Shipping is fundamental for the UK economy, transporting c.85% by weight of the country’s international freight trade. Using an econometric model, we show that shipping freight costs are statistically significantly associated with the level and volatility of UK inflation. Scenario simulations, however, indicate that these inflationary effects are predominantly transitory, with impacts decaying over time even under high shipping cost increases. For instance, even a doubling of container freight costs raises inflation by ~0.2% above baseline over a 2-year horizon, declining to 0.03% after a decade.

 

It is found that:

  • Increases in shipping freight rates may contribute to UK inflation, both its level and its volatility.
  • Inflation effects are highly dependent on the magnitude of freight rate increases.
  • Degree of increase varies by shipping type; most from containers, then refined oil products, followed by dry bulk, and finally unrefined oil carriers.
  • Contribution varies in the short (<1 yr), medium (2-5 yrs), and long term (7-10 yrs):
    • Greatest effects on inflation levels and volatility in the short term.
    • Effects significantly decay over time, both inflation levels and volatility, negligible in the long term.

 

Policy Recommendations:

  • Monetary policymakers should explicitly monitor shipping-related cost pressures as a source of short-term inflation uncertainty.
  • Contribution to inflation from increased shipping costs varies by segment – highest is from container ships; attention needed for different vessel types.
  • Potential inflationary effects from shipping decarbonisation measures are highly unlikely to persist over the medium to long term.
  • There can be other, much more extreme shocks to the sector (e.g. due to geopolitical turbulence) that can lead to persistently higher levels of inflation.

 

This Bulletin is based on the publication: Kyriakou, I., Ghahramanpour, S., Marchese, M. & Moutzouris, I. (2026). Shipping Freight Costs and U.K. Inflation Dynamics. Commodity Insights Digest, Summer 2026. https://www.bayes-cid.com/pdf/issues/2026-summer/publications/CID-Summer-2026_Kyriakou-etal-072826.pdf

Recommended citation:

Kyriakou, I., Ghahramanpour, S., Marchese, M., Moutzouris, I., Copeland, C. L. (2026). Shipping Freight Costs and UK Inflation Dynamics. UK National Clean Maritime Research Hub. https://doi.org/10.5281/zenodo.20268869

 

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