By Wasana Nadeeshani Sellahewa
(Commonwealth) _ The recent study conducted by the British Chamber of Commerce (BCC) has brought to the forefront the extensive repercussions resulting from disruptions to shipping in the Red Sea. This research provides valuable insights into the myriad challenges confronting businesses in the United Kingdom. Moreover, it aligns with a prior cautionary statement issued by EuroCommerce, further emphasizing the pervasive effects on the European retail and wholesale sector. The British Chamber of Commerce’s findings serve as a crucial resource for understanding the multifaceted implications of the shipping disturbances in the Red Sea.
Furthermore, the parallel warning from EuroCommerce, issued earlier in the same month, reinforces the gravity of the situation across European markets. The concerns expressed by EuroCommerce echo those raised by the BCC, underscoring the transcontinental nature of the disruptions and their significant repercussions for both retail and wholesale enterprises. The convergence of warnings from these two prominent business organizations highlights the urgent need for attention and intervention at national and international levels.
The BCC survey, encompassing more than 1,000 firms, reveals that a significant portion (37 percent) reported being adversely affected by the disruptions. Exporters, manufacturers, and business-to-consumer (B2C) enterprises, particularly in the retail and wholesale sectors, were found to be more susceptible to the consequences. Notably, 55 percent of UK exporters, 53 percent of manufacturers, and a substantial proportion of B2C service firms acknowledged the impact on their operations.
William Bain, Head of Trade Policy at the BCC, acknowledged that the shipping freight industry initially demonstrated spare capacity to address the challenges, providing a temporary buffer. However, he cautioned that if the current situation persists, the cumulative impact could lead to escalating cost pressures. Against this backdrop, the BCC is advocating for the establishment of an Exports Council to refine the UK’s trade strategy and a thorough review of the effectiveness of government funding for export support.
EuroCommerce, representing the European retail and wholesale sectors, expressed deep concern over the Red Sea situation in a letter to the EU Minister for Foreign Affairs, Foreign Trade, and Development Cooperation Hadja Lahbib on February 16. The group highlighted significant consequences, including the rerouting of over $80 billion in cargo around the Cape of Good Hope. This rerouting results in an additional two to three weeks of travel time and substantial cost increases related to fuel, insurance, and labor. Moreover, it triggers port congestion, equipment shortages, and soaring shipping rates, with EuroCommerce warning of further challenges during the Southern Hemisphere winter months.
In the context of geopolitical developments, Western Allies initiated a new round of strikes over the weekend, marking the fourth such effort since security measures commenced. The objective is to degrade the Houthis’ capacity to threaten shipping. Simultaneously, the European Union is intensifying its efforts, with Greece becoming the latest member to approve participation in the action. Despite the militants’ threats to escalate attacks, the UK Maritime Trade Organizations reported on Monday that no actions aimed at shipping were reported, yet ships continue to avoid the Red Sea due to security uncertainties.
The broader ramifications of the Red Sea shipping disruptions are evident in the economic landscape, as the UK witnessed a decline in total exports for 2023. Given the weakness in global demand, the BCC emphasizes the need for the government to play a more active role. The call for an Exports Council and a comprehensive review of export support funding reflects the urgency to navigate the challenges posed by the prolonged disruptions in the Red Sea, safeguarding the interests of businesses and the broader economy.
