More than half of UK exporters impacted by Red Sea disruptions

The disruption in the Red Sea is creating considerable challenges for UK exporters, with reports indicating a surge of up to 300% in container hire costs.

Recent attacks on commercial shipping by Yemen’s Houthis have significantly impacted the efficiency and cost-effectiveness of transporting goods through this crucial maritime corridor, causing a ripple effect throughout the UK export industry.

More than half of UK exporters, approximately 55%, have reported feeling the reverberations of disruptions to shipping in the Red Sea, according to recent research conducted by the British Chambers of Commerce’s (BCC) Insights Unit. The survey encompassed over 1,000 firms, revealing a significant impact on businesses across various sectors.

The study found that not only exporters but also 53% of manufacturers and business-to-consumer (B2C) service firms, including retailers, have felt the repercussions of the disturbances in the Red Sea shipping routes.

Among the key impacts cited by the surveyed businesses, increased costs and delays took center stage. Approximately 37% of the surveyed firms, spanning exporters, manufacturers, and B2C businesses, acknowledged being affected by the disruptions.

Businesses highlighted soaring costs, with some reporting a surge of up to 300% in container hire expenses for shippers and forwarders. Logistical delays, extending delivery times by three to four weeks, were also flagged as a significant challenge. These disruptions, in turn, triggered cascading effects such as cashflow difficulties and shortages of components on production lines.

“There has been spare capacity in the shipping freight industry to respond to the difficulties, which has bought us some time. And recent ONS data also indicates the impact has yet to filter through to the UK economy, with inflation holding steady in January,” William Bain, Head of Trade Policy at the BCC, 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.”

According to Bain, the situation is further exacerbated by the recent introduction of the new customs checks and procedures for imports by the UK government which are also adding to costs and delays.

“The UK economy saw a drop in its total good exports for 2023, and with global demand weak, there is a need for the Government to look at providing support in the March Budget,” Bain pointed out, urging 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,” he added.

Escalating situation in the Red Sea

The situation in the Red Sea has taken a concerning turn as the Rubymar, a Belize-flagged cargo ship owned by the United Kingdom, has sunk days after being abandoned following an attack by Yemen’s Houthis. The vessel, carrying over 41,000 tonnes of fertilizer, had been leaking oil for several days before its sinking, raising fears of significant ecological damage to the Red Sea and its coral reefs.

The Rubymar was targeted by Houthi missiles on February 18 while traversing the Bab el-Mandeb Strait. The crew evacuated the ship for safety, marking the first vessel lost since the Houthis initiated attacks on commercial shipping in November. The sinking, confirmed by Yemen’s internationally recognized government and the United States military’s Central Command (CENTCOM), occurred on Saturday, coinciding with adverse weather conditions and strong sea winds.

Sinking of Motor Vessel⁰Rubymar Risks Environmental⁰Damage

On Mar. 2 at approximately 2:15 a.m., MV Rubymar, a Belize-flagged, UK-owned bulk carrier, sank in the Red Sea after being struck by an Iranian-backed Houthi terrorist anti-ship ballistic missile on Feb. 18.

The ship… pic.twitter.com/fRUM4ll4cY

— U.S. Central Command (@CENTCOM) March 3, 2024

CENTCOM expressed concern over the environmental risk posed by the approximately 21,000 metric tons of ammonium phosphate sulfate fertilizer aboard the Rubymar. As the ship sinks, it also presents a subsurface impact risk to other vessels navigating the busy shipping lanes of the Red Sea.

The Houthis, claiming responsibility for the attack, cited their targeting of ships linked to Israel, the US, and the UK as a means to pressure these nations to end Israel’s war on Gaza.

Meanwhile, another containership was struck by anti-ship ballistic missiles from Yemen on March 4 while underway in the southern Red Sea. Swiss-owned containership MSC Sky II was impacted by the missile, according to CENTCOM, causing damage. However, based on initial reports there were no injuries reported and the ship resumed its journey without seeking assistance.