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Manufacturers must brace for more supply and price disruption

Significant backlogs at major Chinese ports, coinciding with record gate prices from Chinese producers, are set to add more pressure onto the UK’s already struggling supply chains.

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According to data compiled by US logistics platform Project44, there were nearly 400 container ships anchored off the coasts of Shanghai and Ningbo - the world’s first and third busiest ports respectively - in the first week of October.

The backlog has been partly caused by new outbreaks of COVID-19 at Chinese ports, which account for 40 per cent of global shipping container trade. The result will be more shortages for UK businesses and knock-on impacts to shipping worldwide.

The UK’s largest commercial port, Felixstowe, is also facing its own logjam. Shipping giant Maersk has reported that some of its largest container ships had been waiting outside Felixstowe for up to a week in early October. Many ships have been re-routed from Felixstowe to other ports in Europe.

In an attempt to reduce further pressure on supply chains amid the “perfect storm” of labour and driver shortages, the Prime Minister has launched a new Supply Chain Advisory Group that will be headed up by Sir David Lewis, former CEO of Tesco.

In a statement, the government said David Lewis will “work closely with the Prime Minister, No10 and the Treasury” and will be based in the Cabinet Office.

Reacting to the appointment, Hannah Essex, Co-Executive Director of the British Chambers of Commerce (BCC), said SMEs should receive special attention over the coming weeks.

“The increasing pressure that businesses, especially SMEs, are facing around supply chain costs and disruption, labour shortages, price rises, soaring energy bills and taxes is becoming dire.

“The economic recovery is on shaky ground as over two thirds of firms have yet to report any increase in investment or cashflow [in the last quarter], and the position is even worse for smaller firms.”

Meanwhile, manufacturers are bracing for further price rises. According to official figures from the country’s Producer Price Index (PPI), factory gate prices in China rose at the fastest rate on record during September. This is likely to lead to more price inflation in countries, like the UK, which rely heavily on Chinese imports.

Greater Manchester manufacturers suffering supply chain problems are encouraged to contact our specialist Manufacturing Service for fully-funded advice and guidance.

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