by Damon de Laszlo, ERC Chairman
Thoughts on today’s most visible topic, petrol station closures. Hardly a black swan event, HGV driver shortages were causing problems even before Brexit and the subsequent restrictions on Europeans working in the UK. Wages in the industry had been drifting downward for some time, which has contributed to the disparity between lower and higher wage rates in the economy. COVID added to the driver shortage with the government’s closure of the licencing authority and the test centres, along with the closure of many other government departments. It is estimated that 40,000 HGV licences were not issued as a result of these closures, leading to the figure of 100,000 driver shortages. This number has been trailed by the industry for a long time and ignored by the government. Members of Parliament and Ministers have for a long time been asleep at the wheel, only responding to pending crises when they finally affect the public. Lack of planning has been endemic in government and the civil service for many years now, not only evidenced by the HGV problem but also in the gas industry. Apart from heating, gas also supplies the baseload for electricity generation, sometimes 40% of our needs. UK government has refused to licence new gas storage facilities and indeed sanctioned the closure of a major facility in 2017, adopting a just-in-time approach! Bearing in mind a large percentage of our gas supply comes from Europe, which itself is highly dependent on Russian supplies, the UK has been for many years exceedingly vulnerable to any disruption. We can also expect electricity supply problems in the next twelve to twenty-four months as the shutting down of baseload facilities gathers pace. It is also worth remembering that a few years ago President Macron threatened an embargo on electricity supplies to the UK, which would have cut off a significant percentage of UK requirements.
The UK is not alone in its lack of government foresight, although in some areas it may be the world leader. The interconnectedness of economies has been growing for many decades, facilitated by modern communications and computer systems. This phenomenon has not been taken on board by western politicians. Government in the west is siloed in unconnected departments and political responsibilities. Civil service departments are almost by definition adversarial, with Ministers lobbying on their behalf for resources and power. Something not conducive to the joined-up thinking needed in a modern interconnected world. The famous Black Swans of Nassim Nicholas Taleb have been superseded by Lord Harris’s Black Jellyfish with multiple tentacles which “go on longer than you would expect and have a nasty sting.” These tentacles are the intertwining of supply chains and technology. Businesses know only too well the specialisation in the skill base and the interdependence of these skills on each other to create a modern business where the failure of any one part, sometimes quite small and insignificant, can stop the whole process. It is the lack of this understanding in government leaders and their departments that means we can expect challenging times over the next few years. The lack of attention to, and investment in, infrastructure and education means our 21st century economy has become vulnerable. Infrastructure includes road, rail, airport and seaport facilities, as well as hi-speed internet. A failure in any part of the infrastructure can do major damage to our integrated economy.
In the last few years businesses, particularly ones with a multi-national view, have started to build resilience into their supply chains by onshoring. This has been brought about by the deteriorating relations between the US and China and the increase in the cost of trans-ocean shipping.
Recent events, while encouraging this trend, still mean it will be many years before the old trend is significantly reversed. New technology and computer driven industry will greatly mitigate the costs involved in localising production of goods and services, but this will be insufficient to compensate for the costs that will be incurred in decarbonising the global economy.
While the Green movement is understandable, and our new generations are frustrated by the lack of government initiative over recent history, the cost of speeding up decarbonisation is not fully understood and is being studiously avoided in the public debate.
Damon de Laszlo
28th September 2021