In the last 12 months, Chubb has published two thought leadership reports on the state of supply chains across the globe. We studied how supply chains were being disrupted and how these disruptions may change and develop over time. In this article, we return to the topic to ask: what is the current state of global supply chains and how are they impacting U.K. businesses?
Inflation and reduced capacity
Much of 2023 was characterised by high inflation across the world, and we are now seeing a softening which has led to a slight reduction in shipping and air freight costs. There have also been sharp reductions in capacity, reflecting consumer spending shifts from discretionary to essential goods. While many carriers are maintaining their rates, these are far below the peak of March 2022.
Labour shortages and strikes
In the U.K., post-Brexit Britain has seen trucks stacking up as they try to get across the English Channel and industrial action in the form of labour strikes are common. In 2022, there were long and troublesome strikes in the ports of Felixstowe and Liverpool. In the last quarter of 2023, the Unite union reported that industrial action was brewing at 21 ports, raising the possibility of further strikes. If these go ahead, it means the potential for more significant delays.
Additionally, labour shortages are putting even greater pressure on supply chains. In the shipping industry, it has been reported that as of June 2023 there is a record officer shortfall of 9%.
With cyber criminals becoming ever more sophisticated, cyber crime is emerging as a potential destabiliser to supply chains, regardless of how they are structured. Supplier assets that can be targeted include configurations, data, hardware, processes or people. Attack techniques range from a malware infection to impersonating a supplier’s personnel. In 2021, threat mapping by the European Union Agency for Cybersecurity (ENISA) revealed that attacks on a supplier’s computer code were emerging as the biggest risk area globally (accounting for 66% of supply chain attacks). Since then, ENISA have published a good practices guide for businesses involved in the supply chain, to help mitigate
How supply chain disruption is impacting businesses in the U.K.
Businesses operating in many industries – including but not limited to manufacturing, property, life sciences, marine, aviation, motor and construction – are still experiencing delays in obtaining essential materials to run their operations. In the U.K. there has been a significant decline in the number of brick and concrete block deliveries year on year, with 30% fewer brick deliveries made in August 2023 compared with August 2022. Construction companies have been significantly impacted by this, leading to longer lead times to obtain materials and causing delays to construction projects.
Consequently, business interruption and its associated costs have been affected. In the life sciences industry, companies are faced with a precarious situation should they need to replace specialised research materials, such as cell lines or specialised product components. It now takes a lot longer to source replacements than it did before the onset of the COVID-19 pandemic and can mean that business interruption periods are longer than before.
Although global supply chains are more stable than they were from 2020 to 2022, there is still a long way to go before we see a complete cessation of disruption in the shipping and freight industries. Businesses in the U.K. will continue to be affected by the issues outlined here and should take care to allow for longer lead times and potentially higher costs to import or export goods as a direct result of this disruption.