Companies say the Red Sea attacks delay goods and drive up costs

  • Written by Lucy Hooker
  • Business correspondent, BBC News

Image source, Getty Images

British companies say they face rising shipping costs and delays of up to four weeks due to Houthi attacks in the Red Sea, a business group said.

More than a third of companies surveyed by the British Chambers of Commerce (BCC) said they had been affected.

This number rose to more than half among exporters who responded to the survey.

The British Chamber of Commerce warned that the additional costs could contribute to higher prices in the UK economy overall.

“There was spare capacity in the shipping industry to respond to the difficulties, which bought us some time,” said William Payne, head of trade policy at the BCC. “But our research suggests that the longer the current situation persists, the more likely cost pressures will start to accumulate.”

The British Chambers of Commerce found that exporters, retailers, wholesalers and manufacturers were more likely to feel the impact than other businesses, resulting in some leaving goods for sale to customers and components for production lines, or facing cash flow difficulties.

BCC said rerouting shipments around Africa's southern tip, the Cape of Good Hope, is adding an extra three to four weeks to delivery times, with some companies citing container rental rates rising by more than 300%.

Rachel Waring, managing director of Warings Furniture, which imports interior decor for pubs and restaurants, said the conflict had affected her business since before Christmas.

Image source, Rachel Waring

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Rachel Waring has been facing delays since before Christmas

“We had to budget for the additional costs because the prices we were getting for the containers were much higher,” she told the BBC.

They also offer customers additional services to compensate for delays. But it hopes to counter some of the cost increases by negotiating lower prices with the Chinese manufacturers it imports from, and avoiding further price hikes for customers if it can.

The Bahrain Chamber of Commerce and Industry, which represents more than 50,000 companies across its network, said it would like to see additional government support for exporters, including the formation of an export council to boost trade, under the current circumstances.

“The UK economy saw a decline in its total goods exports for 2023, and with global demand weaker, there is a need for the government to consider providing support in the March Budget,” Payne said.

The Houthis attacked commercial ships passing through the Red Sea after the conflict between Israel and Hamas began in October. The Iran-backed group said it was targeting ships linked to Israel, the US and the UK in support of Hamas.

The United States and the United Kingdom responded with air strikes on Houthi targets in Yemen.

The Red Sea is the fastest sea route between Asia and Europe. Major shipping companies, including Mediterranean Shipping and Maersk, diverted ships to the much longer route around Africa's Cape of Good Hope and then to the western side of the continent. But this has led to higher costs, including insurance costs, as well as delays.

Earlier this month, one of the UK's most popular tea brands, Tetley, warned that supplies were “much lower” than it would like, and rival Yorkshire Tea said it was monitoring the situation closely.

The British Chamber of Commerce heard from more than 1,000 businesses in its annual survey, conducted between 15 January and 9 February.

90% of the companies that responded to the questionnaire were small companies with less than 250 employees.

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