Over the past week or so, you may have been mistaken for thinking that we were back in the height of last year’s lockdown, where toilet paper was treated like a rare commodity and if you were lucky enough to see some stacked on a supermarket shelf, you were obliged to buy as much as you were allowed… or able to carry. In recent weeks, the hottest commodity is fuel.
A lack of truck drivers has led again to supply shortages, as well as empty forecourts in a few petrol stations dotted around the UK. The British media in standard form seemed to relish another opportunity to make a drama out of a crisis, stoking fears and prompting a near nationwide panic, leading thousands of people to queue for hours, waiting for a brief opportunity to top up their car’s petrol tank. For a particularly worrisome few, they also took the chance to fill up anything that could remotely hold fuel, ranging from metal jerry cans to plastic carrier bags.
This has led some to point towards Brexit, and proudly proclaim “we told you so!”. But I suspect this is slightly wide of the mark. Whilst it is certainly the case that a large proportion of lorry drivers originate from the EU, and that since Brexit these drivers have found it more difficult to work ‘cross-border’; see the lorry queues from a few months ago above. However, this is only part of the problem, with the effects of COVID-19 over the past 18 months having also seriously damaged the UKs ability to keep its supply chain together.
According to the ONS, there are around 16,000 fewer EU nationals working as HGV drivers compared to this time last year. However, there is estimated to be a shortage of around 100,000 HGV drivers in the UK at this time. Clearly, the UKs fuel crisis isn’t one caused by Brexit alone, but it has been worsened by it.
Many industry experts have explained that because of COVID and the recent ‘ping-demic’, the training and testing of truck drivers was paused for most of the past 18-months. This has created a gap which can’t easily be papered over, leading to very real issues in the UKs ability to keep its petrol stations pumping.
Given what the country has been through in recent years, starting with Brexit in 2016, the first rumours of a new virus emerging from Wuhan in late 2019, leading to full scale lockdowns in early 2020, it is unsurprising that the UK has seen its traditional model of supply disrupted. Normally, commodities such as fuel are moved around the country by an invisible workforce, and whilst there has been an abundance of these workers this has worked well. However, due to the lack of available new drivers, and being unable to replace those returning to the EU, there is a very visible problem.
What is the solution?
Put simply, there wasn’t actually a fuel shortage. There was however sudden panic, which led to an increase in demand that meant for a brief period some petrol stations were unable to quickly enough replace the fuel that was being bought. In a way, this situation is similar to the crisis Northern Rock went through early in on the financial crisis back in 2007, when rumours of the bank potentially running out of money meant thousands of people queued to withdraw all their savings, leading to the bank actually running out of money.
There are also some parallels with the psychology of how short-term stock market crashes often unfold. The press stoke the fires of a negative situation, prompting widespread panic and making many amateur investors act irrationally, with those that lose their bottle dumping their investments, further fanning the flames. Then rationality begins to set in, people start to realise they overreacted and markets recover. The panic sellers return to the market, often buying back in at a higher price than when they sold, leaving them worse off. Meanwhile, long-term investors that kept their cool and those that topped up during the dip are rewarded for their patience...
However, we can take more comfort this time out, and like most of these recent panic events such as ‘the great toilet paper shortage of 2020’, these crises usually blow over and we quickly resume normal day to day life. What is clear however is that there are changes coming to the way the UK economy and supply chain will operate. At a time where political parties are holding their party conferences, we will listen carefully to their suggestions around the shaping of future government policy.
By now you may be wondering what all this means for your investments, and the way we construct our portfolios. In short, not much. Our portfolios are professionally managed with the main objective of controlling risk and benefitting from diversification. Our latest range of portfolios invest in a globally diversified way, meaning that your specific exposure to the UK economy is often limited, meaning these short-term regional evens have little impact on your portfolio performance, especially over the long term.
If you have any questions please just let us know, otherwise we look forward to seeing you for your next financial review.
Kind regards,
Ashley Burrows-Brown Dip PFS
Financial Planner
Wetherall's
