Shortages of food items and staff hitting Britain 'threaten to stifle the recovery'

Reports of shortages in the UK had broadened as the week went on beyond the Covid-hit areas of hospitality and construction

Capital Economics said the list of anecdotal reports of labour and product shortages has grown ever longer in the past week and now includes various items at Greggs. Picture: Danny Lawson/PA

Strains in the British economy that have led to shortages of McDonald's milkshakes to food items at retailer Greggs may likely get worse and could weigh on the economic recovery in the UK, a leading economics consultancy has said. 

Capital Economics said that reports of shortages had broadened as the week went on beyond the Covid-hit areas of hospitality and construction. 

A major survey showed a significant number of cases of disruption to output at British factories either because of staff or raw materials shortages, while a Confederation of British Industry survey also showed a sharp fall in stock levels. 

"The list of anecdotal reports of labour and product shortages has grown ever longer in the past week and now includes McDonald’s milkshakes and various items at Greggs," said Capital Economics in London.  

"These add to the broadening range of sectors, such as hospitality, wholesale and construction, where shortages are already biting," the leading consultancy said in its assessment — 'Shortages threatening to stifle the recovery'. 

It forecasts the shortages could get worse and then fade over time but that Brexit effects may have longer effects on some parts of the British economy. 

All these shortages will probably last for a while and may even intensify further.

"After all, the furlough scheme doesn’t expire until the end of September, university and college terms won’t restart until a similar time, and many people who moved out of cities during the pandemic are still living at family homes," it said. 

That means that the British economy could take longer to get back to its pre-pandemic levels.

"And a bit further out, the danger is the shortages persist for longer than we expect, meaning that inflation might not drop back to 2% in late-2022," it said. 

"These dual risks of slower GDP growth and higher inflation sound like a gentle whisper of stagflation."