UK businesses are grappling with increased shipping expenses and delays of up to four weeks, attributed to Red Sea attacks, according to a statement from a prominent business group. The disruptions highlight the mounting challenges faced by the British firms in navigating global trade amid geopolitical tensions affecting key routes.
Red Sea Attacks: UK Businesses Struggle with Supply Shortages and Surging Costs
In a recent survey conducted by the British Chambers of Commerce, over a third of the participating firms reported being adversely impacted by the ongoing disruptions.
Among exporters who responded to the survey, this figure surged to over half, indicating a significant strain on business engaged in international trade.
The BCC has sounded a cautionary note, emphasizing that the resultant additional costs may potentially fuel inflation, posing broader implications for the overall UK economy.
"There has been spare capacity in the shipping-freight industry to respond to the difficulties, which has bought us some time," noted William Bain, BCC head of trade policy.
However, he expressed on a media platform, "The pressures are getting higher and higher and there's only so long that costs can be absorbed... [The scale of price rises] is not as high as the pandemic - but these cannot be kept away from prices for long."
Exporters, retailers, wholesalers, and manufacturers are disproportionately feeling the impact of disruptions, according to the findings of the British Chambers of Commerce (BCC). This has left many struggling with shortages of goods for sale, components for production, and grappling with cashflow challenges.
The BCC reported that re-routing shipments around the Cape of Good Hope in Southern Africa has extended delivery times by an additional three to four weeks.
Some businesses are experiencing substantial cost escalations, with reports of more than a 300% increase in container hire prices.
BCC Calls for Government Support Amidst Export Challenges and Houthi Attacks
Representing a vast network of over 50,000 businesses, the British Chambers of Commerce (BCC) has called for additional government support for exporters amid the current challenges. In response to the circumstances, the BCC is advocating for the establishment of an exports council dedicated to promoting and facilitating trade.
Mr. Bain stated that the UK economy witnessed a decline in its total goods exports for 2023. With global demand showing signs of weakness, he emphasized the imperative for the government to explore avenues for providing support in the upcoming March Budget.
Highlighting the challenges faced by small businesses, Mr. Bain pointed out that these enterprises are likely encountering more difficulties compared to larger companies. He proposed that the government could offer assistance by considering reforms to business rates, among other measures, to provide support during these challenging periods in international trade.
Shipping rates surged following Houthi attacks on commercial vessels in the Red Sea amid the Israel-Hamas conflict since October. The Iran-backed group targeted ships associated with Israel, the US, and the UK.
In response, the US and the UK conducted airstrikes on Houthi targets in Yemen. Major shipping companies, including Mediterranean Shipping Company and Maersk, diverted vessels around Africa's Cape of Good Hope, increasing costs and causing delays.
The Red Sea, being the fastest route between Asia and Europe, faces disruptions affecting global trade. The British Chambers of Commerce (BCC) received feedback from over one thousand firms in its annual survey, conducted from January 15 to February 9, with 90% being small businesses with fewer than 250 employees.
The unfolding situation has triggered cautionary signals from several prominent brands, each grappling with the tangible impact of disruptions in global trade. As the intricate web of supply chains encounters obstacles, numerous notable brands have sounded alarms regarding potential challenges in maintaining seamless and timely supplies.