According to an S&P Global PMI poll released this week, shipping interruptions in the Red Sea have had the greatest impact on the UK economy among its European rivals.
According to the data, 12% of UK manufacturers indicate that supply schedules have been impacted by Houthi rebel strikes on ships passing through the waterway, forcing shipping companies to reroute boats around the southern tip of Africa. Greece (9%), France, and Germany (both 8%) have seen slightly fewer enterprises affected.
“An analysis of the reasons provided by PMI panel member companies suggests that the Red Sea situation had a particularly strong impact on European businesses in January… Out of the European countries monitored, UK producers were the worst affected by the Red Sea issue.” S&P analysts
UK businesses taking part in the survey noted that delivery times have been pushed back by an estimated 12 to 18 days, “disrupting production schedules and raising inflationary pressures.”
Re-routing vessels away from the Red Sea also led to higher delivery prices, which caused UK manufacturers’ input costs to rise in January for the first time since last April, the survey found. Supplier price increases were reported in chemicals, electronics, energy, food stuffs, metals, packaging, and timber. Output costs also surged by the most since September, as manufacturers were forced to pass on the increased costs to customers. New orders, meanwhile, have been falling due to weaker demand both domestically and from abroad, the survey noted.
The purchasing managers’ index (PMI) for UK manufacturing rose to 47.0 in January, but did not meet prior expectations and stayed below the threshold of 50, signaling a persistent deterioration in operating conditions.
The Houthis, an Islamist organisation that controls a major section of Yemen, have been assaulting ships traversing the Red Sea since mid-October, claiming to be in solidarity with the Palestinians in their fight with Israel. The Red marine route accounts for around 15% of world marine traffic and is an important waterway for trade between Asia and Europe. Cargo traffic in the area has dropped considerably over the last three months as a result of the attacks. According to a Financial Times story quoting the IMF’s PortWatch, trade volumes in the Bab el-Mandeb Strait fell 65% in the seven days leading up to January 28 compared to October 31.
