UK factories are “paying the price” for port chaos, with almost half of manufacturing firms reporting longer wait times for supplies.
In a leading business survey, 45% of manufacturers this month said stocks were taking longer to arrive than last month, with some forced to lower production.
The poll shows “severe pressure” on supply chains “overwhelmingly linked to freight delays following congestion at UK ports,” according to an industry report on Wednesday.
IHS Markit and the Chartered Institute of Procurement & Supply (CIPS), which compile the survey, said shortages of critical stocks were hitting production volumes at some firms. Backlogs of work at factories have risen at their fastest pace in a decade in December.
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A string of firms from toy retailers to carmakers have sounded the alarm over issues at UK ports in recent weeks. Rising container volumes linked to the pandemic and the run-up to Christmas have increased the strain on ports and shipping firms worldwide, with Felixstowe facing among the most severe disruption.
Issues in the UK have been exacerbated by uncollected PPE shipments and Brexit stockpiling, with more disruption expected as new Brexit trade rules come into force on 31 December. Tesco is among the firms reported to have stockpiled goods.
The latest purchasing managers’ index (PMI) survey, showed lead times lengthening at the third steepest rate since the poll began in 1992 — with only the virus and lockdown upheaval seen this April and May worse.
Levels of uncompleted work have risen for only the second time in three years of monthly surveys. Factories have had to source supplies elsewhere and pay more for goods and shipping to plug gaps and meet demand.
“Many essential materials were not getting through. Manufacturing companies were also paying the price of goods shortages with the highest rise in cost inflation since June 2018 as shipping and commodity prices soared.
The end of the Brexit transition period will mean some disruption regardless of whether a trade deal is struck as the UK government has decided to leave the single market and customs union.
“Of course, the concern will be that these problems will become magnified next month when the UK and EU move to new trade terms,” wrote ING analysts in a note. “Even under a free trade agreement, which we still think is the mostly likely scenario, there will be major changes for businesses.
“As things stand, full customs processes will kick in at European ports in January, while the UK is offering a reprieve for businesses on some elements, including customs declarations.”
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