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Labour supply - lorry driver shortage threatens to cause a surge in cost-push inflation

Geoff Riley

8th July 2021

The estimated shortage of 100,000 HGV drivers makes for a superb introductory economics lesson.

What is causing the shortage of lorry drivers? What are the likely effects on the economy (including the reality of higher distribution costs and the risks of shortages of key components, foodstuffs and other supplies). And, perhaps of more significance, what can be done to overcome this labour shortage.

The government's short-term response - akin to papering over the cracks - is to allowa temporary relaxation of the rules governing how many hours per day an HGV driver can work.

Savvy students will see the flaws in such an approach. Firstly, the risks of increased driver fatigue and the risks of accidents on our busy roads. Nearly 50% of cycling fatalities & 25% of pedestrian deaths in London involve collisions with HGVs.

Second, the likelihood that longer hours will make HGV driving even less attractive to potential new entrants and make the labour shortage even more severe.

Standard economic theory suggests that road haulage firms will have to bid up wages and improve other aspects of working conditions to expand the supply of available drivers and indeed, there are signs that this is happening.

The industry is in talks with the government to agree a temporary rise in the quota of migrant lorry drivers from overseas although whether this is sufficient to overcome the two fundamental causes of the shortage - namely Brexit and the pandemic - remains to be seen. There has been an exodus of trained lorry drivers from the EU leaving the UK. And the coronavirus pandemic and lockdowns has caused delays in getting drivers under training to pass their final exams.

The lorry driver shortage has real consequences - it is leaving gaps on Sainsbury's shelves and German confectionery giant Haribo has said it is struggling to deliver its sweets to shops in the shops!

Maybe this latter crisis might be a tipping-point for people to take up arms and apply forthwith for their HGV training licence!

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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