For energy, at least, countries already have the blueprint to help beef up their resilience: turning to renewables can boost energy security while also cutting carbon emissions. Those plans may need to be accelerated if the UK and Europe are to move away from Russian gas at pace.
“We’ve already decided that we want to get ourselves off gas over the next 20 years anyway”, says Sir John Armitt, chairman at the National Infrastructure Commission.
He adds that while efforts by Boris Johnson in Saudi Arabia this week to secure energy supplies “addresses a short term issue, it certainly doesn’t address our long term resilience or our long term infrastructure strategy when it comes to energy”.
Although Russia’s invasion marks the latest blow to globalisation, building resilience by bringing supply closer to home will take time – and come at a cost.
Companies struggle with new surge in freight charges
By Laura Onita
“If it goes on for two to three weeks, it’s probably okay,” says Simon Geale, an executive at supply chain firm Proxima. “But no longer than that.”
Chinese authorities have forced roughly 37m citizens into lockdown once again as Covid cases soar, triggering fears of a renewed squeeze on supplies as factories shut and workers remain at home.
“Most companies we work with have been saying that things were getting more predictable – and that’s really important for supply chains,” says Geale.
“What they hate is volatility. Even if there are shortages and inflation, prediability enables you to calibrate the rest of your business and plan price increases.”
China’s stringent rules are expected to have a knock on effect on global supply chains and freight rates amid delays. Already, local manufacturers are warning supplies of products such as circuit boards and touchscreen components will be hit.
Now, British businesses are wondering if they can survive another surge in shipping prices and a lack of imports, having faced a similar situation throughout Covid. It comes as the UK is more reliant than ever before on China, which accounted for a seventh of all imports last year.
Foxconn, a major assembler of Apple iPhones, for instance, paused production after a one-week shutdown in Shenzhen before partially resuming. The waiting time for ships to get into the Chinese manufacturing hub has increased by almost a third.
“About 90pc of stuff from China gets shipped on boats at the moment,” says Geale. “If you don’t want to ship it on a boat, your options are not many.”
“We believe more restrictions are likely given how fast Omicron is spreading,” analysts at UBS said in a note last week.
China last year exported £63.5bn of goods to the UK, including more than £6bn each of office and telecoms tech – around £12bn more than came in from Germany and £26bn more than from the US.
What is different this time around, however, is China’s ability to create ‘bubbles’ around factories and manufacturing hubs to avoid entirely halting production. Experts say this keeps the goods moving.
Dr Martens, the cult shoe brand, has been actively reducing its exposure to China in recent years and moving manufacturing to areas in south-east Asia – largely due to higher duty costs on Chinese-made boots.
Spreading out production has inadvertently paid off as its flow of goods remains unaffected, the chain says. It works with two factories in China, which account for up to 15pc of its annual production and remain up and running with no issues at the ports – for now.
Geale warns that those likely to be the most affected could be sellers of electronics that plan shopping events such as Black Friday months in advance.
“This has come at the worst time,” he adds. “What it really puts into question is China’s zero-Covid policy, and how far is that going to keep going when the rest of the world is pleading with the supply chain to get some predictability back.”
