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Ministers have warned business leaders there are limits to what the UK government can do to protect critical global supply chains as attacks on ships using the key Suez Canal route continued this week.
“It is first and foremost for businesses to manage their supply chains, with government intervention reserved for those areas where it is necessary, such as in cases of market failure,” Nusrat Ghani, business minister, said on Wednesday.
Her comments came as she unveiled a report outlining a new critical imports and supply chains strategy that set out ways the government can help industries retain access to critical products such as medicines, minerals and semiconductors against an increasingly unstable geopolitical backdrop.
The measures include setting up a Critical Imports Council to work with businesses to improve analysis of potential global supply chain shocks by identifying risks to the most sensitive imports and drawing up a plan of action.
The government said it would develop a new programme to “identify, review and where feasible” remove import barriers. It could also assist companies seeking to identify potential new suppliers in third countries, citing recent agreements with Canada, South Korea and Australia to improve access to critical product supply.
While there was no fresh funding available, ministers also said they would “explore the case for further supply chain financing interventions for the UK’s most critical supply chains”.
The report warned of the vulnerability of transport systems including “where goods transit through maritime chokepoints”.
The launch of the strategy comes as attacks in the Red Sea and Gulf of Aden on shipping heading north to the Suez Canal continued this week, despite recent US and UK air strikes on Iran-backed Houthi rebels in Yemen to try to end the threat.
The recent spate of attacks has prompted nearly all container shipping lines to reroute vessels away from the affected area, adding up to two weeks to the journey from Asian ports to Europe.
The report warned about the “increasing prospect of further deterioration in the international security environment” with “signs of fragmentation” in the global economic and trade order.
It highlighted the disruption to global trade caused by Russia’s full-scale invasion of Ukraine two years ago and China’s increasingly belligerent stance on the independence of Taiwan.
“Increased tension in the Taiwan Strait and South China Sea or the deterioration of regional security in the Middle East could directly and indirectly impact the accessibility of critical goods globally,” the report said.
A recent survey by Interos, an operational resilience company, found that 85 per cent of senior procurement leaders said geopolitical tensions were their biggest concern.
On Monday, UK defence secretary Grant Shapps warned that the world had moved into a “prewar” phase as he called on allies to lift defence spending without committing the UK to any increase beyond repeating the government’s “aspiration” to lift it from 2 to 2.5 per cent of GDP.
Additional reporting by Robert Wright
Source: Economy - ft.com
