Staycations and inflation - and so many 'staff wanted'

Jonathan Sloan

FOR many of us, this year has been the year of the staycation, including my own household.

Living on an island, the lure of a sea voyage inspired us to venture on to a ferry across the Irish Sea to the (equally wet) Lake District.

We had a great time and quickly adapted to the new reality of having to make a booking to have a coffee in a café. One very noticeable thing, however, was the apparent scarcity of staff, and many of the cafés, restaurants and hotels we visited were boldly advertising “Staff Wanted”.

It's not just the hospitality sector that has been affected – as regular readers of this column will recall, I wrote recently about the cost of home-improvements creeping up, along with the noticeable jump in the price of a pint, and I pondered whether we should be overly concerned about this inflationary trend.

For those who have tried to get some home improvements or building work done recently, it is not only the jump in price that is noticeable, but also the fact that the skilled people to do the job seem to be heavily booked up. Elsewhere, we're hearing of farmers struggling to bring in crops in the absence of their usual pool of seasonal workers.

There are lots of potential reasons for this apparent reduction in staff availability, aside from the “pingdemic” which led to thousands of workers isolating after being notified that they had come into contact with someone who had coronavirus.

A combination of factors are at play and as we move towards new self-isolation guidance in the coming weeks, together with the end of the furlough scheme, these will truly start to be revealed.

Post-Brexit (and perhaps aided by the pandemic and travel restrictions), many workers from mainland Europe have returned or indeed stayed at home. Staff in the hospitality industry, who may not have been furloughed, have re-trained and secured employment elsewhere. And there is also a school of thought that post-pandemic, many have reconsidered their work/life balance and have decided to retire or reduce hours as they see fit.

The availability of labour is a key economic factor, so as investors, should we be worried by this trend? We must consider whether there is a risk that these current staff shortages could push up wage inflation, thereby eroding the value of our investment strategies.

At this stage, it is still too early to say whether this trend will be significant or indeed sustained. After all, we have a new cohort of school leavers, students and graduates entering the workforce every year.

On the upside, the decreasing unemployment rates are a really positive sign of an economic rebound and resilience post-Covid, which, this time last year, looked a lot more uncertain.

For newer investors who have only ever experienced a low interest rate/low inflation environment, of course any “spike” in inflation is likely to cause concern.

While there may be some credible inflation-linked investment strategies (for example, investors have tended toward bigger well-established brands and household names in such times), we need to recognise that the best strategy is to be as diversified as possible.

While the labour market levels out in the coming months to reveal a clearer picture, investors should stay mindful of how this factor could impact more than just the waiting time to be served in a café.

The availability of an appropriately trained and skilled workforce plays a key role in keeping costs from rising. In the meantime, we diversify, we watch and we wait.

:: Jonathan Sloan is head of Barclays Wealth & Investment Management in Belfast.

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