The UK appears to be booming. You can see it in the official data, but it’s just as obvious in the anecdotal that there don’t appear to be enough staff to keep up with demand. This week alone The Observer wrote on a restaurant in St Albans short of 20 of its normal number of employees (55); The Sunday Times featured a brave entrepreneur setting up a new chain (Tapas Revolution) and struggling to find the 25 chefs and waiting staff he needs; The Times said that in Devon “millionaire hotelier” Giles Fuchs is washing his own dishes; and The Daily Telegraph noted that Le Gavroche in Mayfair is to suspend lunch service due to staff shortages. The Sunday Times sent two young people on a quest to see how many firm job offers they could get in 24 hours. One got nine; the other six. Not bad.
Overall, says trade body UKHospitality, there is a shortfall of 188,000 hospitality workers in the UK. Some of this is due to many workers still being tied up in furlough (well over two million). Some may also reflect changing attitudes to work – 810,000 new firms were started in the UK in the year to end-March (up 22% on the year before). Founders aren’t usually also employees. Still, even if it turns out to be temporary (some furlough will turn into redundancy and around 60% of new businesses fail in year one), it’s little wonder wage pressures are rising: employers are offering sign-on bonuses, extra cash for bringing in a mate and, in one case, monthly hampers for those that stay, plus the promise of future vineyard visits.
This is what employers tend to do before they do the one thing they really hate (it’s hard to roll back) but that actually works – put up wages. You might at this point recall the pre-Brexit era when we were told that the opposite was not true – that the surge in the UK labour supply after we introduced full freedom of movement in 2004 was not holding wages down. Definitely not. But we’ll gloss over that for now.
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We’re still going to need oil
Back to the V-shaped recovery: our services sector (which makes up 80% of the UK economy) grew at its fastest pace for 25 years in May. Construction and manufacturing are booming too – most forecasts now have GDP rising at 7%-plus this year. If your brain isn’t flashing inflation warnings yet (it should be), consider how much energy growth takes, and where that energy might come from. There’s a reason metals prices are rising (renewable-energy creation is very metals-heavy). And there’s a reason oil prices are rising – we use a lot of it and will do for a long time yet. One of the best stories of our age is the spat between outdoor wear group The North Face and oil-services company Innovex. The latter ordered 400 jackets from the former for its staff. North Face rejected the order – Innovex wanted to put its logo on the jackets; North Face did not want to be associated with them. The Innovex CEO took his revenge by noting that not only are most North Face products made at least in part from hydrocarbons, but that without oil and gas there would, for now at least, be no skiing, kayaking or mountain climbing.
A reminder that despite all the environmental grandstanding, we still need fossil fuels – and that we’d be wise to recognise that in our portfolios. If inflation is coming you may get a hamper and a raise. But we think you’ll want to hold commodities too.
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