More than a third of UK businesses report rising costs and delays
By First Internet on February 27, 2024 - 5 Minute ReadBritish businesses are experiencing higher shipping costs and delays due to shipping disruptions in the Red Sea.
- Survey finds over half of UK exporters (55%) affected by Red Sea disruptions.
- Businesses experiencing substantial delays, with costs soaring up to 300%.
- Urgent government action urged to support affected firms and safeguard economy.
A survey by the British Chambers of Commerce’s (BCC) Insights Unit has revealed that more than half of British exporters (55 percent) are facing supply chain disruptions as a result of Houthi attacks in the Red Sea.
Just over half (52 percent) of manufacturers and business-to-consumer firms who responded to the survey said they’d been affected, while over a third of overall respondents (37 percent) said they’ve been affected by the attacks.
The survey highlighted an issue with supply chain delays. Businesses said disruptions had added three to four weeks to their delivery times.
The report also uncovered a spike in costs, with respondents citing rises of up to 300 percent for shipping container hire.
Discussing the report, William Bain, Head of Trade Policy at the BCC said: “… our research suggests that the longer the current situation persists, the more likely it is that the cost pressures will start to build.
“Certain sectors of the economy are obviously more exposed to this than others. But with the recent introduction of the Government’s new customs checks and procedures for imports also adding to costs and delays, it is a difficult time for firms.
“The UK economy saw a drop in its total good exports for 2023, and with global demand weak, there is a need for the Government to look at providing support in the March Budget.
Overseas trade is vital to growing our economy. We must do everything we can to see businesses through these tough times, and then set a laser-sharp focus on expanding exports for the future.
William Bain
Head of Trade Policy at the BCC
“We are calling for the establishment of an Exports Council to hone the UK’s trade strategy and a review of the effectiveness of government funding for export support.
“Overseas trade is vital to growing our economy. We must do everything we can to see businesses through these tough times, and then set a laser-sharp focus on expanding exports for the future.”
The Suez Canal, which connects the Mediterranean Sea to the Red Sea, is the preferred shipping route for imports and exports in and out of the UK. But attacks by Houthi attacks have disrupted this route.
Windward, a company that uses AI to help companies navigate maritime shipments, analyzed the impact of the diversion. In a blog post, their CEO, Ami Daniel, explained the potential financial impact, he said:
“To go through the Red Sea now you would need to pay $1 million to $3 million of war risk insurance, plus $500K for Suez Canal passage, plus double crew wages, plus armed guards.”
Daniel contrasted this with the cost of rerouting shipments via the Cape of Good Hope, “An additional $1 million or so for bunkering cost for going around the Cape of Good hope and the additional freight rates (let’s say additional $700 thousand). This is assuming you’re going to find ship owners and charterers willing to do the direct passage now.” He added.
Diverting from the Suez Canal to the Cape of Good Hope adds 6,000, which can add three to four weeks to delivery times. Last December, the Guardian reported that more than 100 container ships had rerouted to travel around Africa’s Cape of Good Hope.
But this number has since greatly increased, with a reported 586 container vessels being diverted in the first half of February alone.
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