As panic buying strikes, the U.K. calls on soldiers and foreign workers to restore order

September 27, 2021, 12:12 PM UTC

At an Applegreen’s gas station in South London, cars spilled out of the station lot and blocked rush-hour traffic on Monday morning, as the station manager frantically directed cars off the road in an attempt to manage the disruption.

Faced with signs announcing that the station had run out of diesel, one waiting customer said it was the fourth filling station he had been to during the morning and offered a one-word description of the situation: “stressful.”

Post-Brexit employment regulations had already put the squeeze on the number of non-British drivers available to transport fuel across the country when a spree of gasoline panic-buying this weekend left the U.K. government scrambling to find ways to fix shortages. Much like nervous stocking up left supermarket shelves bare of toilet paper and pasta during the early days of the COVID-19 pandemic, a mixture of Brexit rules and consumer fear has left the tanks of many of Britain’s “petrol” stations quite empty.

The evidence of the shortage was clear across southern England over the weekend, as cars lined up to enter gas stations, spilling onto major roads and creating miles of gridlock. Many of those cars were ultimately disappointed as a number of London gas stations had run out of fuel and closed by midday Sunday. Up to 90% of British fuel stations ran dry across major English cities on Monday, according to the U.K. Petrol Retail Association.

In a bid to quickly resolve the issue, the government of Prime Minister Boris Johnson announced plans to issue 5,000 short term visas for European truck drivers. After the U.K.’s departure from the European Union, truck drivers, who mainly hailed from Eastern Europe, were classified as “low skilled” under a new points-based visa system and barred from entry, leaving the country desperately short of Heavy Goods Vehicle (HGV) drivers.

In another attempt to find a quick solution, the government is also considering the deployment of hundreds of soldiers to drive heavy goods vehicles in an an emergency plan called “Operation Escalin”.

The granting of visas signifies a U-turn for Johnson’s pro-Brexit government, which campaigned in part on the need to limit immigration. U.K. Home Secretary Priti Patel, who was once a strong opponent of giving temporary visas to foreign HGV drivers, has backtracked on her decision.

Supply and demand

This is not the first supply chain issue the U.K. has seen in recent weeks. Restaurants like Nando’s and KFC have shuttered doors and reported missing menu items, McDonald’s stopped selling Milkshakes and bottled water, and supermarket suppliers such as dairy giant Arla and sweets manufacturer Haribo have reported stocking issues—all due to the lack of truck drivers.

Based on a member survey, the Road Haulage Association, a drivers’ trade group, estimated earlier this month that there was a shortage of more than 100,000 drivers in the U.K.—a marked dent in the 600,000 drivers employed before the pandemic.

“The U.K. has supply and demand issues,” says Paul Donovan, UBS chief economist, in a note. According to his report, sales of gas rose 180% during the recent panic-buying spree, with demand exceeding supply in many areas.

Donovan adds that in a week or two, “demand is likely to be below normal, as people use the fuel ‘stockpiled’ in their vehicles,” but he adds that “there are lessons here for the global patterns in goods demand.”

The problem is not limited to truck drivers, however, but extends to meat-packing workers with many fearing Christmas might see a similar run on—and shortages of—foodstuffs. “Our concern is that the pictures of empty shelves will get 10 times worse by Christmas and then we’ll get panic buying,” Andrew Woolfenden, Tesco’s head of distribution and fulfilment in the U.K., was reported to say in Cabinet Office meeting last week.

Although the issues are very U.K. specific, “this current ‘demand > supply’ at lower levels of activity than we would have had without covid is going to cause central banks a huge headache over the coming months,” wrote Jim Reid from Deutsche Bank, who asked whether central banks should tighten in the face of a “prolonged period of higher prices” or should look to the “potential demand destruction of higher prices?”

“The risk of a policy error is high,” he noted.

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