Analysis: Cold Brexit turkey: UK has been trying to shed imported work habit for 25 years

LONDON, October 5 (Reuters) – Britain’s 25-year-old model of importing cheap labor has been shaken up by Brexit and COVID-19, sowing the seeds of a winter of discontent in the way the 1970s did, with labor shortages, spiraling wage demands and price hikes.

The exit from the European Union, followed by the chaos of the biggest public health crisis in a century, plunged the world’s fifth-largest economy into a sudden attempt to shake off its dependence on cheap imported labor.

Prime Minister Boris Johnson’s Brexit experience – unique among major economies – has further strained already crumbling supply chains globally for everything from pork and poultry to medicines and milk.

Wages, and therefore prices, will have to increase. Read more

The long-term impact on growth, Johnson’s political fortunes and the UK’s intermittent relationship with the European Union are unclear.

“What I won’t do is go back to the failed old model of low wages, low skills, supported by unchecked immigration,” said Johnson, 57, when asked about the shortages.

He said the British voted for change in the 2016 Brexit referendum and again in 2019, when a landslide election victory made Johnson the most powerful Conservative prime minister since Margaret Thatcher.

Stagnant wages, he said, are set to rise – for some, the economic logic behind the Brexit vote. Johnson bluntly told business leaders in closed meetings to pay workers more.

‘Taking back control’ of immigration was a key message from the Brexit campaign, which the Johnson-led ‘Leave’ campaign narrowly won. He later promised to protect the country from the European Union’s “job-killing machine”.

BREXIT “ADJUSTMENT”

Johnson presents his Brexit bet as an “adjustment”, although opponents say he disguises a labor shortage as a golden opportunity for workers to raise their wages.

But restricting immigration amounts to a generational shift in UK economic policy, just after the pandemic triggered a 10% contraction in 2020, the worst in over 300 years.

As the EU expanded eastward after the fall of the Berlin Wall in 1989, Britain and other major European economies welcomed millions of migrants from countries like Poland, which joined the block in 2004.

No one really knows how many came: in mid-2021, the UK government said it had received more than 6 million settlement applications from EU nationals, more than double the number it thought to be in the country in 2016.

After Brexit, the government stopped prioritizing EU citizens over people from elsewhere.

Brexit has prompted many workers in Eastern Europe – including around 25,000 truck drivers – to leave the country just as around 40,000 truck license tests have been halted due to the pandemic.

Britain is now short of around 100,000 truckers, leading to queues at gas stations and concerns about food being brought into supermarkets, a shortage of butchers and staff to warehouse is also of concern.

“Wages will have to go up, so the prices of everything we deliver, everything you buy off the shelves, will also have to go up,” said Craig Holness, a British truck driver with 27 years of experience.

Salaries have already skyrocketed: A Class 1 Heavy Truck Driver (PL) position was advertised for 75,000 pounds ($ 102,500) a year, the highest the recruiter had ever heard of.

WINTER IN THE MONTENT?

The Bank of England said last month that CPI inflation is expected to reach 4% by the end of the year, “largely due to the development of energy and goods prices” , and that the case for raising interest rates from historic lows appears to have strengthened.

He cited evidence that “recruitment difficulties had become more widespread and more acute,” which Bank officials attributed “to a combination of factors, including a faster-than-expected recovery in demand and a reduction in demand. availability of European workers “.

Johnson’s ministers have repeatedly rejected the idea that Britain is heading for a “winter of discontent” like the one that helped Thatcher come to power in 1979, with wage demands spiraling, inflation and electricity shortages – or even that Brexit is a factor.

“Our country has a long history of relatively low wage growth – mostly stagnant wages and totally stagnant productivity – and that’s because, chronically, we haven’t invested in people, we haven’t. not invested in equipment and you saw wages stagnate, ”Johnson said on Sunday.

But he did not explain how wage stagnation and low productivity would be solved by a mixture of lower immigration and higher wages fueling inflation that eats away at real wages.

It was also unclear how higher prices would affect a consumer-driven economy increasingly dependent on supply chains whose tentacles stretch across Europe and beyond.

For some observers, the UK has come full circle: he joined the European club in the 1970s as a sick man from Europe and his exit, many European politicians clearly hope, will bring him back to a cautious dead end. .

Johnson’s legacy will depend on proving them wrong.

Reporting by Guy Faulconbridge; Editing by Catherine Evans

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