The sunk cost of shipping to the UK


UK updates

When we wrote in late August about the widening gulf in shipping costs between big companies and smaller ones, a reader asked if there was a difference between the cost of shipping to mainland Europe and to the UK.

In short, the answer’s yes.

The chart below is based on rates charged for deliveries to some of Northern Europe’s largest ports — specifically, Antwerp, Zeebrugge, Bremerhaven, Hamburg, Wilhelmshaven, Le Havre and Rotterdam — for goods arriving from the Far East, and cargoes making the same journey but docking in either Felixstowe, London Gateway Port or Southampton. Throughout 2021 it has consistently been cheaper to chip to continental Europe than the UK.

Line chart of Price of a 40ft container ($) showing It costs more post-Brexit to ship to UK ports

Xeneta only began recording mainland Europe and the UK as two distinct groups at the turn of this year — the reason being that before the end of 2020 there was little, if any, difference.

When it comes to shipping from the Far East, the UK has witnessed the same phenomenon as importers based in the US, where rates have not only become more expensive overall, but the gap between shipping lines’ most favoured customers — as represented by the pink line on the chart below — and the rest has widened.

Line chart of ($) showing Cost of shipping a 40ft container from the Far East to the UK

We’ve seen the same thing emerge on the Northern European routes too.

Line chart of Cost of shipping a 40ft container from Far East to Northern Europe ($) showing Smaller companies are paying far more for space than larger rivals

The gulf between the cheapest and most expensive rates in both the UK and the Northern EU means that the big companies that are favoured by shipping will almost certainly paying less to ship goods from China than smaller rivals, regardless of whether they are based in the UK or the EU. Size matters more than location.

We’ve been arguing that officials ought to address these widening gaps in shipping costs as a competition problem. It’s hardly fair on the companies involved. But given that, in the case of the UK, the difference in rates is being driven by arrangements these same officials put in place, we’re not quite sure what can be done. Like empty shelves and labour shortages, shipping costs look set to prove a burden to British businesses for some time yet.

Related links:
Who’s really feeling the shipping squeeze? – FT Alphaville


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