Retailers and food manufacturers call for an investigation into why the freight system is failing to deliver goods on time this winter while shipping costs are rising at a rate of 25% per week.
Representatives of food and retail importers have called for an urgent inquiry into the ongoing disruption at UK ports, which has led to long delays to goods arriving and escalating freight prices.
Following several months of disruption at the UK’s largest container port Felixstowe that has spread to other box import gateways, the British Retail Consortium (BRC) and the Food and Drink Federation (FDF) have written to the chairs of key UK parliamentary committees asking them to investigate the causes and potential remedies for the current problems.
Their letter to Lilian Greenwood MP, Chair of the Commons Transport Select Committee, and Angus Brendan MacNeil MP, Chair of the Commons International Trade Committee requesting “an urgent inquiry into the ongoing disruption at UK ports and across the shipping market”, noted that the impact of Covid-19 on global shipping schedules and the shipping workforce, along with a shortage of empty containers “has created significant disruption at many of the UK’s key ports in the crucial run up to Christmas”. This has meant retailers face “major challenges in building up stock for the Christmas period and for the end of the transition period at the end of December”.
Rates have jumped considerably
The letter points to the “significant impact that disruption is having on shipping-related costs”, noting that “container spot rates have jumped considerably – in one instance, by 170% from this time last year. Others have noted week-on-week cost rises of 25%. In addition, congestion charges are being levied by carriers for imports into Felixstowe and Southampton.”
Indeed, freight sources have told Lloyd’s Loading List that freight rates from Asia to the UK and other European ports have quadrupled in the last three months, rising to above US$10,000 per 40-foot unit (feu) to the UK, including the base rate and surcharges. And those figures are said to be rising further almost by the day.
Food manufacturers have been badly affected by the delays, the letter noted, adding: “Food manufacturers now face additional cost to source key inputs elsewhere, whilst also losing sales due to missed retail promotions in the run up to a key seasonal period – one company has lost over £1 million in sales due to the delays.”
The BRC was among groups that previously wrote to the Secretary of State for Transport on 20November to call for action. “At the behest of the BRC and other organisations, the government temporarily relaxed the enforcement of EU drivers’ hours rules until 31 December to help delivery of essential items and reduce the backlog in some ports,” the association acknowledged.
The organisations stressed that retailers and their supply chains “are working tirelessly to build stock ahead of the festive season and the end of the transition period, including redirecting consignments to other ports. However, some delays are inevitable. Once the Brexit transition period ends, UK ports will be placed under even greater pressure.”
The letter requests the Transport Select Committee holds a joint-inquiry with the Commons International Trade Committee on Port Disruption and Functioning of the Shipping Market. Such an inquiry would give affected businesses the opportunity to set out how the disruption has impacted their operations and could help support planning and troubleshooting of this crucial issue.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium said: “The lead up to Christmas is the most important time of year for retailers – ordinarily accounting for up a fifth of the entire year’s sales and generating a large part of annual revenues. After a tremendously challenging 2020, many firms’ cashflows are under severe pressure, and so businesses are in no position to absorb these additional shipping costs.
“As a result, consumers will pay the final price. Christmas orders could be delayed, and retailers might be left with no option but to increase product prices. These issues must be addressed urgently; an inquiry would provide the scrutiny needed to help get our ports flowing freely again.”
Tim Rycroft, Chief Operating Officer of the Food and Drink Federation, said: “Food and drink manufacturers are extremely concerned about the delays we are witnessing at the ports. Our members are incurring costs totalling tens of thousands of pounds, and in some cases hundreds of thousands. In some cases, it is directly impacting on the ability of businesses to build up stockpiles of products and ingredients ahead of the end of the transition period.”
Freight sources say the origins of the current crisis go back to the cause and effects of Covid, starting with the extended closure of China at the start of the year, “and as they re-opened, Europe going into lockdown”, leading to the acceleration of the rise of e-commerce retail.
UK’s ports particularly affected
And although container port congestion is not just a UK issue, the UK’s ports have been particularly affected, because preparations for the UK leaving the EU customs union and single market at the end of this year has led to “the stocking up and the overstock of things ahead of 1 January”.
But those attempts to stock up have contributed to a supply chain crisis that has also hindered those processes. “I would say this stocking up in preparation for Brexit won’t be at the levels some would have hoped, because the containers aren’t here, and aren’t likely to be here much before the middle of January,” one freight source told Lloyd’s Loading List.
“A number of the lines are not calling UK, due to port congestion. So, in terms of the full boxes coming in, they are in Rotterdam, they’re in Zeebrugge, they’re in Dunkirk, Antwerp, Bremerhaven, I suspect,” he added.
One freight source confirmed to Lloyd’s Loading List that the high-profile examples of businesses such as Honda and IKEA, whose UK supply chains have been already disrupted by goods not arriving in time, are just the tip of the iceberg. Small and medium businesses have been experiencing supply chain problems for considerably longer, for several months, and also face major cash flow problems that threaten their businesses because goods they have already paid for are stuck in mainland European ports.
Revolving circle of congestion and capacity cuts
He said the ongoing crisis had been created by an “ever-revolving circle” of congestion and capacity cuts – because there isn’t the time to load and unload ships because of lowered capacity and congestion at ports – leading to a worsening of the problem and shortages of empties”.
“Due to the pandemic, the requirement on working for staff, the social distancing, health and safety requirements to ensure safe working for port workers, has been a huge consideration – and quite rightly so,” he added. “And that has slowed down the workflow – the number of movements they can do.
“That, along with a lot of empty boxes sitting in the port, is causing the congestion.
As it stands, what we envisage is months, not weeks, before the ports – and I use all major deepsea ports – are able to get back to some form of normality.”
And this is true not just of the southern UK ports. “It will be the same with LA, it’ll be the same in in Europe as well, at the major hubs.
But the southern UK container ports are particularly affected. “Felixstowe, (London) Gateway, Southampton are struggling massively with the congestion,” he added.
Source: Lloyd’s
