Tesco issues warning: Red Sea shipping conflict could lead to inflation-hiked prices, says CEO
Tesco's boss is warning of further inflation due to the Red Sea conflict
GETTY
Tesco boss Ken Murphy has issued a warning that the ongoing disruption on the Red Sea could hike inflation and leave supermarket shelves empty.
Shipping has been impacted by attacks on vessels by Houthi rebels from Yemen which has forced traders to travel around the southern tip of Africa instead of using the important trading route between the Arabian sea and the Mediterranean.
Mr Murphy said: “If they do have to go the whole way around Africa to get to Europe, it extends shipping times, it constrains shipping space and it drives up shipping costs.
“So that could drive inflation on some items, but we just don’t know.”
Houthi fighters are targeting ships in the Red SeaREUTERSThe Consumer Price Index (CPI) rate of inflation for the 12 month to November 2023 eased to 3.9 per cent which signalled that the prices of everyday goods and services could drop in the months ahead.
Recently, Tesco announced plans to reduce the price of more than 150 supermarket items by 12.5 per cent.
The supermarket also confirmed that shoppers will be able to get double Clubcard points for the first time in over a decade until February 25.
Due to the conflict, the number of shipping vessels travelling through the Red Sea plummeted by more than half last month.
The Kiel Institute of the World Economy confirmed that only around 200,000 containers daily travelled through the route compared to the usual 500,000 in November.
The volume is currently 66 per cent below the expected levels due to the detour taking seven to 20 days longer to complete than the traditional Red Sea route.
Vincent Clerc, the chief executive of shipping firm Maersk, said there were “no winners” to the conflict.
He warned the disruption to shipping has the potential to last for months unless resolved.
LATEST DEVELOPMENTS:
Supermarket prices could be pushed by the conflict
TESCOSpeaking to The Financial Times, Mr Clerc said: “It’s unclear to us if we are talking about re-establishing safe passage into [the] Red Sea in a matter of days, weeks or months.
“It could potentially have quite significant consequences on global growth.”
Outside of Tesco, Sainsbury’s chief executive Simon Roberts has confirmed that the supermarket is working closely with the Government to address the impact of the Red Sea conflict.
The CPI inflation figures for December 2023 will be announced by the Office for National Statistics (ONS) on January 17.