Inflationary Pressures and Supply Chain Complexities

The correlation between supply chain disruptions and inflation is evident. Studies by the Federal Reserve Bank of San Francisco have shown that a shock to the Global Supply Chain Pressure Index (GSCPI) can lead to a significant rise in inflation. 

 

European business leaders acknowledge that inflationary pressures are eroding business margins, with 78% reporting a significant impact and 20% experiencing cost increases exceeding 10% compared to the previous year.

 

In the manufacturing sector, rising raw material costs for steel and semiconductors force companies like Ford to delay production, while retailers grapple with higher shipping costs and inventory shortages impacting product availability.

 

Skilled Workforce Shortages

Another critical challenge is the shortage of skilled labour. In Northern Europe, for example, over 77% of business leaders cite this as a significant issue. This shortage is prompting companies to rethink their supply chain networks, favouring regional providers over global sources.

 

The big squeeze is systemic and more complex than supply disruptions alone. 

Wages have stagnated for decades, Adjusted for inflation, many workers are poorer in real terms than they were forty years ago and this despite record corporate profits. Health and pension benefits have grown stingier, and job security has shrivelled. The big squeeze is starting to take its toll. Here is a breakdown of its other major impact:

  

The food supply squeeze

Whilst we have enough food to feed everyone on planet earth, we have too much of it in the wrong places, and too much of the wrong types of food (High fat, sugar and salt — HFSS). Food wastage has also become a massive grey elephant. The UN estimates that each year, 1.6bn tonnes of food worth approximately $1.2tn, goes to waste –  A new study warns that unless urgent action is taken food loss in 2030 is set to have increased by a third to 66 tons of food thrown away every second. 

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The overweight squeeze

For the first time in human history more people are dying from eating too much rather than too little. Obesity has tripled worldwide since 1975 and by 2030 half of humankind will be overweight. The impact of diabetes and other eating related disorders it going to increasingly impact business. The bottom line is that the global food system is unsustainable. Changes are inevitable and as this shift happens supply shortages and higher food costs will add to the big squeeze.

 

In addition the industrialised production of food such as palm oil, soy beans, and beef is resulting in the extinction of millions of wild mammals, fish, birds and insects. 

 

The fresh water squeeze

The future of Himalayan glaciers is bleak. If global warming is limited to 1.5 degrees over the next two decades, a third of all Himalayan glaciers will disappear. If temperature increases above 2 degrees Celsius, two-thirds of its glaciers are doomed. You may be wondering why this matters especially if you may live thousands of miles away. The simple answers is it matters massively. Directly or indirectly, 3 billion people rely on the ten big glacier-fed rivers. That’s 40% of the world’s population in an economic region that drives at least 20% of the global economy. 

 

But like a trickling stream, the impacts of melting glaciers won’t all be felt at once. Rather it will come in increasing waves of disruption. At first, melting water will flood rivers and dams. The next wave will be crop failure as rivers dry up. This will also hamper hydroelectric power plants starving industries of crucial energy. The great water squeeze will hit the poorest the most, especially subsistence farmers in Bangladesh and Nepal. The result, mass migration and social unrest. As water availability evaporates, tensions between geopolitical rivals such as China, India and Pakistan could boil over into water wars. Other regions in Africa and the Americas are also under threat. In parts of Mexico the mighty Colorado river has dried up. As global warming intensifies the risks of water wars erupting over access to fresh water supplies are highly probable, high impact yet neglected threats.

 

The energy squeeze

As we look towards 2024 and beyond, the global energy landscape is poised to undergo significant changes, influenced by ongoing geopolitical events such as the war in Ukraine and Gaza and growing escalation of Houthi attacks against commercial shipping in the Red Sea. These disruptions are expected to perpetuate volatility in global energy markets, leading to unpredictable fluctuations in oil and gas prices. 

 

Investments in green technologies are set to rise, driven by the need for sustainable and reliable energy solutions. Economically, regions dependent on energy imports will face challenges, reshaping their fiscal policies and international alliances. 

 

On the consumer front, extended periods of energy instability could shift demand towards more energy-efficient products and services, influencing market trends across various sectors. Governments might respond with tighter regulations aimed at ensuring energy security and promoting environmental sustainability, impacting how businesses operate. 

Additionally, supply chain dynamics are expected to evolve as companies seek to mitigate risks associated with energy supply uncertainties.

 

Overall, this big squeeze will likely witness a complex interplay between traditional energy powerhouses and the burgeoning green energy sector, reshaping the global energy narrative in profound ways.