UK manufacturers call for action on commodity price risk

Will Green is news editor of Supply Management
22 July 2014

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22 July 2014 | Will Green

A group representing UK manufacturers is calling for the creation of an Office of Resource Management to promote commodity security.

The EEF said price volatility, supply risks, dependency on imports and a predicted increase in competition for resources was “leaving the UK vulnerable”.

The organisation said the government should take action by:

• Regularly assessing material supply risks

• Providing stronger incentives for resource efficiency

• Regulating waste to extract more economic value

• Establishing an Office of Resource Management to coordinate action across government

In a report the EEF said around 40 per cent of manufacturers’ operational costs were related to materials, while average resource prices had doubled since 2000.

The report said the number of middle class consumers was expected to expand from 1.8 billion in 2010 to 4.9 billion by 2030, and demand for all commodities was predicted to grow by between 30 per cent and 80 per cent over the same period.

“Highly volatile costs, supply risks associated with a small but growing number of commodities and the UK’s high dependency on imports have heightened concern within the manufacturing community in recent years. UK manufacturers have consistently highlighted that high material prices and security of supply is a threat to growth,” said the report.

Susanne Baker, senior policy advisor at EEF, said: “As we approach the end of an economic era we cannot afford to be left underprepared and overexposed. Manufacturers have sounded the alarm over the growing risks to material supply and others are now picking up the clarion call. But while competitor nations are already taking evasive action, our government is in danger of burying its head in the sand.

“Resource security is dynamic and complex. It requires a flexible response working in close cooperation with industry and other stakeholders. But key to this must be a joined-up, thought-through approach across relevant policy areas. Given how crucial material supplies are to the UK’s wealth and economic stability, there is clear case for a new Office of Resource Management to act as a central hub of expertise, data and stakeholder liaison and to co-ordinate the UK’s response to these risks.”

Writing in the upcoming issue of SM, David Noble, group CEO, CIPS, said: "I can’t help thinking that this is just part of good procurement practice. Understanding risk, looking to the future, understanding the sector you’re in, is all part and parcel of managing supply chains. The specific value in such a move however, is the link direct to Whitehall and reporting on a regular basis.

The economy is the sum of many parts, but I for one would be particularly disappointed if an opportunity to stave off the danger to materials supply is thwarted by a lack of activity and action."

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