Wave of port strikes put global supply chains under fresh pressure

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LONDON — A fresh wave of labor strikes at U.K. ports triggered by the spiraling cost of living are adding further strain to battered supply chains, just as they begin to recover from the COVID-19 pandemic.

Experts warn the specter of widespread industrial action will stunt the U.K.’s stuttering economy and may have damaging knock-on effects for nearby shipping routes at a critical time — adding fresh pain points to already-clogged global trade arteries.

More than 500 stevedores at Britain’s fourth largest port, Liverpool’s Peel Port, voted Monday to strike after rejecting a 7 percent pay hike. Staff are demanding pay increases in line with soaring inflation — already more than 9 percent, and rising fast — and accuse bosses of failing to raise pay since 2018 and of reneging on an agreed bonus scheme.

The Peel Port staff are the second set of U.K. dockworkers to announce strike action this month, after some 1,900 workers at Felixstowe — the country’s largest port — announced eight days of strike action. The circulation of Felixstowe’s global shipping container network is expected to grind to a halt from this Sunday after talks with bosses broke down.

“Industrial action comes just as global supply chains are starting to run more smoothly,” said Chris Rogers, principal supply chain economist at freight forwarding firm Flexport.

Pandemic-induced sky-high shipping container prices that spurred inflation, and bottlenecks created as people rushed to buy goods are finally receding, Rogers added, making the timing of the latest wave of strikes “particularly unfortunate, coming at the start of the peak shipping season.”

The more than 40-day journey for goods en route to the U.K. from Southeast Asia means products ordered for the start of the Christmas inventory cycle will arrive just as industrial action begins, he added. “It’s inevitable that U.K. supply chains that rely on global trade will experience some form of disruption,” Rogers said.

Ports and manufacturers are keen to downplay the likely disruption, however. “We do not currently anticipate this having a prolonged impact on U.K. supply chains,” said a spokesperson for the British Ports Association (BPA), citing expansion opportunities at other U.K. docks like London Gateway and Southampton.

Semi-conductors, parts for assembly and finished retail goods will simply be rerouted to other U.K. ports “if space allows,” or to ports like Rotterdam in the EU for onward transit, said a spokesperson for the manufacturing lobby group Make UK.

There is “capacity available to handle additional volumes if that becomes necessary,” they insisted.

But diverting traffic won’t be easy, said Bobby Morton, a Unite union rep working on pay negotiations for Felixstowe’s workers. “Workers in other ports may not handle ships that are diverted from Felixstowe,” he warned.

Rotterdam’s dockworkers have already said they will refuse to unload ships diverted from Felixstowe, Dutch union FNV announced last week.

“I’ve had letters of support from the American dockworkers on the West Coast,” Morton said, adding that “they will refuse to handle any work that’s going to or from Felixstowe.” The Maritime Union of Australia’s workers, he said, have promised the same.

Challenges from the port strikes “could be compounded by labor action in other centralized parts of the logistics network,” Rogers added, citing strikes by British rail freight and warehouse workers.

Strikes organized by the National Union of Rail, Maritime and Transport Workers (RMT) this summer involve 40,000 workers at Network Rail, which manages rail infrastructure handling freight. Workers have rejected a “paltry” 4 percent pay rise, and an event in London this Wednesday will kick off further rallies across the U.K. as workers face soaring energy bills and grocery prices that far outstrip pay offers.

Amazon warehouse workers in Britain are also striking, further raising the risk to supply chains. Strikes have hit European docks in Germany this summer too as labor shortages ripple throughout the world — becoming a new wildcard in global supply chain bottlenecks, according to Joanna Konings, a senior economist in international trade at ING.

The Port of Oakland near San Francisco shut down in late July because of a trucking strike. And an eight-day trucker strike in South Korea in June snarled microchip supply chains.

The issue is compounded because labor markets are already tight in advanced economies around the world. For a chunk of workers, the pandemic offered a one-off decision to retire, Konings said, and some labor “isn’t going to flex back.”  

“Strikes are going to happen because they are an opportunity for labor to win wage increases … against the backdrop of cost of living increases,” Konings said.

Still, the disruption from striking workers is “unlikely” to be on the scale of the impact of the container ship Ever Given’s blocking of the Suez Canal last year, British manufacturers argued.

The biggest disruption to British manufacturers, Make UK expects, will be logistics operators getting their exports or imported products to or from the diverted ports, leaving some “uncertain of when [their] product will depart the U.K. or arrive into their warehouses.”

Flexport’s Rogers has a gloomier outlook in a report on the performance of British ports set for publication Tuesday. The result of “congestion at other ports in the U.K. and Europe,” he said, may trigger “knock-on effects for global shipping routes.”

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