And finally... here’s our news story about how the UK supply chain crisis could scupper the festive season, unless the HGV driver shortage is tackled fast.

The government is under pressure to relax post-Brexit migration rules to unblock Britain’s worst supply-chain crisis since the 1970s, with business leaders warning that continued disruption could ruin Christmas.

Industry bosses said urgent changes to the visa system were required as retailers struggle to keep shelves stocked, and restaurants run out of food and drink in the meltdown triggered by Covid and Brexit.

Industry estimates put the shortage of workers needed to drive lorries, handle goods in warehouses and pick fruit and vegetables at hundreds of thousands. Company bosses and trade groups are now warning that if ministers refuse to allow more EU workers into the UK, they risk a deeper crisis this winter.

The chairman of Tesco, the UK’s largest supermarket group, called for more drivers to meet an estimated 100,000 shortfall. “I think there may be some shortages at Christmas,” he warned.

“At the moment we’re running very hard just to keep on top of the existing demand and there isn’t the capacity to build stocks that we’d like to see.”

Richard Walker, Iceland’s managing director, said the UK faced a shortage of HGV drivers that was already causing 30-40 deliveries to its stores to be cancelled daily. Explicitly linking the issues to Brexit, he called the crisis a “self-inflicted wound” that was likely to get worse.

“The simple solution is that HGV lorry drivers need to be added to the essential and skilled worker list” he said.

However, ministers appear unwilling to give way on visas. The government continued to insist on Wednesday that employers needed to do more to recruit and retain British workers.

A Home Office spokesperson said:

“The British people repeatedly voted to end free movement and take back control of our immigration system. Employers should invest in our domestic workforce instead of relying on labour from abroad.”

Guardian analysis of labour market figures from the Office for National Statistics confirms the extent of the fall in eastern Europeans in the UK workforce since the start of the pandemic, and after Britain left the EU earlier this year.

The number of Romanian and Bulgarian workers in the UK, who would typically fill lower-paid logistics and food production roles, has plunged by almost 90,000, or 24% since the end of 2019. Meanwhile employees from eight eastern European countries, including Poland and the Czech Republic, have fallen by more than 100,000, or 12%.

Meanwhile, industry sources said in addition to lorry driver shortages, there was a lack of tens of thousands of seasonal agricultural workers, and 14,000 needed in meat-processing plants.

Tony Danker, director-general of the CBI, said there was no doubt staff shortages were starting to drag back Britain’s economic recovery from the pandemic and that changes to migration rules could help firms with acute problems.

“The government needs to take a sector view of the challenges and identify solutions that can have an impact quickly. That could mean being agile in the way we use our immigration system to bring in fixed term visas for shortage occupations.”

More here.

On that note, goodnight - and thanks for reading, and for all the comments. We’ll be back tomorrow. GW

UK farmers are warning that unpicked fruit and vegetables up and down the count will go to waste, because of the labour shortage, my colleagues Joanna Partridge and Richard Partington write.

Reports of unpicked fruit and vegetables are coming from up and down the country, according to Tom Bradshaw, vice-president of the National Farmers’ Union (NFU).

“Earlier in July we know Barfoots [a farming company] on the south coast near Chichester had courgettes they couldn’t harvest because they didn’t have enough labour. There is a pepper grower down there who could only pick their peppers every 11 days instead of every three because of labour shortages,” he said.

It’s not just crops that are affected, but animals too, Bradshaw added.

“We’ve got big issues with pigs backing up on farm because slaughterhouses are only operating four days a week because they haven’t got enough butchers to process the pork. We’ve got dairy farmers that are really struggling to recruit the workforce they need, in Wales and in Bath,”

And at a fruit farm in Herefordshire, unpicked blueberries are rotting on the bushes. The fruit is ripe and ready for harvesting, but there are not enough workers to pick it.... More here.

In a development that could intensify the crisis in the UK’s supply chains, Yodel’s delivery drivers are voting on whether to go on strike.

The GMB union said it had opened a ballot on industrial action for more than 250 of its members on Wednesday, after failing to reach an agreement with Yodel over pay and working conditions affecting the delivery company’s lorry drivers.

The union said staff were angry over issues including a lack of work-life balance, and the fact that agency workers were paid more than drivers directly employed by the company. Workers are also concerned over a lack of payouts in lieu of annual leave and a failure to honour contractual agreements on pay for holiday and sick leave.

GMB added that workers were upset that Yodel had not offered any substantial pay increases that would keep drivers from leaving for better paying jobs elsewhere, especially at a time when employers across the country are scrambling to hire workers.

GMB union’s national secretary, Andy Prendergast, said.

“Yodel has seen fit to pick a fight with its loyal workforce in the midst of a chronic, nationwide driver shortage.”

Tesco chairman John Allan has also warned of the prospect of shortages on supermarket shelves at Christmas.

Speaking on BBC Radio 4’s World At One, Allan echoed Iceland’s Richard Walker’s point this morning that allowing HGV drivers in from abroad (such as via the ‘skilled workers’ list) would help alleviate problems.

But Allan also suggested that the crisis was ‘modest’, saying:

“We are very short of drivers, it’s a combination of many EU drivers having decided to go home and also the ageing age-profile.

“I think certainly Brexit has been a contributor to that but also improving economies, higher wages in some of the countries that they’ve come from historically, have also led to that flow.

“If we’re looking at the short-term, the run up to Christmas, the best and most straightforward solution would be to allow UK industry to bring in skilled drivers from elsewhere.

“Normally the supermarket industry would start building stocks from now in readiness for Christmas. Longer-life products first, things like Christmas puddings and so on, shorter-life products, like fresh turkeys, very late in the day.

“At the moment we’re running very hard just to keep on top of the existing demand and there isn’t the capacity to build stocks that we’d like to see.

“So in that sense I think there may be some shortages at Christmas. But again I wouldn’t want to over-dramatise the extent to which that would be the case, I think it’s very easy to make a drama out of a modest crisis.”

[thanks to PA Media for the quotes].

Back in the UK, private companies that sell Covid-19 tests to holidaymakers have been told to “get on the right side of the law” by the competition regulator, after widespread allegations of poor service triggered a government crackdown.

Days after the health secretary, Sajid Javid, said “cowboy” PCR test firms could be removed from the government’s list of approved providers, the Competition and Markets Authority issued a separate warning.

It said rogue companies could face enforcement action from the CMA itself or from National Trading Standards if they are found to be breaking consumer law by misleading customers or treating them unfairly.

It follows multiple allegations that private providers, who are thought to have made £500m since the return of international leisure travel in mid-May, failed to deliver tests, send results and process refunds.

In an open letter to PCR test firms, many of which sprang up this year, the CMA’s general counsel, Sarah Cardell, said: “PCR test providers should be in no doubt that they need to get on the right side of the law. If they don’t, they risk enforcement action.

“This warning goes hand in hand with action taken by government this week and is the latest step in our work to tackle rip-off prices and bad service. We continue to work closely with [the Department of Health and Social Care] in reviewing this market and will be providing further advice to DHSC on action that can be taken.”

The letter highlights practices including:

• Advertising test prices that do not include additional charges.
• Advertising cheap tests that are not available or only in small quantities.
• Failing to deliver tests or provide results on time, or at all.
• Refusing to provide refunds when consumers are let down.

Here’s the full story:

In the shipping industry, a key measure of freight costs has dropped back from its highest level in a decade, following the full reopening of the world’s third-busiest port in China.

The Baltic Exchange’s main dry bulk sea freight index fell today, after a 11-session rally pushed it to its highest level since 2010 on Monday.

This may signal that supply chain problems are easing a little, and that the surge in shipping costs may soften.

It comes as the Meishan terminal at Ningbo port, China’s second-busiest port, reopened today following a two-week shutdown after a worker was found to be infected with Covid-19.

In New York, the tech-focused Nasdaq index has opened at a fresh record high.

The Nasdaq Composite has picked up another 17 points, or 0.1%, to nudge 15,037 points, as technology companies continue to shine.

Semiconductor firms are helping drive the rally, with NVIDIA (who beat earnings forecasts last week) up 2.9% and AMD gaining 1.5%.

Moderna (+3.5%) , the biotech firm, is also among the top risers, a day after Europe’s medicines regulator approved additional manufacturing sites for mRNA-based coronavirus vaccines developed by both it and Pfizer-BioNTech, to help boost production amid a resurgence in infections.

The wider market is a little more subdued, though, with investors waiting for the annual Kansas City Federal Reserve Bank economic symposium in Jackson Hole to start later this week.

Fed chair Jerome Powell speaks on Friday - and may give some clues about when the central bank will start slowing its bond-buying programme, and how fast it might move

But given uncertainty over the Delta variant, he may be cautious about making too many commitments about tapering.

Willem Sels, Chief Investment Officer, Private Banking and Wealth Management, HSBC, explains:

The minutes of the latest Fed meeting have already made it clear that most committee members believe tapering should start before year end. But given that there are still three meetings left this year, markets will look for any clues as to which meeting will see the starting gun fired.

In our view, more progress needs to be made towards full employment, and September is thus unlikely, but it is a close call between November and December.

The market is also looking for any potential clarification on the speed of tapering once the process starts and on its composition. Some comments by Fed members have suggested that treasuries and mortgage-backed securities holdings could be tapered at the same pace, and bond purchases could be brought down to zero by the end of 2022, but there is no official stance yet.

In the US, durable goods orders have dipped, driven by a drop in aircraft orders.

Orders for long-lasting goods dropped 0.1% in July, after a 0.8% increase in June. That’s better than the 0.3% fall expected.

Orders were knocked by a 2.2% decline in transportation equipment (with non-defence aeroplane orders - a volatile sector - almost halving).

Strip out transportation, and goods orders were up 0.7%, suggesting that demand is holding up. However, excluding defense, new orders decreased 1.2%.

Notably, the report shows that unfilled orders for manufactured durable goods rose again in July, for the sixth month in a row.

Machinery, up sixteen consecutive months, led the increase. That probably indicates that raw material and component shortages are continuing to bite.

The UK government must allow retailers to recruit HGV drivers from abroad to avoid a supply chain crisis that could ruin Christmas, a senior supermarket chain boss has warned.

Richard Walker, Iceland’s managing director, said the UK faced a shortage of 100,000 HGV drivers that was already causing 30-40 deliveries to its stores to be cancelled daily, and would upend plans to begin building Christmas stock from next month.

“We’ve got Christmas around the corner, and in retail we start to stock build really from September onwards, for what is a hugely important time of year,” he told BBC Radio 4’s Today programme.

“We’ve got a lot of goods to transport between now and Christmas and a strong supply chain is vital for everyone.

The reason for sounding the alarm now is that we’ve already had one Christmas cancelled at the last minute, and I’d hate this one to be problematic as well.”

Here’s the full piece:

In the City, the FTSE 250 index has hit a fresh record high this morning - rising over the 24,000-point mark for the first time.

The FTSE 250 (which contains medium-sized companies too small for the FTSE 100) has been boosted by hopes of a UK economic recovery - despite the threat from supply chain issues.

It’s also been helped by a series of takeover bids for UK companies such as supermarket chain Morrisons and defense engineering firm Meggitt. Their values have jumped so much that they are on track to return to the FTSE 100 after next week’s reshuffle.

Cinema chain Cineworld is the top FTSE 250 riser this morning, up 5.5%. Restaurant Group, which owns the Wagamama and Frankie & Benny’s eateries, are up 3.6%, while ticketing company Trainline has gained 3%.

These companies were badly hit by Covid-19 lockdowns, so this indicates investors are a little more optimistic about the prospects for hospitality and travel now the UK economy has reopened.

High street chain Marks & Spencer have gained 3.5%, adding to its gains since surprising investors with a profit upgrade last week.

Bingo hall and casino operator Rank are up nearly 4% after telling shareholders that UK tax authorities have decided not to appeal against a tribunal ruling over value added tax charged on slot machines. This is likely to mean a £80m refund for Rank.

Budget airline easyJet are up 2% (as is British Airways owner IAG on the FTSE 100).

AJ Bell financial analyst Danni Hewson says:

“The travel sector continues to enjoy some strength amid hopes for the easing of restrictions with a dip in the pound also helping to lift the UK’s flagship index.

“Weaker sterling boosts the relative value of the overseas earnings which dominate the FTSE, though the more domestic FTSE 250 was also moving higher too, reaching a new record level early on.

The City also has yet another takeover bid to digest -- a £341m offer for waste management firm Augean, which trumps an earlier bid from Morgan Stanley Infrastructure.

Hewson adds:

“This continuing global corporate raid suggests bidders still see a lot of untapped value in the UK market. The danger is that if it doesn’t let up soon London will be left looking like a bit of wasteland for stocks.”

Although the UK’s HGV driver shortage is a domestic problem, pandemic supply chain problems are a rather wider issue.

In Germany, manufacturers are also worried about disruption caused by shortages of semi-conductors, plastics and metals, and the risks of another wave of Covid-19

Ifo, the German economic institute, has warned this morning that “the mood in the German economy has clouded over again”.

Its Business Climate Index has dropped this month to 99.4 points, from 100.7, due to a drop in company optimism -- which indicates Germany’s recovery could be weakening.

IFO president Clemens Fuest says:

Concerns are growing in the hospitality and tourism sectors in particular. By contrast, companies assessed their current situation as somewhat better than in the previous month.

Supply bottlenecks for intermediate products in manufacturing and worries about rising infection numbers are putting a strain on the economy.

It’s not just food and toys that are being affected by supply chain woes either.

Builders merchants business Grafton has warned that supply chain disruption has driven up prices of its raw materials, and predicted further problems in coming months.

In its latest financial results this morning, Grafton, which runs the Selco builders warehouse chain and the Woodie’s DIY chain in Ireland – said it saw “significant pressure” on the supply chain in the first half of this year.

There were shortages of core materials including aggregates, cement, plasterboard, treated timber, sheet materials, landscaping, steel and plastics in the first half of 2021, it says.

These shortages, particularly of core products such as timber, drove up Grafton’s costs by around 7.5% compared to the first half of last year.

And there are likely to be more problems ahead, Grafton adds.

It is expected that supply chains will continue to be disrupted to some extent over the coming months and we will continue to work with our partners to minimise the impact on our customers.

But despite these problems, Grafton made record adjusted operating profits and profit margins for the six months to 30 June -- thanks to strong demand from builders as construction recovers from the pandemic.

Christmas is at risk from the supply chain crisis unless the government adds HGV drivers to its skilled worker list quickly, the managing director of supermarket chain Iceland has warned this morning.

Speaking on Radio 4’s Today programme, Richard Walker explains that the UK faces “big shortages” of HGV (heavy goods vehicle) drivers, of around 100,000 drivers. Iceland itself is short of around 100 drivers. And he blames the government’s handling of Brexit for the problems.

The driver shortage is impacting the food supply chain on a daily basis, and leading to shortages on the shelves, Walker confirms.

We’ve had deliveries cancelled for the first time since the pandemic began, about 30 to 40 deliveries a day.

Fast-moving lines such as bread are being cancelled at around 100 stores a day, meaning Iceland is selling out of bread at some outlets and struggling to replenish its stocks quickly, while soft drink volumes are down 50%.

Walker explains that the festive season is now at risk, given it takes months for retailers to properly prepare:

Of course we’ve got Christmas around the corner, and in retail we start to stockbuild really from September onwards for what is a hugely important time of year.

We’ve got a lot of goods to transport between now and Christmas, and a strong supply chain is vital for everyone.

The reason for sounding the alarm now is that we’ve already had one Christmas cancelled at the last minute. I’d hate this one to be problematic as well.

The simple solution, Walker explains, is that heavy goods vehicle drivers need to be added to the UK’s essential and skilled workers list, to help get drivers recruited from overseas.

These men and women, these HGV drivers, have kept the show on the road for 18 months during the pandemic and it’s criminal that we’re not viewing them as skilled workers.

Q: So is Brexit, and the departure of a lot of drivers, responsible for the supply chain problems?

Yes, Walker replies, but it’s a “self-inflicted wound” rather than an inevitable consequence of Brexit, caused (he says) by the government’s failure to appreciate the importance of HGV drivers.

Even if drivers were immediately added to the skilled workers list, it would take four to six weeks to get them onto the road (they need to be recruited, pass ‘right to work’ check, have a PCR test, and find somewhere to live), Walker warns.

It’s not a light switch that’ll happen overnight.

Longer term, we need to replace with UK workers, Walker adds [this is also what the UK government is pushing for].

It’s undoubtedly a tough job, and a skilled job, Walker says. Iceland is raising its pay rates at its depots, but bringing in UK workers into the industry will take time -- and won’t help with Christmas.

I think the market will correct itself. But the problem with bringing in UK workers is that will take six months.

We need to find these people, train them up, they need to get Class One licences. We’ve got Christmas to sort out between now and then.

Other possible solutions, such as bringing in the army, longer hours, bigger trucks, are just “sticking plasters”, Walker concludes.

The average age of a HGV driver is 56. We need to recruit more domestically, but that will take time. In the meantime, let’s get them on the skilled worker list so that we can bring more drivers and get our supply chains running.

The supply chain crisis is also hitting the UK tourism sector, as hoteliers and bar owners try to juggle a surge in holidaymakers and staff shortages.

PA Media’s Rod Minchin reports that hoteliers and bar owners have been hit by staff being taken ill with coronavirus, others isolating after being “pinged”, plus a recruitment crisis due to Brexit --- and too little housing.

It meant some hotels were being forced to close rooms - while restaurants, cafes and bars were operating reduced opening hours and limiting menus -- just as more people choose to holiday in the UK due to the international travel restrictions in place.

Nick Hayman, joint owner of the Fistral Beach Bar in Newquay, said there had been problems with furlough, Covid-19, a decline in EU workers and too little housing.

Hayman warned that staff shortages are acute:

“Hospitality is the first to get locked down and the last to reopen and a lot of people have not been able to get onto furlough and have struggled. It is really hard to find chefs.

“We’ve reduced covers, we’ve reduced opening hours and on a day-to-day basis we’ve had to look at how many staff we have got in and manage it accordingly.”

He said suppliers were struggling to meet orders, due to distribution problems, and he was reducing menus as a result.

“You can substitute drinks a lot more easily than food. It’s just random stuff that is not available - it’s just bizarre.

“Guacamole, tortilla chips and one week it was orange juice and another week it was apple juice and cranberry juice. It is random stuff and it is just down to distribution.”

Kim Conchie, chief executive of the Cornwall Chamber of Commerce, points to a lack of seasonal workers this summer, following Brexit. Shortage of accommodation add to this labour crisis - with the boom in holiday lets meaning seasonal workers struggle to find places to stay.

Mr Conchie explained:

“Traditionally we would normally have thousands of people from EU countries here working in hospitality having been trained in their own countries and that has more or less been cut off entirely.

“We used to have lots of people from northern cities working in places like Newquay for the summer and they problem they have is there is no housing as every landlord who has got a rental property has converted it into a holiday let.

“There is no accommodation at all for hospitality, care sector, agricultural or construction workers.”

Here’s the full story: Tourism industry hit by Brexit, Covid-19 and surge in holidaymakers

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain’s supply chain crisis is deepening by the day, with retail stocks running low, supermarkets struggling to get their normal food ranges onto the shelves, and hospitality firms facing shortages.

Major retailers’ stock levels are at their lowest levels since at least the 1980s, the CBI warned yesterday, due to global supply chain disruption triggered by the pandemic and worker shortages in several key industrial sectors, compounded by Brexit disruption as the UK emerges from lockdown.

This shortage of workers and materials is worrying economists, who fear the recovery is at risk.

Andrew Sentance, a former member of the Bank of England’s monetary policy committee, warns:

“It’s quite striking, I don’t think we can dismiss this as a flash in the pan. Now that lockdown has been eased, we’re seeing a truer reflection of the impact of Brexit and issues building up before the pandemic.

“We could see this persisting for longer than people expect. Skills shortages could go on for a few years, the impact of Brexit on our ability to attract workers from the EU is not going to go away quickly and the process of training was quite significantly disrupted by the pandemic, when people were not working and furloughed.”

Back on Monday, UK factories warned that their stockpiles of materials had hit the worst on record (since 1977), with a lack of components for the electronics industry and in plastics.

The chief executive of the Co-operative Group has weighed in, warning that shoppers will face less choice.

Steve Murrells, chief executive of the Co-operative Group, has told The Times that the current food shortages are the worst he has known, with post-Brexit migration rules and Covid-19 making it harder to get food to the shelved.

Murrells warned:

“The shortages are at a worse level than at any time I have seen”

Murrells attributed the crisis to “Brexit and issues caused by Covid” -- with the Co-op now retraining staff as lorry drivers in the face of an estimated 100,000 shortfall across the industry.

About 14,000 European lorry drivers left the UK last year and only 600 have returned, statistics suggest, the Times adds.

More here: Food shortages worst I have seen, says supermarket chief

With McDonalds running short of milkshakes and bottled drinks, the crisis is becoming increasingly widespread.

And if the situation keeps deteriorating, Christmas dinner staples like turkey and pigs in blankets could be at risk.

The British Meat Processors Association’s chief executive Nick Allen says:

“Some of the pig processors are having to cut down on how many pigs they are processing a week so that’s starting to have an impact back on the farm.”

“We are cutting back and prioritising lines and cutting out on things, so there just won’t be the totals of Christmas favourites like we are used to.”

But could longer lorries be part of the solution? The UK government, which has resisted calls to grant temporary work visas to heavy goods vehicle drivers from the EU, believes that extra-long “eco-friendly” lorries which cut down the number of freight journeys could be on the roads next year.

But there are concerns that such long vehicles could put pedestrians and cyclists at risk.

The Telegraph explains:

Longer-semi trailers (LSTs), which are up to 2.05m (6.8ft) longer than the current limit of 13.6m (45ft), could save up to one in eight journeys by fitting more freight in, according to a nine-year trial by the Department for Transport (DfT).

The Government had initially planned to conduct a 15-year trial until 2027, but last year consulted on ending the scheme early after it concluded that the experiment had yielded enough data.

Responses to the consultation were divided, with 57 per cent supporting an early end to the trial, and 43 per cent calling for LSTs to be removed from the roads entirely, over concern for vulnerable road users.

Full story: Longer, ‘greener’ lorries could be rolled out on Britain’s roads next year

The agenda

• 9am BST: IFO survey of Germany’s business climate
• Noon BST: US weekly mortgage applications
• 1.30pm BST: US durable goods orders for July