Red Sea Shipping Disruption Hits More Than Half of UK Exporters, Firms Say

More than a third of the firms surveyed by the British Chambers of Commerce (BCC) said British firms are facing higher shipping costs and delays of up to four weeks due to the Houthi rebel attacks in the Red Sea.

According to the survey by BCC, the cost of shipping a container from Asia to Europe has increased by up to 300% for some businesses, and logistical delays have added up to three to four weeks to delivery times.

Most UK Exporters Hit by Red Sea Disruption

(Photo : BEN STANSALL/AFP via Getty Images)
Stacks of containers are pictured at the UK's largest freight port, in Felixstowe on the East coast of England, on January 27, 2024. Hundreds of cargo ships and tankers are being rerouted around the southern tip of Africa to avoid Houthi attacks in the Red Sea. The Houthis began targeting Red Sea shipping in November, saying they were hitting Israeli-linked vessels in support of Palestinians in Gaza, which has been ravaged by the Israel-Hamas war.

According to the respondents in the BCC survey of more than 1,000 companies, most small- and medium-sized businesses, repercussions from the delays include cash flow problems and shortages of components on production lines.

The Iran-backed Houthis, who control a large portion of northwest Yemen, have been attacking commercial ships in the region since November. The group claimed that the attacks were a show of support for Palestinians in the war between Israel and Hamas in Gaza.

The disruption shows no signs of ending, as the US and the UK have launched their strikes to protect international shipping on the route. The group carried out the recent airstrikes against 18 Houthi targets in Yemen this weekend, including weapons and storage facilities.

William Bain, the head of trade policy at the lobby group, suggested that the government should consider supporting exporters in the budget due next week amid weak global demand and higher costs.

"There has been spare capacity in the shipping freight industry to respond to the difficulties, which has bought us some time," Bain said. He shared that the recent government data indicated that the impact has yet to filter through to the UK economy, with inflation holding steady in January.

He claimed that their research suggests that the longer the current situation persists, the more likely the cost pressures will start to build.

Bain continued that it took a lot of work for firms as the recent introduction of the government's new post-Brexit customs checks and procedures for imports from Europe had also been adding to costs and delays.

Furthermore, he noted that the UK economy has witnessed a drop in its total goods exports for 2023, and with global demand weak, there is a need for the government to look at providing support in the March budget.

Since December, the cost of shipping goods from China to Europe has increased significantly on average because shipments now travel around Africa instead of the Suez Canal, a route that takes about two weeks longer.

The supply chain issues are expected to exacerbate next month as China resumes shipping in earnest following its yearly pause for the two weeks of Lunar New Year celebrations.

The delivery aggregator ParcelHero reported that air freight has become more popular due to the current logjam, with spot rates from China to Europe up 8% in early February and up 14% from China to the US.

Consumer Expert Warns Retailers

David Jinks, the head of consumer research for ParcelHero, said there was a scramble for aviation services as businesses rushed to get products out before the Lunar New Year festivities began.

Jinks claimed that air freight is still needed as many ships are berthed for the duration, and containers are stuck firmly in Chinese ports until manufacturing ramps up enough to restore full services.

The credit ratings agency Moody's warned earlier this month that retailers will experience a material impact on profitability by the end of 2024 if prices remain high.