Houthi Red Sea Attacks: Retailers Warn of Shortages and Price Rises as Imports Slow

CARDIFF, WALES - OCTOBER 21: A woman walks past mannequins in a Reiss store on October 21,
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Oliver JJ Lane

One of the UK’s largest retailers has warned of potential stock shortages this year and said a planned price cut on mass-produced imports is cancelled as continued strikes in the Red Sea delay arrivals and send shipping prices spiralling.

The UK’s largest clothing retailer Next, which has over 500 stores in the UK and hundreds more abroad has warned delays to the arrival of stock, which is overwhelmingly imported from workshops in the east, are “likely” early this year if the “difficulties” with the shipping sector are not resolved soon. The BBC reports the warning in their trading statement, in which they reported strong business, that “Difficulties with access to the Suez Canal, if they continue, are likely to cause some delays to stock deliveries in the early part of the year”.

Iran-backed Shiite Houthi rebels in Yemen have been attacking Western shipping including container, car carrier, and tanker ships taking the direct route between the oilfields and workshops of the Middle East and Asia through the Red Sea to Europe and the American East Coast in apparent solidarity with Hamas since it launched the major terror attack against Israel last year. Despite attempts by Western navies to protect maritime trade, several cargo ships have been struck by Houthi missiles in recent weeks.

Although no ships have been seriously damaged these strikes have caused fires, and some loss of cargo overboard. The industry has responded by sending millions of containers worth of cargo the long way around, diverting by the Horn of Africa. This route adds over a week to the journey, with a concomitant increase in cost, and insurance premiums have soared.

Next, which is sufficiently large that its performance as a business is seen by economists as a convenient proxy for general UK economic performance, said their planned price cut on clothing planned for 2024 is now likely not going to happen. The Guardian reports chief executive Lord Simon Wolfson said that rising shipping costs caused by the Red Sea attacks and the UK government putting up the minimum wage for workers meant prices could not be slashed, but rather would likely remain level in 2024.

At present, the situation with shipping is “an inconvenience not a crisis”, the retailer said.

Nevertheless, any pressure on prices, particularly at the scales involved with a giant retailer like Next, will be concerning for the UK government which has staked its credibility in an election year on being able to get inflation under control. While steady progress has been made, the situation is delicate and it is conceivable even moderate extra costs in the shipping industry will be passed on to consumers and see inflation tick up again.

Next is not the first retailer to warn of the impact of Houthi Islamists attacking shipping on the availability of goods and prices. While many food staples consumed in Europe, for instance, are domestic or local imports some essentials — like tea for the British — are imported from Asia and there have already been warnings that prices may rise.

Global furniture giant IKEA said last month that it expected supplies of products produced in Asia to experience “availability constraints”. The British Retail Consortium, the trade body for retail businesses, has also warned the delays and rising shipping prices may cause stock shortages and price rises this year.

Some importers state their shipping costs have jumped 250 per cent in two weeks. Given there is some lag time between merchandise landing in Europe and making it to store shelves, it is reported these shortages could start to be felt come February.

 

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