Rising shipping costs affecting UK businesses

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Rising shipping costs affecting UK businesses

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 Rising shipping costs affecting UK businesses
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  • Labour shortages, Covid restrictions, and strain on logistics networks led to a rise in shipping costs and significantly lengthened delivery times.
  • The widespread disruption in the supply chain has affected the UK and other economies as it has led to delayed deliveries of raw materials and goods at the right time.

In the latest World Economic Outlook update, the International Monetary Fund (IMF) downgraded its UK growth forecast for 2022 to 4.7% from the previous forecast of 5% due to further disruption caused by the new omicron variant and the ongoing supply chain crisis. The agency also warned that the increasing inflation would last for longer than previously estimated.

The emergence of Covid-19 along with the UK’s exit from the European Union (EU) around the same time made it difficult for the UK economy and businesses to recover as trading across the EU has become difficult and costly.

According to the recent report published by Public Account Committee, Brexit’s new rules and regulations for trade between the UK and EU has a negative impact on the businesses as it has increased the costs, paperwork, and border delays.

Brexit and the present scenario

Before Brexit, trade between the UK and EU was easier without border checks, tariffs, and other documentation. But now trading goods, businesses need to apply for an Economic Operator Registration and Identification number (EORI) to qualify for trading in the EU and must qualify for tariff-free trading or preferential treatment under new TCA rules.

The UK exited from the EU with an aim to support its businesses by giving them freedom and enhancing their productivity and contribution to the economy. But rather than opportunities, some argue that it has made UK’s goods and services less attractive in EU market.

Continuous rise in shipping prices

Barring some recent decline, shipping cost, have been on a surge for last over two years, and many industry analysts believe that the average shipping costs could hit their highest level ever, while disruption in international shipping continues.

The British Chambers of Commerce and MakeUK, which represent the manufacturing industry, had urged the Competition and Market Authority (CMA) last autumn to look into the world’s largest shipping companies and if rising shipping costs could be justified. But later, CMA said that it was not able to address the rising shipping prices unilaterally as it is a cause of various international factors.

Rising shipping costs and its impact on UK businesses

The main reason behind the soaring shipping cost is the pandemic that affected the global supply chains. Labour shortages, Covid restrictions and pressure on logistics networks significantly lengthened delivery times. Many businesses in UK are facing increased costs of shipping prices to trade goods as the global supply chains are interconnected.

Other reasons for the surge in shipping costs are a sudden spike in consumer demand, delays unloading cargo when ports have been understaffed due to covid and the shortage of HGV drivers. These factors led the ships to keep on waiting to enter the port and unload goods, which increased shipping time.

Also, the zero-covid policy of China had led to repeated port closure, while covid restrictions in December in the Chinese province of Zhejiang further restricted the number of trunks to enter the port of Ningbo, which led to six days delay in vessels travelling from China to Europe.

Related Read: Can China’s zero-Covid curbs hurt global growth?


The widespread disruption in the supply chain has affected the UK and other economies as it has led to delayed deliveries of raw materials and goods at the right time, which has increased prices of goods and services and gaps on supermarket shelves. Shipments from China that used to take around 36 days on average have sometimes taken almost double the average days to arrive.

Experts believe that the pandemic will continue to have a huge impact on global trade in 2022, as empty shipping containers across the world are in the wrong place, shipping costs are soaring, and delays in trade have become routine. The fluctuating shipping costs, and delayed deliveries may make decision making, annual planning, and forecasting extremely difficult for UK businesses.


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