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UK Ministers Caution on Limits of Government Aid for Global Supply Chains Amid Suez Canal Attacks

UK ministers have cautioned business leaders about the limited capacity of the government to safeguard critical global supply chains, in light of ongoing assaults on vessels traversing the crucial Suez Canal route this week.

Nusrat Ghani, the business minister, emphasised, "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.”

These remarks were made as Ghani introduced a report detailing a new strategy for critical imports and supply chains. This strategy aims to assist industries in maintaining access to essential products like medicines, minerals, and semiconductors amidst a volatile geopolitical climate.

The strategy includes the establishment of a Critical Imports Council. This body will collaborate with businesses to enhance the analysis of potential global supply chain disruptions by pinpointing risks to the most sensitive imports and formulating a response plan.

The government plans to develop a programme to "identify, review and where feasible" eliminate barriers to imports. It also aims to support companies in finding new suppliers in third countries, highlighting recent agreements with Canada, South Korea, and Australia to secure access to crucial product supplies.

Although no new funding was announced, the ministers stated they would "explore the case for further supply chain financing interventions for the UK’s most critical supply chains".

The report underscored the susceptibility of transport systems, particularly those passing through maritime chokepoints.

This strategy's launch coincides with continued attacks in the Red Sea and Gulf of Aden on ships heading north to the Suez Canal, despite recent air strikes by the US and UK on Iran-backed Houthi rebels in Yemen.

These attacks have led almost all container shipping lines to divert their routes from the affected area, extending the journey time from Asian ports to Europe by up to two weeks.

The report also highlighted the "increasing prospect of further deterioration in the international security environment" and "signs of fragmentation" in the global economic and trade order.

It pointed to the disruption in global trade caused by Russia's full-scale invasion of Ukraine two years ago and China's increasingly assertive stance on Taiwan's independence.

The report warned, “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.”

A recent survey by Interos, an operational resilience company, revealed that 85 per cent of senior procurement leaders view geopolitical tensions as their primary concern.

On Monday, UK Defence Secretary Grant Shapps warned of the world entering a “pre-war” phase, urging allies to increase defence spending. He reiterated the government's "aspiration" to raise spending from 2 to 2.5 per cent of GDP, without committing the UK to any specific increase.


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