Main points
- Next Plc expects additional costs of £15m due to the conflict in the Middle East.
- If the conflict lasts more than three months, the company plans to increase prices by 1.5-2% to cover costs.
The war in the Middle East is “pressing” a famous clothing brand / Shutterstock
The US-Iran war has cost the British company Next Plc millions in additional costs. If the conflict only escalates and does not end soon, it will lead to higher prices.
What will happen to clothing prices due to the war in the Middle East?
Next Plc said the conflict in the Middle East will add 15 million pounds ($20 million) in costs, Bloomberg reports.
Additional costs related to the war in Iran are so far being offset by savings in other areas, Next said, adding that it would begin passing on the costs to customers if the conflict lasts more than three months.
The impact on supply chain resilience, consumer demand, and shipping costs will also depend on how long the instability lasts and how much damage is done to energy infrastructure.
If this conflict ends relatively quickly, we will simply swallow these costs. If this continues, these additional charges will remain for more than three months – we will have to factor this into the price for the rest of the year. Prices will increase by 1.5 – 2%,
– said CEO Simon Wolfson.
According to him, these are additional costs for air transportation of £8 million, additional costs for sea transportation of £4 million, as well as additional costs for energy carriers in the UK of £3 million.
This is an early sign of the potential impact of events in the Middle East on retailers , as shocks to energy and freight markets take time to seep through the system.
Latest news about the Iran-US war
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Iran officially denies talks with the US but uses intermediaries to convey messages. The US has offered Iran a 15-point deal that includes curbs on its nuclear program and funding for regional allies.
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A US ground operation in Iran could begin soon. Earlier, it was reported that the possibility of deploying about 2,500 marines and landing ships to ensure the security of the Strait of Hormuz and Kharg Island is being considered, but this could have political risks for Trump.
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Iran allows ships to transit the Strait of Hormuz as long as they do not support acts of aggression against the Iranian state and adhere to rules approved by Tehran. Iran charges transit fees to some commercial vessels passing through the Strait of Hormuz.
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Iran has made demands for a ceasefire, including lifting sanctions, closing US bases and preserving its missile program. The US has called Iran's demands “unrealistic and absurd”, making it difficult to reach an agreement.