Most UK exporters hit by Red Sea disruption, survey shows

6:41 pm Sunday, February 25th, 2024

By David Milliken

LONDON (Reuters) – Most British exporters and manufacturers have felt an impact from disruption in the Red Sea caused by attacks on shipping by Yemen’s Iran-aligned Houthi rebels, according to a survey.

The British Chambers of Commerce said 55% of exporters reported disruption, as did 53% of manufacturers and business-to-consumer services firms, a category that includes retailers and wholesalers. Across all businesses, 37% reported an impact.

“There has been spare capacity in the shipping freight industry to respond to the difficulties, which has bought us some time,” the BCC’s head of trade policy, William Bain, said.

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

Some businesses reported container hire costs had quadrupled, while others faced delivery delays of three to four weeks, as well as cashflow difficulties and shortages of parts.

The Bank of England has highlighted the Red Sea disruption as one of the main upside risks to inflation this year, although to date the attacks and broader conflict in the Middle East has had less economic impact in Britain than it originally feared.

Houthi militants have launched repeated drone and missile strikes in the Red Sea, Bab al-Mandab Strait and Gulf of Aden since November in support of Palestinians, as the Israel-Hamas war continues.

Last week the Houthis said they would step up attacks on shipping with links to Israel, the United States and Britain.

The BCC conducted its survey between Jan. 15 and Feb. 9 with responses from 1,087 firms, 90% of which had under 250 employees.

On Thursday, the S&P Purchasing Managers’ Index showed British businesses’ costs rose at the fastest rate in six months in February. Higher freight costs related to Red Sea disruption were cited by many manufacturers, but rising wage bills were a bigger factor for most.

(Reporting by David Milliken; editing by Clelia Oziel)