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16 August 2021

Consumer Confidence Rising but Supply Chain Fears Mount

The world transport industry experienced a pinch in supply last week. Shipping costs have been rising since the start of the pandemic, currently reaching just short of US$18,000 for 40ft of container space, nine times more than pre-pandemic levels. The exporters’ deterioration in service comes after a surge in import demand; a result of ordering surplus supplies, leading to many containers being left off vessels. While this was an attempt by importers to mitigate stockout risks, it has in fact caused unwarranted strain on supply chains.

According to Project44, a data logistics outfit, delays on the China to Europe routes are rising as well. Lead times have shot up from 0.5 days to 2.5, having huge consequences on production continuity for the businesses involved in various industries. A potential solution for European and American companies may be to shift the supply chain closure to the origin of business, though this takes significant time and planning. Automation can play a huge role in undertaking such measures, but the western nations are not suitably to undergo a transition on this scale. Expectations are that the situation it is likely continue into 2022.

Moving closer to home, the UK remains one of the leading countries in the global COVID-19 vaccine rollout and the rewards are being reflected in the economy. The nation’s economy grew 4.8% in the second quarter due to pent up consumer demand. High consumer spending has followed the easing of Coronavirus restrictions, with the economy expected to rise back to its pre-pandemic levels before the end of the year. Major businesses which witnessed greater consumer expenditure included restaurants, hotels and transport operators, suggesting a steady revival of the hospitality and tourism industries. While the government has cut back its expenditure, the easing of restrictions encouraged investment by businesses to increase by 2.4%, perhaps suggesting rising confidence among businesses and meaning more organic growth in the economy.

In Yorkshire, LabCorp (LH), a global diagnostics and drug development company has won permission to build its new UK headquarters in Leeds. The company has extensive involvement in the diagnostic segment and has also worked on the majority of the presently available COVID-19 vaccines. LabCorp already has a presence in Leeds with two sites in operation and plans to combine them under one roof at Drapers Yard on Marshall Street.The decision will help promote research and development and boost the pharmaceutical sector in Yorkshire with a potential of further expansion. The company’s business model of collaborating with other pharmaceutical companies may become an incentive for more companies to enter Leeds. LH plans to expand in European markets with an attempt to diversify its customer base which, at present, is highly concentrated in America. The Leeds HQ could play a pivotal role in such plans of the company.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Consumer Confidence Rising but Supply Chain Fears Mount
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