Businesses look to EU and UK for future suppliers

CIPS’ latest Brexit survey of supply chain managers reveals a future landscape that may not look so different

EU member countries are still of interest to UK businesses when planning where to develop new supplier relations, even with all the uncertainty that comes with Brexit.

Index post-Brexit table

While the most recent CIPS Brexit Survey revealed a third of UK supply chain managers with EU suppliers are already looking for alternative suppliers in the UK, prospects post-Brexit are not so straightforward. The survey – which asked over 2,200 supply chain managers about current and future plans – showed that when considering building new supplier relationships post Brexit, Europe remains the most popular region for UK businesses.

John Glen, CIPS economist, says:  “Despite the challenges posed by Brexit, UK supply chain managers expect Europe to continue to be an important part of Britain’s supply chain, with many intending to grow their relationship with EU businesses in the coming years.”

A total of 16% of UK businesses would look to EU member countries again to develop new contracts after Brexit, with another 4.2% citing non-EU European countries as of greatest interest. UK companies that already have EU supply chains, and where almost a quarter (22%) have admitted to having difficulty securing contracts that run after March 2019, are more focused on the EU for post-Brexit supplier relations, at 16.7% for EU member countries, and 4.9% for non-EU countries.

The survey also shows that over half of UK businesses (54.8%) have already found supply chains more expensive through currency fluctuations, and almost a quarter (24.1%) have had to renegotiate contracts with suppliers. They are currently looking for alternative suppliers in the UK (34.5%), outside of the EU (23.8%) and strengthening relationships with existing European suppliers (25.9%).

Businesses are trying to recoup the money they are losing as a result of Brexit, says Glen, with some looking to switch suppliers. But, they’re likely to have difficulty finding suitable alternatives in the UK, he adds. “It is therefore crucial they don’t burn their bridges with their EU contacts but instead work to build strong relationships with European partners.”

“Outside of Europe, North America is the biggest target for new supply chain relationships,” he says. “But with the UK yo-yo-ing between the front and back of the US trade queue, it is vital to keep supply chains diverse and resilient.”

Keeping your options open

Public sector responses showed a higher proportion of respondents intend to create new relations in the UK (22.9%), and while 13.1% are happy with their already robust supply chain, 26.6% do not know where they will look post-Brexit.

In fact, many are keeping an open mind about plans beyond Brexit, with 20.8% of UK businesses not knowing where they will go to create new supplier relations.

The manufacturing sector appears to be more certain of plans, with just 15.2% unable to select a supplier region of choice post Brexit. Almost a quarter (22.5%) chose Europe (EU and non) as the region of greatest interest, followed closely by 21.8% in Asia. Within Asia, China and Japan’s region of Eastern Asia was most popular, followed by South-Eastern Asia with Thailand, Malaysia and Singapore, then Southern Asia which includes India, Nepal and Pakistan.

Almost 10% of UK manufacturers see North America as the most important region for developing new relationships.

The need to prioritise trade negotiations was highlighted by almost half of UK manufacturers (49%) stating that threats of tariffs and additional quotas are making them rethink their supply chain focus towards the UK. Duncan Brock, CIPS group director, says: “British businesses are looking to emerging markets like India and China, but North America is still seen as the biggest growth market post-Brexit. President Trump promised the UK would jump to the front of the queue for a trade deal, but his actions on steel tariffs demonstrate the uphill battle negotiators face.”

A slightly more encouraging note for the UK economy may be that 16.7% of UK businesses report they are happy with their robust supply chain and have no plans to look elsewhere, and in manufacturing firms, that proportion rises to 17.9%.

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