I have written before about the challenges faced as we come out of a global pandemic. And this week, economic indicators show that the tail of this once in a lifetime event may be longer than anticipated.
As the world met in Glasgow to try and agree on measures to keep warming to 1.5 degrees centigrade by mid-century, in London the Bank of England’s monetary committee agreed to keep interest rates at the rock bottom rate of 0.1%. An increase was widely expected by the markets, and will no doubt be required at some point next year given that inflation is expected to reach 7% by April.
The impact of inflation can be seen in the shops, where the price of everyday items is beginning to creep up. From fuel to food, we are paying more for the items we need compared to last year. Indeed, the ONS reports that 37% of businesses say the price of materials, goods or services bought in the last month had increased by more than normal.
In addition to paying more in the shops, consumers are also facing continued supply chain issues, which translates to empty shelves. It takes time to restart global supply chains – some 50,000 shipping containers lie empty at Felixstowe – while a shortage of people to stack shelves, drive lorries and, yes, load containers is compounding the problem.
In fact, 14% of businesses reported a shortage of workers last month and one out of six businesses said they were unable to source goods and services. Of those businesses that are affected by supply chain issues, 63% experienced moderate or major disruption. This has also served to drive up prices.
These pressures don’t just affect small businesses: $386 billion company Amazon is expected to “incur several billion dollars of additional costs” due to “labour supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs”. The firm has been so affected by staff shortages that it allegedly offering one-off payments of up to £3,000 to attract workers in the UK. And this is a company, remember, that many thought had done well out of a pandemic that saw sales increase by 220%.
In the light of these economic pressures, thousands of people descending on Glasgow to talk might seem a distraction. Yet the threat of climate change is real and demands action. And, as a reminder of how our economy is intrinsically linked to the climate, consider that the price of pasta is expected to increase by 50% because of a shortage of durum wheat – due to rising temperatures and lower rainfall.
If all this seems overwhelming, it’s important we don’t lose sight of the bigger picture. Disruptions to global supply chains will ease. Companies are redesigning supply chains that had become stretched, and they are building greater resilience into their operations. At Reliance High-Tech, for example, we have invested in the technology, people and processes that will allow us to adapt to a volatile business environment. For consumers, meanwhile, the inevitable increase in the interest rate should take some of the heat out of inflation.
And, while some countries in Europe are having to lock down again, the same is not true in the UK, where cases seems to be coming down again. Booster jabs are being offered more widely, while clinical trials have shown that Pfizer’s pill to treat Covid cuts the risk of hospitalisation or death by 89% in vulnerable adults. The UK has already approved and purchased 480,000 doses of another drug developed by Merck, Sharp and Dohme (MSD) and Ridgeback Biotherapeutics, to treat Covid, and the first deliveries are expected this month.
As I write this, COP26 has come to a close and, despite some watering down of language around the phasing out of coal, the talks ended with a global agreement that keeps alive hopes of limiting global warming to 1.5 degrees Celsius. This “maintains a realistic chance of saving the world from catastrophic climate change” – as long as promises are met with action. As the past 18 months have shown, progress is about cracking on and getting the job done.
