The Red Sea crisis may push up the prices of three types of household item destined for British high streets from the Far East. Prince tags on clothing, electricals and furniture could rise with just under a third of container shipping passing through a key gateway between Europe and Asia.
Iran-backed Houthi rebels in Yemen have attacked container ships going through the Red Sea in response to the conflict in between Israel and Hamas in Gaza. The Houthis claim to target cargo ships with links to Israel.
Helen Dickinson, Chief Executive at the British Retail Consortium, said the latest challenges through the Red Sea could lead to some delays on the supply of products coming from the Far East.
She added: “Over the coming months, some goods will take longer to be shipped, as they are re-directed via longer routes and there could be a knock-on impact on availability and prices as a result of higher transportation and shipping insurance costs. Retailers will work hard to ensure their customers are not affected.”
Besides the household items listed above, the price of textiles may also rise as a result of the crisis in the Red Sea. Food imports are less likely to rise as the bulk of these products come from the EU and inside the UK.
Retailers including Next and Ikea have warned persistent disruption could delay deliveries and affect the availability of some products. Increased shipping costs could also mean retailers are forced to push up the prices of their products.
Ben May, Director of Global Macro Research at Oxford Economics, said while the recent wave of attacks has “major ramifications” for the shipping industry, it is not yet clear what the impact on consumer prices will be.
He said: “The key question is how quickly shipping firms will be prepared to allow their fleets to return to sailing through the Red Sea. If the threat from Houthi attacks passes quickly, then the implications for inflation are likely to be minimal.
“After all, shipping costs are volatile and firms are likely to – at least initially – absorb fluctuations in shipping costs.”
Sam Kirk, Managing Director at J-Flex Rubber Products in Retford, Notts, said his business has been advised of delays coming from Asia.
He said: “We import a handful of raw materials from places like China and India. Our freight forwarders are advising us shipments will now take at least one week longer. Inevitably, that comes with a slight increase in cost.
“Given the recent economic turbulence we’ve all felt, I would hope the impact to the consumer is minimal. Businesses should be well-prepared for supply chain disruption following the Covid years.
“Like many others, we reviewed and revised our contingency plans to ensure we were reshoring completely or increasing inventories to mitigate any potential future disruption.”
The UK and 11 other countries this week issued a final warning to militants to ease hostilities in the trade route on Wednesday (January 3).
Allied nations called for an “immediate end” to the attacks and said they are “determined to hold malign actors accountable for unlawful seizures and attacks”.
Mr May from Oxford Economics said: “The importance of the Red Sea shipping route increases the likelihood of a relatively quick resolution to the problem.”
But Joshua Mahoney, Chief Market Analyst at Scope Markets, said with the US-led coalition struggling to contain attacks, there are concerns goods flow will be impacted for a prolonged period of time.
Energy prices have already risen this week, amid warnings of a “fresh inflationary headache” for the Bank of England.
Susannah Streeter, Head of Money and Markets at broker, Hargreaves Lansdown, said: “Middle East tensions could be a big spanner in the works for any hope that the Bank of England might start tinkering early with interest rates.”
