By Shria Pallati

The smooth functioning of the supply chain of any economy is essential to its health, and those who directly connect producers to consumers are working on the front line. Those who are absolutely necessary to this system are truck drivers, as they keep up the flow of goods within the supply chain. Despite their importance, there has been a trend of labor shortages within the USA, UK, and Europe, which can be attributed to many reasons. In particular, the UK has faced much steeper consequences of this labor shortage due to Brexit and COVID-19. Currently, the UK is still experiencing a shortage of drivers, and multiple previously-affected industries are still facing trouble due to this. This article will explore how the UK’s truck drivers, and subsequently the supply chain, were affected by Brexit.

The UK’s truck drivers drive HGVs (heavy goods vehicles) along winding roads that often surpass many borders, including that of countries. Before Brexit, since the UK was a part of the EU, workers could move freely between countries without a visa. There were many migrant workers who settled in the UK, especially those who were working in low-pay sectors, like HGV drivers. However, once the regulation of Brexit was imposed in 2021, immigration laws increased and it became much more difficult to enter the UK from the EU. The effect of such restriction was felt doubly so by the low-pay sectors, as Britain announced its intention to reduce its reliance on migrant workers in low-skill jobs and prioritize “the right kind of skills” via its “points-based immigration system”. As the UK wanted to reduce overall migration numbers by “treating EU and non-EU citizens the same”, existing and potential HGV workers now in the EU were unable to work or felt discouraged from doing so. Those who were working were subjected to long customs procedures and queues, along with UK driving exams that many did not have the language for. Drivers were not prepared for this level of change within their job and lowered job security.

This meant a dramatic shift for the trucking industry, as a large number of EU drivers in the UK left the UK and moved back to the EU. By October 2021, an estimated 20,000 drivers had left the EU, and the UK was left 100,000 drivers short. The effect on the economy was palpable; there was a supply shortage of many goods, and many companies, like fast-food chains and grocery chains, reported on these shortages. Due to some expected shortages around Christmas and COVID-19, any problems with stocking shelves were not met with much concern. But when oil giants like BP and ExxonMobil announced that they were going to close some gas stations as a result of the driver shortage, people started running to gas stations to panic buy, draining some stations dry as fuel could not move smoothly from their depots. 

In response to the growing unrest and agitated economy, the UK government issued 5000 temporary work visas to lorry drivers which were to run from October to December of 2021. However, there were very few applications received and even fewer selections, as drivers were not willing to travel back to the EU for three months for an industry that did not value them. Then President of the British Chambers of Commerce remarked that it was “the equivalent of throwing a thimble of water on a bonfire” due to the insufficient address of the problem. 

Brexit policy was not the only reason drivers were unwilling to return to the UK. It only exacerbated existing problems:

The UK, Europe, and the USA have been facing a driver shortage for some time now. Not only was the number of applications decreasing, but it was also staff retention that posed a problem. Brexit, and then COVID-19, only sped up the decline of an already troubled industry.

Stagnated pay and poor working conditions contribute to these problems. Low wages for a long time left many disillusioned with the job. Businesses, the trucking industry no different, are reluctant to raise wages as they are additional costs that are difficult to reverse. Businesses also perceive their poor staff retention as another reason to limit wages, though this can be argued to be a self-perpetuating cycle. With regards to Brexit, as many drivers are paid by the mile/kilometer, rather than hours, the increased transit time due to border checks and queues costs valuable wages. Then, as many EU countries’ economic prosperity improved, drivers preferred the stability they offered. 

Another issue has been the age of the trucking workforce. Trending older, they tend to leave the industry altogether when facing issues. A high retirement rate meant that businesses needed to hire at higher rates than the rate at which people were leaving or hiring younger. The average age of an HGV driver was 55, with less than 1% under 25. Before 2020, incoming workers matched outgoing workers relatively well, but this failed after Brexit and COVID-19, as many pivoted to other industries that allowed them to spend more time with family or retired. The supply of new workers was lower, but national demand had risen significantly. Young people are also not very interested in the trucking industry, as it does not hold the societal appeal many other jobs do, despite its importance. 

A tax reform, known as IR35, reduced the ease of work and pay drivers experienced. IR35 was designed in 1999 to prevent employees and employers from paying less tax if they were self-employed. New legislation was introduced in 2017 which stated that public-sector organizations would be responsible for ensuring freelancers in private-sector businesses cooperated with the rules. Drivers often operated as limited companies, but due to this legislation, had to lose that status. For businesses, this led to a 25% rise in the cost of employment, translated to £5-6 per hour, which was unsustainable. Many drivers left due to the loss of the net income, and employers struggled as well. A letter was written to then PM Boris Johnson by the RHA (Road Haulage Association) asking for his “personal intervention” on the crisis. While legislation repeal was contemplated, in October 2022, Chancellor of the Exchequer Jeremy Hunt announced it would not proceed. 

Currently:

Much in the vein of the fate of IR35, many of these issues persist in 2023 as well. Drivers briefly enjoyed higher wages due to the low number of staff, but this cost was put onto the customer. Some employers gave their drivers a 25% pay raise, as large supermarket chains were desperate and willing to offer such high rates. Others could not compete with these rates. 

With regard to working conditions, the situation is still inadequate. Drivers often have to sleep in laybys, industrial estates, and other unsafe locations because truck stops or motorway service areas do not have space for more than 1/5th of the HGVs which need to park overnight. This is in spite of £20 million to boost HGV driver facilities committed by the government in April 2022.  

Logistics UK noted that there was an increase in those taking practical HGV tests, along with increased testing for vocational drivers. 

The Bank of England said that the “aggregate labor force participation rate is expected to trend downwards” due to the ageing population and the rate at which workers are leaving their professions. This can be explained by recent legislation and COVID-19. Workers also seem reluctant to come back to their jobs, with 80% of those who are inactive and of working age claiming they do not want a job. This tight labor market has been contributing to excess demand in the UK. Additionally, due to concerns over Brexit and the speed at which Brexit was conducted, businesses faced uncertainty which led them to reduce capital spending, leaving the capital per worker available also low. The labor market did not have any ‘grace period’ to adjust, especially given the immediate blow of COVID-19. 

The Migration Observatory at the University of Oxford concluded that Brexit, the end of free movement, contributed to shortages in the UK labor market, though there were many other factors. The economy, generally, is worse off, and certain industries are left much more vulnerable due to their previous reliance on migrant workers. 

There have been many responses to the crisis, as discussed earlier. The government issued 5000 temporary work visas for lorry drivers. Leveraging immigration policy in this manner can be useful when workers have ample time to make decisions and are not seen as a bargain for cheaper workers. However, this carries the risk of exploitation. The free movement gave low-wage EU workers “broadly similar rights to UK citizens”, but they are lost as workers’ rights and ability to bargain will now be tied to their employer. Temporary work visas also make it harder to “integrate into a permanent residence and unite family”. If they are constantly cycled through, the ability to develop language reduces, and workers are then left with a limited understanding of their rights and how to utilize them. This can be mitigated by education for employees and providing grace periods to ensure safe work, but it will be done when the right funding is provided by the government, a fact that does not look promising given the current scenario. 

Immigration policy is also not the only way to increase intake; observing and tackling factors that lower recruitment, like wages and working conditions will also be beneficial. It is also more reliable than bureaucratic and fickle immigration policy.   

The IRU (International Road Transport Union) has stated that it is necessary to make the profession attractive to young people. Some have debated reducing the minimum age to apply to the position, while others highlighted increasing safety measures to attract women to the profession. 

Migration is a sensitive issue, and in light of all these long-standing issues, it appears that the crisis and truck driver shortage will remain for some time. It does not have its origins in Brexit only, but was exacerbated by it. It is often the case that some essential jobs’ workers are taken for granted, and the case of Brexit has made this situation reach its boiling point. Given the current cost-of-living crisis, recession, state of British-EU politics, and sentiments of drivers, it serves to follow the progress of this issue.

About the Author

Shria Pallati is a final-year student studying economics and political science. Her interests lie in inflation/recessions, economic crises, and economic and political institutions.

Image source: https://www.reuters.com/world/uk/britain-expected-ease-visa-rules-truck-driver-shortage-bites-2021-09-25/