Food for Thought

Posted on: 03.11.2010    11:10:22

Just when the UK has come to terms with the pending public sector cuts and reflected on better than expected GDP figures some of the threats identified in the summer are coming into play.

We warned that food price inflation was inevitable and at 4.4% annual increase it will cost the average family another £5 on their weekly shopping bill.

Clothing prices look like increasing after years of effective deflation.

Cost of holidays are increasing the further you travel owing to a sharp increase in tax.

Fuel costs are on the way back up.

With half a million public sector workers being axed over 4 years it is questionable if the private sector can create the jobs to absorb them especially as most won’t have the skills required. Additionally demand will be dampened as there will be less cash to be spent.

Understandably employers are nervous with many sat on their hands wondering what to do and being fearful of direct recruitment.

Using contract labour is a clear alternative and specialist recruitment firms are reporting an increase in enquiries following a quiet October but only in areas of skills shortages or for work that Brits don’t want to do. Polish workers are still being used extensively in care, warehousing and agricultural areas and also where the lack of apprenticeships has lead to trade skill shortages like welding, fabrication, bench joining or CNC operators. Infrastructure projects will require considerable contract labour and the irony is that much of the job creation will not go to Brits as our education systems churns out the wrong end product. One supplier admits that finding nurses from Eastern Europe is now difficult because as a global skill Nurses will go where the money is best and currently that isn’t the UK.

Much is said about the fact that 9% of graduates are still unemployed after 6 months. What we should be saying is that 91% are employed within 6 months but then look closely at the courses followed by the 9% that are unemployed – what do we see as the top 2 – IT and media studies. This has to tell you something – when considering going to university follow a course that is in demand.

So where does this leave us – other than in a mess. We are facing a real drop in personal wealth, most of it on paper. House prices will stagnate for years unless there is a sharp price readjustment in the next 2 years as inflation will very slowly return the price/earnings ratio to a sensible level. Our disposable income will also be stretched through factors beyond our personal control and discussed above. In the next 2 years it is unlikely that wage price inflation will match true inflation as we all have to tighten our belts by a notch or two.

This is the price of profligacy and Gordon Brown’s belief that he could walk on water as far as the economy is concerned and will be painful adjustment for us all.

 

Author: Chris Slay

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