Above 50 per cent of UK’s export businesses have felt the impact of the violence-induced disruption to critical trade routes along the Red Sea.
The British Chambers of Commerce (BCC) compiled data from over 1,000 businesses, predominantly comprising those with fewer than 250 employees. It was found that approximately 37 per cent of firms spanning various sectors experienced significant repercussions due to the ongoing events in the Red Sea.
More specifically, companies have cited increased costs as the crux of their challenges, with some reporting a 300 per cent spike in the cost of hiring containers since the disruption.
Violence erupted in late 2023 between the Houthi rebels and traversing containerships in what is regarded as one of the world’s most vital trade routes. Should the situation persist for much longer, however, pressure will begin to mount on businesses, warned the BCC.
“Our research suggests that the longer the current situation persists, the more likely it is that the cost pressures will start to build,” said William Bain, who oversees trade policy at the BCC.
The situation has had a cascading effect on supply chains. Logistical delays to delivery times take three or four weeks longer than the usual scheduling. This has subsequently triggered cashflow difficulties and shortages of components on production lines.
According to Bain, the new research provides an immediate insight into the impact felt by UK businesses as a result of the Red Sea disruption. “There has been spare capacity in the shipping freight industry to respond to the difficulties, which has bought us some time.”
Bain further stated: “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.”
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With global demand weak, the UK economy saw a fall in total goods exports in 2023, according to Bain, who further implored the British government to provide more support to exporters in the Spring Budget.
“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 impact of the Red Sea crisis has been felt globally, with the US Federal Maritime Commission (FMC) having held an informal public hearing to investigate the impact of assaults on merchant vessels in the Red Sea and Gulf of Aden earlier last month.
