Shipping crisis: Im being quoted £10,000 for a £1,600 container

“We were paying £1,600 per container in November, this month we’ve been quoted over £10,000,” says Helen White.

The founder of start-up Houseof.com, which imports lighting from China, says the rise in shipping costs means she’s making a loss on what she sells.

She’s one of many UK importers facing soaring freight costs amid a global shipping crisis that may last months.

A shortage of empty shipping containers in Asia and bottlenecks at the UK’s deep sea ports are behind the problems.

It was hoped the backlogs could be cleared during the Chinese New Year holiday in February, but instead a coronavirus outbreak in China is adding to the uncertainty facing firms.

In the UK the difficulties in international shipping have coincided with problems faced by businesses trading with the EU after Brexit.

One Manchester-based freight forwarder said the logistics industry is facing the most challenging conditions he’s seen in the 17 years he’s been in the business.

Craig Poole from Cardinal Maritime said during lockdowns, people have been turning to online shopping, and that’s causing a surge in demand for goods from China.

But some companies can’t absorb the skyrocketing freight costs that shipping lines are charging. That could lead to higher prices for consumers or businesses having to close.

“The really unfortunate thing is, the small businesses who can’t afford to pay those rates are going to go under as a result,” Mr Poole said.

Helen White’s lighting range is designed in the UK and manufactured in Guangzhou, China.

She said the six-fold increase in shipping costs is hard to take, especially when getting hold of a container “is like gold dust”.

“It’s really hard for a small business to absorb those costs. We’ll be making a loss on the goods we’re selling.”

At the other end of the supply chain, Chinese manufacturers and logistics firms say they are equally frustrated.

Johnny Tseng is the owner and director of J&B Clothing Company Ltd., which manufactures garments for some of the UK’s most popular fashion sites including Boohoo and Pretty Little Thing.

He’s been supplying clothes to British retailers for more than 40 years, but he says his family-run firm won’t be able to absorb inflated shipping rates for much longer.

“To be honest I don’t even know how we can survive if we carry on shipping things at this kind of cost.”

He says he’s now being quoted $14,000 to ship a container to the UK, when the usual price is $2,500.

The shortage of empty containers in China and congestion at UK ports caused some of his stock to miss the busy Christmas trading period. Now some customers are holding orders for their Autumn-Winter collections until next year.

“It’s chaos,” he said. “We are making a loss. We take it as a loss leader and keep our fingers crossed it will go back to normal after Chinese New Year, but it is a major issue if it persists this way.”

Usually during the Chinese New Year holiday, factories in China shut down for two weeks. There were hopes the pause in production would give UK ports a chance to clear the backlog of ships waiting to dock, and encourage shipping lines to move more empty containers back to Asia, which is a less profitable journey.

But rising numbers of coronavirus cases have prompted the Chinese authorities to stagger factory closing dates so that not all workers are travelling to their home regions at the same time. A worsening outbreak could lead to travel restrictions, in which case some factories may not stop production at all.

Craig Poole says some companies have been caught out by factories closing earlier than planned.

“A lot of businesses that can’t get those goods away are delaying orders until after Chinese New Year, so this situation could continue ’til March,” he said.

Patrick Lee from the Hong Kong-based Unique Logistics International said it could be even longer than that.

“Middle of the year at the earliest is what we’re hearing from end customers in the UK, and also from some of our people in the industry. Some of the carriers as well,” he said.

Mr Lee has called on the shipping lines to add more ships to help ease the backlog of stock orders building up at warehouses across China.

“They are increasing sailing but can increase a lot more. There are idle ships out there that they can reactivate without too much difficulty,” he said.

But a spokeswoman for the World Shipping Council said carriers are using all available capacity.

“The demand for transportation service far exceeds supply. As in any free market, this puts upward pressure on rates,” she said.

Shipping lines have been trying to drive down demand from British importers by charging a premium for deliveries to the UK, or bypassing the country’s ports altogether.

One shipping line recently offered freight rates of $12,050 for a 40ft container from China to Southampton, but charged just $8,450 for the same container to travel from China to Rotterdam, Hamburg, or Antwerp.

The UK’s largest container port at Felixstowe has been experiencing long delays since October. Congestion has also been a problem at the Port of Southampton, albeit to a lesser extent.

The bottlenecks were initially caused by a surge in imports as business activity picked up after the first wave of the pandemic. Huge shipments of PPE and the usual Christmas rush added to container volumes and ports struggled to cope.

“Most of the carriers just don’t want UK cargo because of the issues when the vessels dock, so mainly they’re favouring European ports and we are having to truck containers over,” said freight forwarder Craig Poole.

He said that adds a cost of up to £2,000 per container, and takes an extra seven to ten days to reach the delivery point in the UK.

For business-owners like Helen White , the difficulties affecting global shipping can’t be solved quickly enough.

“Lots of little start-ups are really hurting,” she said. “It has been paired with logistical nightmares across Europe as well. It just feels like logistics is falling apart at the moment. It’s hard to see where the resolution is.”

Cladding crisis: Delays could bankrupt us

The government’s fund to pay for the removal of dangerous cladding is woefully inadequate, oversubscribed and taking too long to make buildings safe, campaigners say.

More than three and a half years since the Grenfell Tower fire which killed 72 people, an estimated 700,000 people are still living in high-rise blocks with flammable cladding.

The £1.6bn Building Safety Programme was set up in 2019. Concerns have emerged about the contract that the Ministry of Housing, Communities and Local Government requires applicants to the fund, usually managing agents or building owners, to sign.

A clause in the contract, seen by the BBC, indicates applicants will be financially liable for any repair work not covered by the fund.

The BBC has learnt that some managing agents are refusing to sign the document, further delaying the repair work, and have written to the government asking ministers to clarify the position.

Christian Hansen, a solicitor at Bindmans LLP specialising in housing law and fire safety claims, said the contract showed that “there’s going to be a significant shortfall between the costs of the [repair] works that are required and the funding provided under the scheme”.

“Someone is going to need to pick up the bill and pay the difference. This contract makes clear it’s going to be the leaseholders and for many, this could be tens of thousands of pounds, potentially ruinous costs,” he warned.

Mr Hansen said that leaseholders wanted the focus of government action “to be on the manufacturers of the defective materials and construction companies who built these buildings”.

“At the moment, they are the ones profiting from putting people’s lives at risk.”

First-time buyer Amy Cottenden, who is 28, bought a one-bed flat in Metis Tower in the centre of Sheffield for £85,000 in 2017.

Inspections of the 14-storey building in the wake of the Grenfell Tower tragedy revealed it had the same type of flammable ACM cladding and other safety faults.

Work to remove the cladding started last month, but Ms Cottenden, who is a frontline NHS health worker, is frustrated at what she describes as a lack of progress.

“The pace of work is extremely slow. So far, they’ve put scaffolding up and removed three panels. They have told us it’s going to take between 12 and 24 months just to take the cladding off,” she said.

“It is absolutely terrifying knowing that you are stuck here. With lockdown, they are saying not to go out, but you are in a building where all you want to do is not be in it. You can’t leave. You can’t sell. My flat isn’t worth anything until it is made safe.”

While the government’s Building Safety Fund is paying for the Grenfell-style cladding to be removed, the building has other fire safety faults, including missing fire breaks, that aren’t covered by the scheme.

It could cost up to £6m to fix. Flat owners fear they may face huge bills of up to £50,000 each.

“We can’t pay it and we shouldn’t have to pay it. It is not our fault. We could all go bankrupt because of this,” Ms Cottenden said.

A spokesperson for Rendall & Rittner, the company which manages Metis Tower, said government funding to remove ACM cladding had been approved totalling £6.3m.

However, an application to the same fund to pay for the removal of other types of unsafe cladding was rejected and the company has appealed against that decision.

The company added: “We understand and sympathise with residents and owners about the uncertainty that this situation is causing and will do all we can to assist.”

What started as a cladding scandal has now become a much wider building safety crisis, exposing decades of regulatory failure.

Safety inspections have revealed that many buildings have other serious faults, including missing fire breaks, flammable balconies and defective insulation. None of that is covered by the government’s Building Safety Fund.

Dr Nigel Glen, the chief executive of ARMA, the trade association for residential leasehold management, said the additional costs that leaseholders were currently facing for non-cladding-related issues remained a huge concern.

“In the longer term, the draining of reserve funds will also mean that in the years to come, any major works that were being saved up for, such as a new roof or lift repairs, will have to be funded anew by the leaseholders,” he added.

A spokesperson for the Ministry of Housing, Communities and Local Government said that despite the pandemic, significant progress had been made to remove dangerous cladding, but “building safety remains the responsibility of the building owner and we expect them to ensure any necessary work is carried out safely and effectively”.

“All applicants to the Building Safety Fund are told the amount of funding they have been awarded before being asked to sign contracts – this is clearly explained in the guidance,” the spokesperson added.

Body defends action on Covid workplace safety complaints

The boss of the body in charge of monitoring and enforcing workplace safety has defended its response to Covid workplace complaints.

The Health and Safety Executive (HSE) has received 134,000 complaints since the crisis started, but issued only 192 enforcement notices.

“We aren’t naïve, we fully understand some employers are not trying to do the right thing,” its boss told the BBC.

Concerns have been raised about bosses who are failing to protect workers.

In the year before the pandemic struck, the HSE issued 7,000 notices in response to more than 32,000 complaints.

HSE chief executive Sarah Albon said many firms had acted when warned, meaning further action was unnecessary.

“It’s really about employers’ willingness to work with us co-operatively to put things right before it gets to the point of formal notices,” she told Radio 4’s Today programme.

Formal notices from the HSE can mean that bosses have to improve conditions to bring them up to health and safety standards, or that they have to stop work immediately.

Lesser measures that inspectors can take include issuing advice or a caution.

Ms Albon pointed out that the HSE had also carried out more than 32,000 site visits since the start of the pandemic.

Under current lockdown rules, people who can work from home effectively should do so, including in areas such as healthcare.

Staff should only travel to their workplace if they cannot do their job remotely, while bosses should have a range of measures in place to stop the spread of the virus.

“The vast majority of employers have been doing the right thing and have been trying to do the right thing,” Ms Albon said, although she admitted the organisation had seen a “significant increase” in the number of complaints.

Jane works as an administrator for a private healthcare firm in Oxfordshire, a job that she is expected to do from the office, even in lockdown.

However, since she caught Covid-19 at work before Christmas, she has chosen to work from home because she feels safer – something that is causing problems with her boss.

“The office is so small and it is impossible to socially distance,” she tells the BBC.

“My boss also didn’t follow guidelines when I got ill and no one was told to isolate. It was so irresponsible.”

Jane argues that her job, which is computer and phone-based, can be done easily from home. She feels that she is only following government guidelines.

However, she says her boss wants her to come back in and she cannot hold out much longer: “I have a mortgage to pay, I can’t risk losing my home.”

Read more about her story here.

The HSE has also introduced telephone spot-checks in response to the coronavirus crisis, its chief executive said on Friday.

“We’re trying to work with business wherever, to make them make changes immediately in order to keep the workplace safe.”

The Trade Unions Congress recently called for an increase in resources for the organisation “to stop rogue employers getting away with putting staff at risk. Every employer needs to know an inspection could happen any time”.

TUC general secretary Frances O’Grady said: “If the government is upping enforcement, ministers should start with employers who break Covid safety rules.”

The government should also make it clear that everyone who can work from home should do so, Ms O’Grady said last Sunday.

Under current lockdown restrictions, people across the UK who can work effectively from home should do so. They should only travel to their workplace if they cannot do their job remotely.

This includes healthcare professionals, teachers, childcare providers, transport workers, people who work in construction or manufacturing, funeral directors and essential retail workers.

For workplaces that remain open in England, employers must “carry out an appropriate Covid-19 risk assessment” to develop a “specific” strategy to stop the virus’s spread.

In England, guidelines set out strict measures which employers must follow, such as minimising the number of unnecessary visits to the office, cleaning workspaces frequently and ensuring that staff observe 2m (6ft) social distancing wherever possible.

There is similar guidance for employers across a range of sectors in Scotland, Wales and Northern Ireland.

Read more from our Explainers team here.

Brexit: Retailers warn they could burn goods stuck in EU

UK retailers could abandon goods EU customers want to return, with some even thinking of burning them because it is cheaper than bringing them home.

They say the new EU trade deal has put costly duties on returns at a time when firms are already struggling.

The BBC has been told UK High Street and luxury brands have a mounting volume of goods stuck with courier services on the continent.

None of the retailers would comment on the problem.

Adam Mansell, boss of the UK Fashion & Textile Association (UKFT), said it’s “cheaper for retailers to write off the cost of the goods than dealing with it all, either abandoning or potentially burning them.”

Since 1 January, lots of European customers have been presented with an unexpected customs invoice when signing for goods they’ve ordered from the UK. These new customs charges are a result of the new EU trade deal with the UK.

“It’s part of the ongoing small print of the deal,” said Mr Mansell. “If you’re in Germany and buying goods from the UK, you as the German customer are the importer bringing goods into the EU.

“You then have a courier company knocking on the door giving you a customs clearance invoice that you need to pay to receive your goods.”

Many customers automatically reject the goods, refusing to pay the additional surcharges, leaving couriers to take them away.

About 30% of items bought online are returned, according to figures from Statista. That has meant large volumes of goods are heading back to the UK.

When goods arrive back at depots on the Continent, there is new customs paperwork to complete. “Export clearance charge, import charge arrival, import VAT charge and depending on the goods a rules of origin document as well,” said Mr Mansell.

“Lots of large businesses don’t have a handle on it, never mind smaller ones.”

The BBC has seen a document that states four major UK High Street fashion retailers are stockpiling returns in Belgium, Ireland and Germany. One brand will incur charges of almost £20,000 to get the returns back.

Couriers and freight businesses that ship from the UK to Europe are also experiencing delays getting goods to the Continent because of the new customs clearances.

“It’s a bigger change than we thought possible,” explained Shona Brown from Speedy Freight, a courier service. “Before, we’d get the order to Germany and off the driver would go.

“Now we’ve got to do export entry detailing where was it made, the driver needs to go to the customs office at Dover, then customs in Germany on arrival and then sort out the VAT. There are so many hoops to jump through, it’s so laborious.”

“You’ve got to have manpower to figure out what to do. And with people working from home it’s difficult. For small businesses, it is a huge thing for people to do,” she added.

Ulla Vitting Richards runs her sustainable fashion brand VILDNIS from the UK. She has stopped exporting to her fastest growing market, the EU, because of the new customs processes.

“I’ve been involved in logistics before. I expected it to be bad and I am used to shipping to the USA which is difficult. But this is just mind-blowing,” she said.

“Every day there is another layer. In the first two weeks we couldn’t get answers. For two years we were told to get ready for Brexit. But for these we couldn’t prepare.”

She added: “I don’t think we can increase prices but we might just have to say that we can’t make the business with the EU work. It is a real shame. There is a huge interest in sustainable fashion in Europe and we might have to walk away from it.”

Ulla did speak with the Department for International Trade for help and advice. She was told that setting up a subsidiary distribution hub in Europe might be a good idea: “He told me we’d be best off moving stock to a warehouse in Germany and get them to handle it.”

Retailers in the UK and Europe that trade across the new customs border are all still adapting to the rules. Hauliers and customs agents are facing a steep learning curve too.

The government said: “Now the UK has left the EU customs union and Single Market, there are new rules and processes businesses will need to follow.

“We have encouraged companies new to dealing with customs declarations to appoint a specialist to deal with import and export declarations on their behalf – and we made more than £80m available to expand the capacity of the customs agents market.”

It added: “Most businesses use a specialist such as a customs broker, freight forwarder or fast parcel operator to deal with this.

“The government will continue to work closely with businesses to ensure they are able to trade effectively under the new rules.”

Next pulls out of race to buy Topshop-brands

Fashion chain Next has said it will no longer bid to buy Sir Philip Green’s Arcadia retail brands Topshop and Topman out of administration.

It comes after a consortium including the fashion chain was named as frontrunner to buy the brands.

In a short statement, Next said the consortium had been “unable to meet the price expectations of the vendor”.

Some 13,000 jobs were put at risk when Arcadia, which also owns Burton and Dorothy Perkins, went bust in November.

It leaves a clutch of others in the race to buy the 440-store group, including Mike Ashley’s Frasers Group, which owns House of Fraser and Sports Direct.

According to reports, Authentic Brands, the US owner of the Barneys department store, and JD Sports have tabled a joint offer, while online retailers Asos and Boohoo are also said to be interested.

Administrators Deloitte have been looking for buyers for some or all of Arcadia, after a slump in sales caused by the pandemic triggered its collapse.

Next, which has 550 UK shops and has weathered the pandemic well, was seen as a good fit to take over the group’s assets.

It had been bidding in partnership with the US hedge fund Davidson Kempner, which was going to put up most of the money.

Next said it wished “the administrator and future owners [of Arcadia] well in their endeavours to preserve an important part of the UK retail sector”.

Experts expect Arcadia to be broken up, with bidders taking on different parts of the business and brands potentially hived off from their stores.

In December, Australian collective City Chic said it would buy Arcadia’s Evans brand, commerce and wholesale business for £23m but not its store network.

Last year was the worst for the High Street in more than 25 years as the coronavirus accelerated the move towards online shopping, according to the Centre for Retail Research (CRR).

Nearly 180,000 retail jobs were lost, up by almost a quarter on the previous year, as shops faced strict curbs and prolonged closures.

Clothes sales slump in worst year ever for shops

British retail sales saw their largest annual fall in history last year as the impact of the pandemic took its toll.

Sales fell by 1.9% in 2020, when compared with 2019, the largest year-on-year fall since records began in 1997, official figures show.

Clothes shops were hit hard, with a record annual fall of more than 25%.

The drop came despite a slight pick-up in December, as a brief easing of some lockdown measures meant more stores were able to open.

Retail sales, including fuel, increased by 0.3% last month when compared with November.

The small increase came despite the end of England’s national lockdown on 2 December. Sales had slumped by 2.6% in November during a month-long shutdown.

“During December, there was initially a period of eased restrictions early in the month, however, there followed a number of tighter restrictions to non-essential retail in England, Scotland and Wales later in the month,” the ONS said.

“Feedback from retailers suggested that these enforced closures later in the month affected turnover, though not to the same extent as witnessed in November.”

And while clothing retailers were particularly hard-hit in 2020, they saw the largest monthly growth in December at 21.5%.

ONS deputy national statistician for economic statistics Jonathan Athow also said that some sectors had been “able to buck the trend” last year.

“The increased popularity of click-and-collect and people buying more items from home led to a strong year for overall internet sales, with record highs for food and household goods sales online.”

In a sign of the way the pandemic has changed shopping habits, the value of online retail sales jumped by 46.1% in 2020 when compared with 2019 – the highest annual growth reported since 2008.

Richard Lim, chief executive of Retail Economics, explained that the rise of online had “polarised industry performance”.

“The gap widened between those retailers with the most sophisticated online propositions from those with legacy store-dependent business models,” he said.

UK borrowing hits highest December level on record

UK government borrowing hit £34.1bn last month, the highest December figure on record, as the cost of pandemic support weighed on the economy.

It was also the third-highest borrowing figure in any month since records began in 1993, the Office for National Statistics said.

The figures underline Chancellor Rishi Sunak’s problems as he prepares his March Budget.

Borrowing for this financial year has now reached £270.8bn.

That is £212.7bn more than a year ago, the ONS said.

China falling short of US trade deal targets

China is falling short of its commitment to buy an extra $200bn (£146bn) worth of US goods over 2020 and 2021.

China agreed to buy the goods in a trade deal with the US agreed last January in exchange for reduced tariffs on $120bn worth of goods.

The agreement was seen as phase one of a deal aimed at resolving the trade war between the world’s biggest economies.

Since the Covid-19 pandemic the US trade deficit with China has surged.

Medical goods and equipment used for the work from home boom helped drive US imports of Chinese goods in 2020.

During this time, China exported nearly three times as much as it imported from the US in December, according to Chinese customs figures.

The January 2020 trade agreement was an attempt to wind back a tit-for-tat trade war which saw both China and the US ratchet up tariffs.

At the time, then-president Donald Trump hailed the deal as “transformative”, and said it would protect American workers.

Under the agreement, the $200bn worth of additional purchases are based on 2017 levels, and only apply to specific categories of goods.

The agreement included agricultural products, manufactured products and energy products.

Analysis by the Peterson Institute estimates that China would need to purchase $173bn worth of goods to meet the requirement.

The latest figures from Chinese customs show that China imported just under $135bn from the US in 2020.

However, about $35bn worth of goods didn’t count under the agreement, meaning China bought about $100bn worth of covered goods.

The figure amounts to 58% of what China committed to under the agreement, according to the Peterson Institute.

China imported 64% of its targets for agricultural products, 60% of its targets for manufactured products and 39% for energy products.

Google says goodbye to giant internet balloons idea

Google’s parent-company Alphabet is scrapping a company set up to build giant balloons to beam the internet to rural areas.

Loon was a long-term experimental bet from the tech giant’s “X” business unit.

But it failed to get costs low enough to make it sustainable, its chief executive said in a blog post on Thursday announcing the winding-down.

The balloons were the size of tennis courts and self-navigating.

“While we’ve found a number of willing partners along the way, we haven’t found a way to get the costs low enough to build a long-term, sustainable business,” Loon chief executive Alastair Westgarth wrote.

“Developing radical new technology is inherently risky, but that doesn’t make breaking this news any easier. Today, I’m sad to share that Loon will be winding down.”

Loon was set up nine years ago but has struggled to make a profit from bringing the internet to remote places via high-altitude balloons.

“The arc of innovation is long and unpredictable,” Mr Westgarth added in the blog.

The scrapping of Loon comes one year after Alphabet shut down another experimental business called Makani, which provided wind power from gigantic kites.

These were part of a wave of eye-catching projects that helped to forge Google’s image as one of Silicon Valley’s most ambitious tech companies.

Technology experts said one of the problems with Loon was that many people in rural areas couldn’t afford the 4G phones that Loon required or weren’t interested in getting access.

However, Loon wasn’t a total failure as it signed a major deal with a Kenyan telecommunications company, Telkom, to bring 4G to remote parts of the country.

In 2017, it helped bring internet connectivity to Puerto Rico after Hurricane Maria destroyed the island’s telecommunications infrastructure.

Beckhams pay themselves £21m despite business losses

David and Victoria Beckham have paid themselves £21m from their sports and media business since 2019, according to the their latest accounts.

This is despite continued heavy losses at Ms Beckham’s fashion business, where trade has worsened during the pandemic.

Profit at David Beckham Ventures Limited (DBVL), the brand management firm owned by the former footballer and his wife, fell £3.5m to £11.3m in 2019.

This was in part due to money spent on expansion and charitable donations.

However, the celebrity couple still paid themselves a £14.5m dividend at the end of 2019, accounts show, and took a further £7.1m in 2020.

A spokesman attributed the payments to “profitable performance” at DBVL, which among other things manages Mr Beckham’s strategic partnerships with Adidas and Haig Club whisky.

He also noted that the company’s revenue climbed by £600,000 in 2019 to £16.2m.

However, Victoria Beckham Holdings (VBHL), which manages the former Spice Girl’s fashion label, fared much worse during that time.

Losses at the business – which is also backed by the Beckhams’ former business partner Simon Fuller and private equity firm NEO investment Partners – widened to £16.6m during the year, following a loss of £12.5m in 2018.

It marked the seventh year the brand has been in the red since it was founded in 2008.

VBHL blamed costs associated with the launch of the Victoria Beckham Beauty business, a new cosmetics range in which the group has an 85% shareholding.

It also noted that total sales across the whole business were up by 7% in 2019.

Nevertheless, auditors BDO, who signed off on the accounts, warned that the business was now reliant on shareholder support to keep going which could “cast significant doubt on the company’s ability to continue as a going concern”.

As the pandemic hammered the business last April, VBHL had to borrow £9.2m from its shareholders to repay an outstanding bank loan to HSBC after breaking its debt covenants.

VBHL said it was doing all it could to “navigate” the coronavirus crisis, including taking “all actions possible to conserve cash”.

“All non-essential expenditure is being deferred and hiring freezes have been implemented for open positions.to enable the company to navigate through this pandemic,” it said.