British industry is summoning up the “wartime spirit” to deal with anticipated staff shortages and supply disruption caused by the coronavirus.
But for some, the major concern is a short, deep shock from the outbreak followed by the longer, more drawn-out pain of a hard Brexit.
While large multinationals may be able to ride out those twin problems, some smaller firms have more to worry about.
The Bank of England’s governor, Andrew Bailey (who starts the job in 10 days), told MPs this week he may take action imminently to support lending to struggling small businesses. That might include relaxing banks’ capital requirements to allow them to hand out more loans – but there’s no guarantee that the banks will actually do it.
For some British firms, the impact is already being felt.
Tudor Rose International, a Gloucestershire-based logistics company, exports well-known food and drinks brands around the world.
It is close to the sharp end of the outbreak. Costs have shot up around 15 per cent so far as the company struggles to find enough ships to transport its products, says commercial manager John Stephenson.
Tudor Rose is losing sales as ships stay stuck in Chinese ports, causing a major backlog in the key arteries of world trade.
With many Chinese factories shut down to contain the virus’s spread, there is much less to ship and so freight companies have cancelled sailings. That leaves British firms facing a shortage of containers to put their goods into, pushing up prices.
“It has an effect all along those routes via places like Mumbai and the Middle East,” says Stephenson.
Shipping is often seen as a canary in the coal mine for economic shocks to come. With a vessel taking about a month to make its way from China to Europe, the sharp drop in activity in China is still working its way through.
Stephenson estimates that there are about 100 fewer vessels on the global routes along which Tudor Rose ships its food and drink. That may not sound like a lot but each one is vast, carrying an average 20,000 containers.
Two million fewer containers has a real impact, says Stephenson. “It’s already been quite pronounced. We’ve had a customer already waiting for a large order that we haven’t been able to fill.”
The effect coronavirus is having on shipping is unprecedented, he says. “We do see some seasonality of demand but we’ve not seen an event like this that’s had this much impact.”
Tudor Rose has been looking to boost sales in North America where disruption has been less severe than Asia but there is a limit to this strategy.
“We sell fast-moving consumer goods so we need a consistent, regular supply to our customers,” says Stephenson. The company anticipates some rebound in demand when the outbreak calms down but for the most part, sales lost now are likely to be lost for good.
If Chinese ports open up fully again things will improve, but Tudor Rose fears there may be further shutdowns at other key points along the route as governments seek to contain the virus.
“We are at the early stages of this. It’s only in the last 10 days that it’s come to light how significant this could be,” says Stephenson.
Back in Glasgow, Donald Pow is remaining vigilant but relatively relaxed, given the situation. “We don’t know what’s going to happen; many of the experts don’t seem to know what’s going to happen.”
“It’s like that old football manager cliche: we just take each game as it comes.”
Source: The Independent