageindustries being hit particularly badly [1].  At the end of lastyear, the Chief Executive of the Food and Drink Federation stated that therewere around 500,000 staff shortages across the entire UK food supply chain; anumber which represents 12.5% of the total workforce needed [2].  Moreover, according toa recent ONS survey, 37% of large businesses reported that they had struggledwith staff recruitment [3]. 

But what has really exacerbated the problem of staffshortages?  The problem is tri-fold: Brexit, Covid and Structural Economic Issuesin the UK.

Brexit

As the free movement of workers came to an end withthe UK exiting the EU, and the governmental decision to instead replace thiswith a points-based immigration system has made it significantly more difficultfor UK firms to recruit EU workers. Popular sectors with EU workers such as agriculture, haulageand food & manufacturing have been the most severely hit and as a resulthave struggled to replace the vocational chasm [9].  

Covid

Soon after the pandemic began and as the initialBrexit date of December 31st 2020 loomed, around 1.5 million EU nationals leftthe UK [4].  This was heavily influenced by a combination of the increased cost andbureaucracy of international travel as well as new restrictions at the time ofthe pandemic [5].  

Vocational training in most sectors was alsodisrupted by the pandemic, with many courses postponed or cancelled, there wasa significant reduction of newly trained staff - for the haulage sector thisnow means there is a backlog which will take around 18 months to fully correct[6].

Finally, employee burnout, a significant stressor inthe UK job market reached its peak at the height of the pandemic with swathesof employees either leaving their posts and searching for other roles withinthe same industry, or some leaving the market altogether [7].  Since the start of thepandemic, a total of around 1% of the working-age population are out of workand not actively searching for new positions [8].

Structural Economic Issues

The impact of both Covid and Brexit on the UK andglobal supply chain has also resulted in the exposure of long-standing problemswith labour supply more specifically in certain sectors.  

Lorry drivers in the haulage sector have long beentolerating the combination of low wages, poor working conditions, unsociableworking hours and long shifts that is typical of their role [10,11].  There is also a lackof young people entering into the industry, resulting in a surplus of driversthat are beginning to reach retirement age and too little new drivers toreplace those leaving [12].                   

Post-Brexit Trading Rules

With the UK no longer in the EU customs union orsingle market, there are extensive customs and regulatory checks adding to thecost and complexities of cross-border trade. 

Since the end of the Brexit transition period, the UK’stotal trade in goods with EU countries has dramatically decreased by 23.1% [13].  With EU drivers beingcaught in lengthy border delays, the UK is a less attractive destinationparticularly as many drivers are paid based upon distances travelled [14].

Finally, from a purely operational and logisticalperspective, businesses have struggled to organise and make decisions abouttheir supply chains in the last few years due to the conflicting andever-changing Brexit negotiations throughout the transition period.     

Global Supply Chain Problems - Electronic Components, Energy & Shipping

The majority of UK firms rely on both importingintermediate products and raw materials from abroad and exporting finishedproducts and components abroad.  According to the Fed Global Supply Chain Barometer - which measuresglobal supply chain pressure - the current supply chain pressure is at itshighest point since the index was created in 1997 [15].  Several key factorsare currently playing a significant role in creating pressure upon the globalsupply chain.

Electronic Components

The closure of many key Asian ports and factoriesduring the pandemic has led to the overall global shortage of electroniccomponents - most notably affected in the vehicle industry is that ofsemiconductors and microchips used in the production of electric vehicles.  Currently, there aresubstantial backlogs for vehicle manufacturers across the globe with mostwaiting times exceeding 18 months and the number of new vehicles registered inthe UK at an all time low [18].  As a result of this, the second-hand vehicle market has experienced asharp increase in prices [19].

Energy

Global gas and energy prices have soared in theoutcome of the Russian war with Ukraine driven by a curb on supply from Russiato Europe, as well as businesses boycotting Russia as a business hub and itsproducts.  Comparedto EU countries such as France, Germany and Italy, the UK has limited gasstorage facilities leaving the country more susceptible to escalating energyprices [16].  More significantly, business energy consumers are not protected by theincrease in prices, with around 1 in 4 UK organisations reporting that theirsuppliers or production was affected by the rise in gas prices [17].

Shipping

In September 2021, the average cost of shipping alarge container reached a record high of being four times more expensive thanthe previous year [20].  The combination of temporary port closures and a shortage of portworkers, resulting in slow turnaround times, has exacerbated problems for theshipping industry to meet the global demand post-pandemic [21].  Increased shippingcosts have also driven up the price of commodities, such as timber, which hashad a knock-on effect on general construction costs around the world [22].   

With all of the above impacting negatively upon global supplychains, hope may appear lost, but there are still vehicles which the Gofor teamcan source for your company fleet.

We’d love to work with you to help source your company fleet –get in touch to talk to our dedicated team.

References

[1] www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/jobsandvacanciesintheuk/february2022

[2] https://www.instituteforgovernment.org.uk/events/border-supply-chain

[3] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/jobsandvacanciesintheuk/february2022

[4] https://www.parliamentlive.tv/Event/Index/e4b0365f-1d36-4f17-8c3c-9368de782999

[5] https://www.parliamentlive.tv/Event/Index/a10512dc-9615-4af0-ae76-a2a8662128c0

[6] www.rha.uk.net/news/news-blogs-and-press-releases/news-updates/detail/-it-will-take-at-least-18-months-to-train-100-000-hgv-drivers-

[7] www.bloomberg.com/news/articles/2021-12-20/u-k-firms-fear-great-british-resignation-after-staff-departures

[8] www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/employmentintheuk/latest

[9] www.newstatesman.com/chart-of-the-day/2021/09/how-brexit-and-covid-19-caused-the-number-of-hgv-drivers-in-the-uk-to-plummet

[10] www.ft.com/content/59ea33c3-8bcd-43a0-bc62-28763d9c440c

[11] www.ft.com/content/5f832d86-827e-4596-999d-e0618364dbe3

[12] www.rha.uk.net/Portals/0/News/Policy and Campaigning/Policy andCampaigning Documents/RHA letter to Prime Mini...

[13] https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/theimpactsofeuexitandthecoronavirusonuktradeingoods/2021-05-25#data-sources-and-quality

[14] www.businessleader.co.uk/study-finds-brexit-causing-1-in-3-uk-hauliers-to-avoid-food-drinks-industry

[15] https://libertystreeteconomics.newyorkfed.org/2022/01/a-new-barometer-of-global-supply-chain-pressures

[16] www.newstatesman.com/chart-of-the-day/2021/09/how-the-uks-low-gas-storage-capacity-leaves-it-vulnerable

[17] www.ons.gov.uk/economy/economicoutputandproductivity/output/datasets/businessinsightsandimpactontheukeconomy

[18] www.smmt.co.uk/2021/10/battery-electric-vehicles-power-on-despite-supply-issues-bedevilling-new-car-market

[19] ww.bbc.co.uk/news/business-58993851

[20] www.economist.com/finance-and-economics/a-perfect-storm-for-container-shipping/21804500

[21] www.bbc.co.uk/news/58926842

[22] www.bbc.co.uk/news/business-58721085

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