David Milliken
LONDON (Reuters) – Most British exporters and manufacturers are feeling the impact of disruptions in the Red Sea caused by attacks on shipping by Yemen’s Iran-linked Houthi rebels, a survey has found.
The British Chambers of Commerce said 55% of exporters reported disruption, as did 53% of manufacturers and business-to-consumer firms, a category that includes retailers and wholesalers. Across all businesses, 37% reported impact.
“The shipping industry has spare capacity to respond to the challenges, which has bought us some time,” said BCC head of trade policy William Bain.
“But our research shows that the longer the current situation continues, the more likely it is that price pressures will begin to build,” he added.
Some businesses reported container rental costs quadrupled, while others faced delivery delays of three to four weeks, as well as cash flow difficulties and parts shortages.
The Bank of England has identified the Red Sea crisis as one of the main risks to rising inflation this year, although terrorist attacks and wider conflict in the Middle East have so far had less of an economic impact on the UK than initially feared.
Houthi militants have carried out repeated drone and missile strikes in the Red Sea, Bab al-Mandab Strait and Gulf of Aden since November in support of the Palestinians as the war between Israel and Hamas continues.
Last week, the Houthis said they would step up attacks on ships with ties to Israel, the United States and Britain.
The BCC conducted the survey between January 15 and February 9, receiving responses from 1,087 firms, 90% of which had fewer than 250 employees.
On Thursday, the S&P Purchasing Managers’ Index showed UK business spending rose at the fastest pace in six months in February. Many producers pointed to higher transport costs associated with the Red Sea disruption, but for most the more important factor was rising wages.