Red Sea attacks: Implications for UK food and grocery businesses
03 January 2024Conflict in the Middle East has increased political tension and led to attacks on shipping in the Red Sea, with implications for global supply chains.
What’s happening?
In recent weeks, militias based in Yemen have made attacks on US warships and on merchant vessels in the Red Sea and Gulf of Aden.
These seaways connect to the Mediterranean via the Suez Canal and, in normal times, many merchant vessels pass through, carrying fuel and other freight.
Shipping companies have already responded, with some now routing their vessels around the Cape of Good Hope, rather than risking the usual Red Sea route.
This adds thousands of miles to journeys, increasing costs and creating delays. Diverting via the Cape means that ships can make fewer trips, effectively reducing shipping capacity on the East-West route.
Sea traffic is also disrupted in other areas at present – the Panama Canal is affected by weather factors and trade via the Black Sea has been endangered by mines.
Disruption to Red Sea traffic threatens business and consumer interests in many countries. The US has therefore developed a multi-national initiative to safeguard shipping.
Short-term impacts
Events in the Red Sea region seem unlikely to impact food security in the UK significantly, in the short-term. The volume of food goods coming via the Suez Canal are likely to be fairly minor overall, although important in some categories (e.g. coconut milk, exotic fruits, spices).
In the UK, about two-thirds of all food eaten is sourced domestically 1. The remaining one-third is imported, with the EU being the major partner. Most UK food imports come from, or at least through, the EU.
In 2022, for example, the UK imported about £51bn in food and drink, with £36bn coming from the EU 2. So, for our food supply, the Channel and Irish Sea crossings are considerably more important than the Suez Canal.
Companies that are affected have likely already started to adapt their supply chain arrangements in light of the conflict in the Middle East.
Previous brief disruptions (e.g. the stranding of the container ship the Ever Given in the Suez Canal in 2021) had little effect on the UK food market and this may be a guide to what to expect.
Shoppers may be affected if global oil prices begin to rise as a result but so far, energy market responses have been muted.
Longer-term impacts
A large part of global container and energy trade goes via the Suez Canal. Longer journey times or increased risk would likely be paid for by shoppers at some point, creating inflationary effects.
This is bound to have some impact on the UK economy and on UK consumers, although probably quite unclear and hard to measure, occurring over multiple categories.
Food businesses in the UK would certainly be exposed to higher costs for energy, chemicals and packaging, especially primary producers.
Of more concern is the possible welfare impact of disrupted food transport in other markets, especially in Africa and the Middle East.
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