UK study reveals impact of Red Sea supply chain disruption

Over a third of companies in the UK say they have been hit by higher shipping costs and supply chain delays as a result of Houthi attacks in the Red Sea, according to the British Chambers of Commerce (BCC).

The disruption caused by repeated attacks on shipping in the region has led to the largest diversion of international trade in decades, raising the risk of price rises that will be passed on to consumers, and creating component and material shortages that – hypothetically at least – could open up opportunities for groups engaging in illicit trade and counterfeiters exploiting gaps in the market.

The Houthis have been targeting ships linked to Israel, the US and the UK in support of Hamas as the conflict in Gaza continues to claim innocent lives.

BCC’s survey of more than 1,000 British firms found that 37 per cent said they had been affected by the crisis, with exporters, manufacturers and business-to-consumer (B2C) businesses, including retailers and wholesalers, far more likely to report an impact.

Issues cited by firms included increased costs, with some respondents reporting rises of 300 per cent for container hire, and logistical delays, adding up to three to four weeks to delivery times as major shipping firms reroute shipments around the Cape of Good Hope, the southern tip of Africa.

“There has been spare capacity in the shipping freight industry to respond to the difficulties, which has bought us some time. And recent [Office of National Statistics] data also indicates the impact has yet to filter through to the UK economy, with inflation holding steady in January,” said William Bain, head of trade policy at the BCC. 

“But our research suggests that the longer the current situation persists, the more likely it is that the cost pressures will start to build.”