Businesses have become ‘drunk on cheap labour’, say Tories

Tory ministers have been saying that businesses are to blame amid post-Brexit fuel and staff shortages as they didn't prepare adequately

A cabinet source said that “businesses have become drunk on cheap labour”, reports The Telegraph.

The government is blaming businesses for not being prepared for post-Brexit shortages and should be shouldering the burden. A series of ministers have criticised firms during the Tory Party Conference, feeling furious as businesses tried to shift blame on the government for the issues such as fuel and staff shortages. A source told The Telegraph that the empty shelves were “a failure of the free market, not the state”.  

One source also said: “They have known for five years that we were ending freedom of movement, and we have told them repeatedly they shouldn’t pull the lever of uncontrolled immigration every time.”

Rishi Sunak has said that he can’t “wave a magic wand” to solve the crisis, with firms needing to adjust their supply chains. Business minister Paul Scully said companies had a “collective responsibility” to fix these issues while secretary of state for business, Kwasi Kwarteng, said that too many businesses were relying on too few suppliers.

>See also: How to find the right suppliers – a small business guide

While some had reorganised their supply chains to withstand shocks, others had “no business plan at all” and assumed the government would step in to solve the problems, according to one source. There are concerns that industries that were previously reliant on cheap foreign labour are trying to unpick the government’s immigration policy by demanding that the government make it easier for workers to get foreign visas.

Johnson insists that firms need to pay better wages to attract staff into sectors where there are shortages. However, it might not be that simple.  

FSB national chair, Mike Cherry, told Small Business: “Wage growth, without economic growth, will add to inflationary pressure. The only way to secure wage rises to the benefit of all is to secure growth within the wider economy – that means providing firms with the right incentives to invest and recruit, not announcing tax hikes off the back of 18 months of disruption. For every £1,000 increase to the pay of an employee on the living wage, HMRC already takes close to £500 in taxation.

He added that if the government wants to see more high-quality job creation, it needs to remove barriers to recruitment and upskilling. As things stand, it’s adding to them.

“A hike in Employers National Insurance – which essentially serve as a jobs tax – in the spring will leave a lot of small businesses with tough decisions to make as they grapple with inflation and cash reserves seriously depleted by months of Covid-linked disruption. Helping firms to manage those upfront costs, starting with an increase in the Employment Allowance to £5,000, marks the way forward as furlough ends,” he said.       

The Telegraph says the comments made by ministers are a marked shift from the Conservative Party’s traditional stance as the champion of business. The paper also says that it reflects the determination of Boris Johnson to follow through on the UK becoming a high wage, high-skill economy as a result of Brexit.

Businesses are blaming the government for being unprepared for supermarket shortages that they were already warned about during discussions of a no-deal Brexit, otherwise known as Operation Yellowhammer.

Mike Cherry told Small Business: “We’re hearing often from members impacted by rising input prices, spiralling shipping fees and challenges accessing fuel which are disrupting operations across the board.

“We put a series of recommendations to government aimed at addressing supply chain disruption – encompassing the launch of a COBRA-style taskforce, finance for upskilling new HGV drivers and efforts to highlight vacancies within job centres – months ago. Unfortunately, they weren’t taken forward in the main, so it’s incredibly frustrating to see policymakers now having to resort to emergency measures.”

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