Considering the life-or-death nature of any war, it seems somewhat gauche to lament the Iran War’s impact on UK shopping. However, there’s no denying that certain businesses have found the consequences of the Middle Eastern conflict difficult to contend with.
Chief among the issues facing UK companies is the resultant hike in crude oil prices. Now selling for over $100 a barrel, this rise has forced domestic wholesale gas prices to achieve a four-year high and energy prices to spiral.
The disruption in 20 per cent of the world’s oil supplies would be problematic enough to tackle, but the Strait of Hormuz also handles an enormous amount of non-oil shipping too, and its bottlenecking has created huge delays and higher costs as ships have to circumnavigate the area.
Shoe Zone’s concerns
Bosses at Shoe Zone have been vocal about the effect that the Middle Eastern conflict is having on their business. They warn that the combination of higher operating costs teamed with dwindling consumer confidence is making life harder on the high street.
A pre-tax loss of £5.3 million for the six months up to the 28th March has prompted the footwear retailer to both slash the size of its warehouse and reduce its portfolio of stores by 19.
After seeing their shares drop by 3.5 per cent in early trading, Shoe Zone have been forced to try to placate shareholders. Investors have been told that the war has seen their transportation costs soar and the price of shipping containers rise, adding that these factors will have an impact on their financial performance for at least the rest of the year.
Other industries disrupted
The shortage of oil affects most businesses in some way or another, but those involved in shipping or importing/exporting will find the increased fees an issue.
Beyond problems with oil and shipping, the disruptions in the Gulf region have also had seismic repercussions on several specific industries.
Qatar, for example, supplies almost a third of all the world’s helium, and while that only sounds like an issue for wedding balloons at first glance, it actually affects a lot more than you might think. Helium is not only used for cooling MRI machines, but also as a crucial element needed in the production of microchips.
A third of all global ammonia and fertiliser supplies also comes from the area. This may potentially drive up produce costs as agricultural businesses face dwindling crop yields.
Almost half of the world’s seaborne sulphur trade is handled by the Strait of Hormuz too. This sulphur is used in a tremendous number of applications, from fertiliser formulations to manufacturing batteries for electric vehicles.
On top of this, almost 10 per cent of global aluminium supplies normally travels through the Strait, meaning that delays in choosing a safer (but longer) route have caused significant issues.
Could this be the “final nail in the coffin”?
Business insolvency expert, Ben Westoby commented that “it’s no surprise to see firms like Shoe Zone speak out about how the conflict in the Middle East has affected them so negatively. High street shops are already struggling under higher wage costs and large energy bills. The fact that they now have to contend with bigger shipping prices and fuel costs could yet be the final nail in the coffin for many more big names.
“Reports are already showing that even larger companies are putting a hold on their recruitment and growth plans, with global uncertainty and tensions prompting them to focus on stability instead”.
Are you worried how the conflict could affect your business?
UK businesses have had to contend with setback after setback over the last few years. Global pandemics, cost-of-living-crises, and energy price hikes have all contributed to making operating a business more difficult than it has been for some time.
If you’re concerned that your company will struggle to absorb these and other costs in the future, you need to seek help before it becomes an issue.
We have specialists on hand that can help you to facilitate turnaround strategies, sell your business, or close down your company depending on the best route available to you. Call us on 0808 280 6032, or email advice@forbesburton.com for a free consultation.
