It isn’t just the UK that’s suffering supply chain issues. In the US, the crisis may last until the summer

Published

3 years ago

October 16, 2021

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The backlog of cargo ships at the busiest port complex in the US – images of which have come to define the global supply chain crisis – is unlikely to return to normal before next summer.

The executive director of the Port of Long Beach in California says plans to switch to 24/7 operations, pushed by President Joe Biden this week, will improve the crisis in the short term but that logistics globally need a rethink.

Long Beach and the neighbouring port of Los Angeles are the two busiest in the US – and for weeks now, container ships, often as many as 70 at a time, have been forced to wait at anchor offshore for a berth.

The post-pandemic surge of trade combined with labour shortages has created bottlenecks at key logistics hubs around the world and raised concerns about more product shortages.

Mario Cordero, who met Mr Biden this week as the White House pushed for ways to unclog the backlog, told Sky News: “Everybody agrees we’re in a crisis, everybody agrees we need a solution, so the question is what are the short-term solutions, what are the long-term solutions?

“What’s important is that we cannot be in this situation next time there’s an unforeseeable event.”

Not surprisingly, many of the issues facing the supply chain industry in the US are the same as those being seen in the UK and Europe. There is a shortage of truck drivers and delays caused by the logjam are costly.

At a truck stop close to the Port of Long Beach, one trucker said: “Sometimes some drivers get mad, I understand that because I am one of them. We try to do our job the best we can but we’re wasting too much time inside, like five or six hours waiting for one load.”

That is double the time they would usually wait, he said, and can make the difference between drivers making one load or multiple loads in a day.

With the holiday season approaching, business and customers are becoming nervous at the possibility of shortages for Christmas.

“Ordering, ordering, ordering,” is how Lisa McHenry, who runs the Knock Knock toy and gift shop in Seal Beach, says she has approached the crisis.

“Ordering early and ordering deep because you don’t know if some items are not going to come in, so you’re just ordering heavy on some things and just hoping something comes in.”

The phone calls have not stopped from those hunting elusive toys. “It is floating on a ship somewhere,” she told one caller. “The tooth fairy will have to leave an IOU.”

Some large US retailers have considered chartering their own container ships which could dock and unload at smaller ports. Guaranteeing their supplies would come at a cost though and that is likely to be passed on to their customers.

This week, Mr Biden touted 24/7 operations at major ports as a first step to dealing with the crisis. But he added: “We need the rest of the private sector chain to step up as well.”

Business

UK long-term borrowing costs highest this century

Published

2 hours ago

January 7, 2025

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UK long-term borrowing costs highest this century

UK long-term borrowing costs have hit their highest level since 1998.

The unwanted milestone for the Treasury’s coffers was reached ahead of an auction of 30-year bonds, known as gilts, this morning.

The yield – the effective interest rate demanded by investors to hold UK public debt – peaked at 5.21%.

At that level, it is even above the yield seen in the wake of the mini-budget backlash of 2022 when financial markets baulked at the Truss government’s growth agenda which contained no independent scrutiny from the Office for Budget Responsibility.

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The premium is up, market analysts say, because of growing concerns the Bank of England will struggle to cut interest rates this year.

Just two cuts are currently priced in for 2025 as investors fear policymakers’ hands could be tied by a growing threat of stagflation.

The jargon essentially covers a scenario when an economy is flatlining at a time of rising unemployment and inflation.

Growth has ground to a halt, official data and private surveys have shown, since the second half of last year.

Critics of the government have accused Sir Keir Starmer and his chancellor, Rachel Reeves, of talking down the economy since taking office in July amid their claims of needing to fix a “£22bn black hole” in the public finances.

Both warned of a tough budget ahead. That first fiscal statement put businesses and the wealthy on the hook for £40bn of tax rises.

Corporate lobby groups have since warned of a hit to investment, pay growth and jobs to help offset the additional costs.

At the same time, consumer spending has remained constrained amid stubborn price growth elements in the economy.

Higher borrowing costs also reflect a rising risk premium globally linked to the looming return of Donald Trump as US president and his threats of universal trade tariffs.

The higher borrowing bill will pose a problem for Ms Reeves as she seeks to borrow more to finance higher public investment and spending.

Tuesday’s auction saw the Debt Management Office sell £2.25bn of 30-year gilts to investors at an average yield of 5.198%.

It was the highest yield for a 30-year gilt since its first auction in May 1998, Refinitiv data showed.

This extra borrowing could mean Ms Reeves is at risk of breaking the spending rules she created for herself, to bring down debt, and so she may have less money to spend, analysts at Capital Economics said.

“There is a significant chance that the Office for Budget Responsibility (OBR) will judge that the Chancellor Rachel Reeves is on course to miss her main fiscal rule when it revises its forecasts on 26 March. To maintain fiscal credibility, this may mean that Ms Reeves is forced to tighten fiscal policy further,” said Ruth Gregory, the deputy chief UK economist at Capital Economics.

Business

Growing threat to finances from rising bills

Published

8 hours ago

January 7, 2025

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There is mounting evidence that consumers are facing hikes to bills on many fronts after Next became the latest to warn of price rises ahead.

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Higher prices for 2025 as Christmas trading fails to meet expectations – BRC says

Published

14 hours ago

January 7, 2025

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Higher prices for 2025 as Christmas trading fails to meet expectations - BRC says

Shop prices will rise in 2025 as the key Christmas trading period failed to meet retailers’ expectations, according to industry data.

Shop sales grew just 0.4% in the so-called golden quarter, the critical three shopping months from October to December, according to the British Retail Consortium (BRC) and big four accounting company KPMG.

Many retailers rely on trade during this period to see them through tougher months such as January and February. Some make most of their yearly revenue over Christmas.

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The minimal growth came amid weak consumer confidence and difficult economic conditions, the lobby group said, and “reflected the ongoing careful management of many household budgets”, KPMG’s UK head of consumer, retail and leisure Linda Ellett said.

Non-food sales were the worst hit in the four weeks up to 28 December, figures from the BRC showed and were actually less than last year, contracting 1.5%.

What were people buying?

Food sales grew 3.3% across all of 2024, compared to 2023.

In the festive period beauty products, jewellery and electricals did well, the BRC’s chief executive Helen Dickinson said.

AI-enabled tech and beauty advent calendars boosted festive takings, Ms Ellett said.

What it means for next year

With employer costs due to rise in April as the minimum wage and employers’ national insurance contributions are upped, businesses will face higher wage bills.

The BRC estimates there is “little hope” of covering these costs through higher sales, so retailers will likely push up prices and cut investment in stores and jobs, “harming our high streets and the communities that rely on them”, Ms Dickinson said.

Separate figures from high street bank Barclays showed card spending remained flat since December 2023, while essential spending fell 3% partly as inflation concerns forced consumers to cut back but also through lower fuel costs.

The majority of those surveyed by the lender (86%) said they were concerned about rising food costs and 87% were concerned about household bills.

More info to come

Numerous UK retail giants will update shareholders on their Christmas performance this week including high street bellwether Next on Tuesday, Marks and Spencer and Tesco on Thursday and Sainsbury’s on Friday.