Britain deploys its army to deliver fuel as panic buying and shortages continue

British army personnel at the BP fuel terminal in Hemel Hempstead, U.K., on Monday, Oct. 4, 2021.
Chris Ratcliffe | Bloomberg | Getty Images

LONDON — British soldiers have begun delivering fuel in the U.K., as panic buying of gasoline continues in some parts of the country.

Around 200 military personnel are to be deployed as part of Operation Escalin, a strategy devised by the British government to help ease fuel supply constraints caused by a major shortage of truck drivers. Photographs Monday morning showed soldiers in combat fatigues at a BP refinery in Hemel Hempstead, England.

Army tanker drivers have been on standby since last week. The government’s Reserve Tanker Fleet —  driven by civilians — was deployed on Tuesday to deliver gasoline.

Panic buying of gasoline in the U.K. in recent weeks has caused long lines outside stations, many of which have been left completely dry. While the situation has begun to improve in most parts of the country, shortages remain acute in London and England’s southeast.

The U.K. has an estimated shortage of 100,000 truck drivers, which has disrupted the delivery of fuel, food and goods around the country. Brexit, regulatory changes and the Covid-19 pandemic are among the issues contributing to the issue.

As well as utilizing the army, the government has taken steps such as suspending competition laws for the fuel industry and granting thousands of temporary visas to truck drivers, to attempt to ease the sector’s logistical challenges.

‘Warning sign’ for the economy

Kallum Pickering, senior economist at Berenberg investment bank, said Britain’s fuel crisis was a “warning sign” for the country’s economic outlook.

In a note on Monday, Pickering said the ongoing panic buying in the U.K. “highlights the [country’s] dismal state of affairs as well as the potential for more serious outcomes in the future.”

He added that although the U.S. and other major European economies also faced structural shortages and a lack of truck drivers, the fact that those shortages had triggered panic buying was a U.K.-specific problem.

“The whole episode begs the question of why the U.K., once again, seems to be getting hit harder than other economies,” he said. “In my opinion, the panic and hysteria in the U.K. partly reflects a growing lack of confidence by the public in the government’s ability to manage the economy and fix problems when they arise.”

Pickering noted that panic buying could become a feature of the U.K. economy — which he described as “unnerving.”

Despite the short-term supply issues, the U.K. remains on a solid recovery trajectory for now, according to Berenberg. The investment bank expects the country’s GDP to grow by 6.9% in 2021, but has lowered its 2022 outlook to 5% growth from 5.8%.

Meanwhile, Berenberg expects U.K. inflation to peak at a slightly higher year-on-year rate and persist for longer than previously expected. The bank expects Britain to see a quarterly inflation increase of 4% in the fourth quarter of this year.

Worsening inflation pressures will translate to the Bank of England hiking interest rates earlier than previously expected, Pickering said.

“We now expect the BoE to raise the bank rate to 0.25% in May 2022 instead of August 2022,” he wrote. “Following a second 25 basis points hike in August (versus November previously), we now look for the BoE to begin a passive unwind of its balance sheet following the November 2022 Monetary Policy Report.”

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