Johnson’s New Economic Plan: Squaring the Price

Higher wages, higher productivity, higher growth and at the same time lower taxes. This is the new business plan of the British Prime Minister Johnson. Experts and entrepreneurs have doubts that this can succeed.

There are still gaps on UK supermarket shelves. According to the ONS statistics office, 43 percent of those questioned said that the range of goods had been lower than usual in the past two weeks. While the British government was reluctant to acknowledge that there was a supply crisis at all, Prime Minister Boris Johnson’s problems are now being considered good Sign counted.

“It may be difficult at times, but this is the move people voted for in 2016,” said Johnson. Namely: in the Brexit referendum. According to Johnson, the labor shortages in many sectors from agriculture to care to hospitality and logistics, and the associated bottlenecks, are the birth pangs of the new economy that the country needs.

Brexit caused investments to fall

High wages, high training standards, high productivity – this is what the new economy should look like. And all, Johnson says, with a domestic workforce and very targeted immigration. “We must not fall back into the old mechanism of allowing uncontrolled immigration that keeps wages low. We need controlled immigration of very well educated people. And we must not shirk urgently needed investments with cheap labor.”

Johnson paints the picture that the UK labor market was addicted to low-wage workers and that the economy wanted to avoid investment. However, the figures show that after the financial crisis until 2016, investments rose steadily. Only the uncertainty after the Brexit decision led to stagnation before investments plummeted at the beginning of the corona crisis.

“Since the Brexit referendum, we have had the lowest investment volume in all of Europe in the past five years because of the uncertainty about how Brexit will turn out – apart from Greece,” says economist Howard Davies, former director of the London School of Economics. “But companies definitely don’t need any tuition in investment and productivity – that’s their topic.”

Experts warn of higher consumer prices

Britain has a productivity problem. Productivity has stagnated since 2008 and therefore wages as well. But was that really because of the cheap labor from abroad? In a comparison of the G7 countries, Great Britain ranks in the middle in terms of productivity. France and Germany, both in the EU, both with free movement of workers, are more productive than the UK. Japan, on the other hand, brings up the lowest productivity among the G7 – but has almost no cheap foreign labor.

Increasing wages now without increasing productivity at the same time is dangerous, warns economist Davies: “This will lead to higher inflation, which we are already observing and we certainly do not want that.” Because fewer workers, better trained and paid cost more if productivity does not increase. And at some point that will hit the customers’ wallets.

Richard Walker, head of the Iceland supermarket chain, sees it that way. “I share the prime minister’s long-term vision. But paying higher wages without ensuring productivity increases will, together with the already rising energy prices, which we as a company are also feeling strongly, will lead to more expensive food.”

Great Britain lacks 100,000 truck drivers

Walker voted for Brexit in 2016. He wanted to control immigration and wanted better trade deals around the world. But he would never have thought that a Brexit would come out of it that would spin the economy.

“I never believed for a moment that we could do without controlled immigration from around the world to fill the structural gaps we have in certain sectors of the labor market, such as agriculture and transport,” said Walker. Passing the buck on them now that they are to blame for the lack of so many truck drivers doesn’t really help.

The British government now plans to provide 5,000 temporary EU visas for truck drivers by March. Transport Secretary Grant Shapps said 3,500 people had applied last week. Overall, the UK is missing about 100,000.

Conservatives feel abandoned

The entrepreneur Simon Wolfson also wanted Brexit. He sits as Lord for the Conservatives in the House of Lords and is head of the clothing store chain NEXT. He, too, is convinced that one must continue to employ foreign workers in sectors such as gastronomy, hotel and care. There was panic and despair in these industries.

Therefore, Wolfson suggests that bringing in foreigners with visas must become more expensive. “These visas have to be tied to two conditions: they have to pay wages that are the same as those for British workers. And there would have to be an extra visa tax, for example seven percent, so there is always a great incentive to visit locals employ them when they are available, “says Wolfson.

Traditionally, the conservatives have always been the party to business. But she feels pretty abandoned by her prime minister right now. “Of course I hope the Conservatives still are. But the situation is very frustrating right now,” says Iceland boss Walker. His impression is that nobody bothered to take a close look at the burdens and challenges that companies are currently facing.