The price of shipping has reached an 18-month high – threatening to impact the falling inflation rate.
It is now more expensive to ship a typical container on a key shipping route than when Houthi militants first started attacking boats in the Red Sea late last year to prevent ships docking in and exporting from Israel.
An index that measures the average cost of a 20ft container being shipped from Shanghai to Europe – and is the most widely used measure of freight cost – has reached $3,949 (£3,102).
The Shanghai Containerised Freight Index (SCFI) has risen sharply in the last month according to data given to Sky News by global logistics company, DSV.
Not since the early days of September 2022, when global supply chains were recovering from the blockage of the Suez Canal, has the cost been so high, at $4,252 (£3,341) a container.
The Suez blockage by the Ever Given container ship which ran aground in 2021, kickstarted a steep rise in shipping costs as goods could not move freely along the vital shipping artery, causing chaos at ports and chocking supply lines.
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Boats having to take alternative journeys and being diverted also brought shipping costs up.
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Houthi-sunk ship causing damage to Red Sea
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It was this wave of supply chain woes that brought about part of the first shock to the economy that caused inflation, the rate of price rises, to go up.
The economy has recovered in large part from shocks – including the energy price hikes brought about Russia’s invasion of Ukraine – which resulted in inflation reaching a 41-year high of 11.1% in October 2022.
While inflation has dropped significantly – to 2.3% at the latest reading – expensive shipping could bring the rate up.
Most goods on UK shelves spend at least part of their lifetime at sea, so importers having to spend more to get goods to the UK could mean consumers pay more at the tills.
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Last week, the world’s second-largest shipping container firm Maersk said it expects to have even higher profits than first thought on the back of demand and disruption.
The Red Sea “ongoing crisis” and the “ripple effects on global supply chains” are part of the market, it said.
Business will continue to benefit, it added.
Maersk said: “The ongoing threats to commercial vessels in the Red Sea and growing supply chain bottlenecks indicate that this situation won’t improve soon. More capacity than expected will be needed to resolve these issues and stabilise the global supply chain.”
A trade court in the US has blocked President Donald Trump from imposing sweeping global tariffs on imports.
The ruling from a three-judge panel at the Court of International Trade came after several lawsuits arguing Trump has exceeded his authority, left U.S. trade policy dependent on his whims and unleashed economic chaos.
“The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs,” the court wrote, referring to the 1977 International Emergency Economic Powers Act.
The White House is yet to respond.
The Trump administration is expected to appeal.
This breaking news story is being updated and more details will be published shortly.
You probably recall the stories about Leicester’s clothing industry in recent years: grim labour conditions, pay below the minimum wage, “dark factories” serving the fast fashion sector. What is less well known is what happened next. In short, the industry has cratered.
In the wake of the recurrent scandals over “sweatshop” conditions in Leicester, the majority of major brands have now abandoned the city, triggering an implosion in production in the place that once boasted that it “clothed the world”.
And now Leicester faces a further existential double-threat: competition from Chinese companies like Shein and Temu, and the impending arrival of cheap imports from India, following the recent trade deal signed with the UK. Many worry it could spell an end for the city’s fashion business altogether.
Gauging the scale of the recent collapse is challenging because many of the textile and apparel factories in Leicester are small operations that can start up and shut down rapidly, but according to data provided to Sky News by SP&KO, a consultancy founded by fashion sector veterans Kathy O’Driscoll and Simon Platts, the number has fallen from 1,500 in 2017 to just 96 this year. This 94% collapse comes amid growing concerns that British clothes-making more broadly is facing an existential crisis.
Image: A trade fair tries to reignite enthusiasm for the local clothing industry
In an in-depth investigation carried out over recent months, Sky News has visited sites in the city shut down in the face of a collapse of demand. Thousands of fashion workers are understood to have lost their jobs. Many factories lie empty, their machines gathering dust.
The vast majority of high street and fast fashion brands that once sourced their clothes in Leicester have now shifted their supply chains to North Africa and South Asia.
And a new report from UKFT – Britain’s fashion and textiles lobby group – has found that a staggering 95% of clothes companies have either trimmed or completely eliminated clothes manufacturing in the UK. Some 58% of brands, by turnover, now have an explicit policy not to source clothes from the UK.
Image: Seamstresses in one of the city’s former factories
Image: Clothing industry workers in Leicester
Jenny Holloway, chair of the Apparel & Textile Manufacturers Association, said: “We know of factories that were asked to become a potential supplier [to high street brands], got so far down the line, invested on sampling, invested time and money, policies, and then it’s like: ‘oh, sorry, we can’t use you, because Leicester is embargoed.'”
Tejas Shah, a third-generation manufacturer whose family company Shahtex used to make materials for Marks & Spencer, said: “I’ve spoken to brands in the past who, if I moved my factory 15 miles north into Loughborough, would be happy to work with me. But because I have an LE1, LE4 postcode, they don’t want to work for me.”
Image: Shahtex in Leicester used to make materials for Marks & Spencer
Image: Tejas Shah, of Leicester-based firm Shahtex
Threat of Chinese brands Shein and Temu
That pain has been exacerbated by a new phenomenon: the rise of Chinese fast fashion brands Shein and Temu.
They offer consumers ultra-cheap clothes and goods, made in Chinese factories and flown direct to UK households. And, thanks to a customs loophole known as “de minimis”, those goods don’t even incur tariffs when they arrive in the country.
Image: An online advert for Chinese fast fashion company Shein
According to Satvir Singh, who runs Our Fashion, one of the last remaining knitwear producers in the city, this threat could prove the final straw for Leicester’s garments sector.
“It is having an impact on our production – and I think the whole retail sector, at least for clothing, are feeling that pinch.”
Image: Inside one of the city’s remaining clothesmakers
While Donald Trump has threatened to abolish the loophole in the US, the UK has only announced a review with no timeline.
“If we look at what Trump’s done, he’s just thinking more about his local economy because he can see the long-term effects,” said Mr Singh. “I think [abolishing de minimis exceptions] will make a huge difference. I think ultimately it’s about a level playing field.”
A spokesperson for Temu told Sky News: “We welcome UK manufacturers and businesses to explore a low-cost way to grow with us. By the end of 2025, we expect half our UK sales to come from local sellers and local warehouses.”
Thames Water, the UK’s biggest water provider, has been hit by a record fine by regulator Ofwat.
The company has been fined £122.7m following Ofwat’s “biggest and most complex” investigation.
It follows two investigations related to Thames Water’s wastewater operations and dividend payouts.
Of the total fine, £104.5m – 9% of Thames Water‘s turnover – has been levied for breaches of wastewater rules – just below the maximum 10% of turnover that Ofwat could have applied.
Another £18.2m penalty will be paid for breaches of dividend payment rules.
It is the first time Ofwat has fined a company for shareholders’ payments which do not “properly reflect” its performance for customers and the environment.
The fine will be paid by Thames Water and its shareholders, Ofwat said, rather than customers.
‘Unacceptable’ environmental impact
The regulator was highly critical of Thames Water’s handling of wastewater, describing it as having an “unacceptable” impact on the environment.
Its investigation of treatment works and the wider wastewater network uncovered failings which “amounted to a significant breach of the company’s legal obligations” and caused that unacceptable environmental impact.
The company announced a 40% spike in sewage spills in December for the period from January to September 2024.
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Thames Water boss can ‘save’ company
The fine was so large because Ofwat’s chief executive, David Black, said Thames Water “failed to come up with an acceptable redress package that would have benefited the environment”.
“This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment,” Mr Black said.
“Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations.”
As a result, Thames Water is required to agree to a remediation plan with Ofwat within six months.
Another investigation by the Environment Agency into environmental permits at sewage treatment works is ongoing.
Bad news for Thames Water finances
Thames Water serves 16 million customers across London and the South East and has just about fended off effective nationalisation, having secured an emergency £3bn loan. Its debts now top £19bn.
These fines were not factored into Thames Water’s financial planning for the next five years. The company’s chief executive, Chris Weston, told a recent sitting of the Environment, Food and Rural Affairs select committee that Thames Water’s future was dependent on Ofwat being lenient with fines.
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A Thames Water spokesperson said: “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.
“The dividends were declared following a consideration of the company’s legal and regulatory obligations. Our lenders continue to support our liquidity position and our equity raise process continues.”