Workers at the Port of Felixstowe, which handles 48% of container trade, began an eight-day strike over pay at the weekend, threatening to add more disruption to the British economy after the shocks of Brexit and Covid pandemic.
It is the first such action at Britain’s biggest container port since 1989, and on Monday a spokesperson for the union behind it claimed “the supply chain will be severely disrupted” as a result. Unite national officer Robert Morton told Sky News there “will be more strikes” if his members’ pay demands are not met.
Why is it happening?
More than 1,900 Unite members are involved in the strike, including crane drivers, machine operators and stevedores. The union is pushing for the company to improve its offer of a 7% pay increase, which it says is “significantly below” the rising cost of living.
The union argues the docks and its owners are “incredibly wealthy”, with pre-tax profits of £61m in 2020 and paying almost £100m in dividends. Felixstowe says the union has not put an improved offer of a 7% pay rise plus a £500 one-off bonus to its members.
Union officials have pointed to the retail prices index (RPI) measure of inflation as a benchmark, which is now 12.3%. Morton suggested a figure between 7% and 12.3% would be acceptable. The RPI is higher than the consumer prices index measure of inflation, which reached 10.1% in July and is forecast by the Bank of England to peak above 13% later this year.
How important is Felixstowe to UK trade?
As a linchpin for long-distance shipments to and from Asia, the terminal owned by the Hong Kong-based company CK Hutchison handles goods for about 17 different shipping lines operating to and from 700 ports. Business leaders fear the strike will have a damaging impact on supply chains at a time when companies are grappling with disruption caused by Brexit and the Covid pandemic.
As much as $800m (£680m) in trade could be affected, according to ALPS Marine analysis by Russell Group, a data and analytics company. That includes more than $80m of trade in clothing and more than $30m in electronics.
What is the impact so far?
Josh Brazil, a global supply chain analyst at project44, a research provider, said container capacity on the first day of the strike fell by more than a third compared with last week. Some vessels are being redirected to nearby London Gateway, with a 45% increase in capacity volumes calling there in the last week. “[It] could have massive implications for the nation’s supply chains,” Brazil said.
Industry sources said shipments had been timed to arrive to avoid the strikes, with orders rushed to beat the start and others delayed to arrive afterwards. Trade is also expected to be diverted to smaller UK ports and EU ports, including Rotterdam in the Netherlands and Wilhelmshaven in Germany.
Are we going to see shortages?
Consumers are unlikely to see an immediate impact on shop shelves, although experts say any further strike action would lead to delivery delays and shortages of some goods.
This is because Felixstowe typically handles bulkier items shipped from Asia, such as furniture, clothing and white goods, unlike Dover, which handles food and perishable goods that require a faster delivery time.
UK ports have gradually been recovering from Covid, Brexit disruption and national lorry driver shortages, while warehouses have been restocked with goods. Consumer demand for big-ticket purchases such as sofas and fridges is also fading amid concerns over the rising cost of living, reducing the pressure on supply lines.
Will it push up prices?
The disruption is likely to add to logistics costs, which could lead to higher prices in shops. “It will add an inflationary impulse,” said John Glen, the chief economist at the Chartered Institute of Procurement and Supply. “We still haven’t got back to just in time supply chains and stocks being held in warehouses. So you will see some impact in the shops. It won’t be a lack of availability of particular products, but you might see a lack of choice.”
What about Christmas?
Experts said any further strikes could affect the festive period, when retailers typically ramp up supplies. Sophie Lund-Yates, a lead equity analyst at Hargreaves Lansdown, said: “This is the latest unwanted twist in our weekly food shops, with high prices already making the experience more difficult for many shoppers.”