Houthi attacks causing supply shortages and steep retail price hikes.

The disruption of global trade due to the Houthi campaign targeting shipping in the Red Sea is impacting over half of all retailers in the UK.

According to research by the British Chambers of Commerce conducted among more than 1,000 UK companies, container shipping prices have surged by up to 300 percent. Delays of up to a month in goods delivery have led to supply shortages and cash flow issues.

The Houthis initiated their campaign against commercial vessels in November, aiming to halt Israeli military strikes on Gaza, which followed the October 7 Hamas attack.

Despite US and UK air and sea strikes on the Houthis in Yemen, the attacks continue unabated.

The average shipping cost from China to Europe has more than doubled, with most ships opting for routes around Africa to avoid the risk of attack near the Suez Canal. In 2023, the UN Conference on Trade and Development reported that around 22 percent of all commercial shipping containers traversed the canal. However, this figure has since plummeted by 82 percent, with 586 ships rerouting around Africa.

William Bain, the head of trade policy at the BCC, called on the UK government to offer more support to British retailers ahead of the upcoming budget announcement.

Bain noted that while the shipping industry had some spare capacity to address challenges, prolonged disruptions could lead to escalating cost pressures impacting the UK economy.

Additionally, new post-Brexit regulations have contributed to increased costs and delays for businesses, adding to the challenges they face.

Credit ratings agency Moody’s cautioned that if the situation in the Red Sea doesn’t improve significantly, retailers could see a substantial hit to profitability by the end of 2024.

Bain emphasized the importance of government intervention, especially considering the decline in total goods exports from the UK in 2023 and weak global demand. He urged the government to consider providing support in the upcoming budget announcement in March.