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07 October 2021

Mixed Outlook for UK Retail

With the festive season approaching, you could be forgiven for being concerned by warnings that labour shortages could lead to supply issues over Christmas and the New Year.

In recent days, a host of media outlets and high street retailers have warned that, without action, shelves could be empty as demand surges in the run-up to Christmas.

However, as fuel supply difficulties eased in recent days, some retailers remain optimistic about the run-up to the festive season. This week, Morrisons’ Chairman Andy Higginson stated that the chain is “not worried” about the “well publicised” and “slightly overblown” logistical issues which have affected various sectors in recent weeks.

The Chairman of the UK’s fourth-largest supermarket was speaking to the BBC shortly after US private equity firm Clayton, Dubilier & Rice (CD&R) won an auction to buy the firm for £7bn.

Morrisons also announced it is seeking to hire 3,000 extra workers to help it cope with the increased demand expected at Christmas. The new roles will be based at its distribution centres and manufacturing sites across the UK. However, while firms including Sainsbury’s and John Lewis have already announced their hiring intentions, the wider recruitment picture looks somewhat gloomy.

Announced as part of a plan to ease the fuel supply worries, the government offered 300 short-term visas to overseas lorry drivers. However, only 127 foreign drivers applied according to Prime Minister Boris Johnson, while the Department for Business said the figure was just 27.

Elsewhere, retailer Next has stressed that overseas workers are the only way to solve shortages, particularly in certain areas and in the run-up to Christmas. Lord Wolfson, the company’s CEO, told the BBC that Next’s warehouse and logistics staffing were under pressure, and suggested that businesses could pay for visas for the skilled workers they need to ensure business continuity.

Next has also warned that there may be price rises and stock shortages in the coming months, unless immigration rules are relaxed to aid with staffing problems. The firm also noted that higher shipping costs, particularly for its larger furniture items, were impacting costs.

While some are already counting down the days to Christmas, the economic and logistical picture may change many more times before December arrives.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Mixed Outlook for UK Retail
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