Covid and Brexit are set to disrupt supply chains in the run-up to the festive season © Geoff Caddick/AFP via Getty Images
Covid and Brexit are set to disrupt supply chains in the run-up to the festive season © Geoff Caddick/AFP via Getty Images

Shoppers face higher prices as supply chain costs rise

23 October 2020

Nearly a quarter of UK supply chain managers are paying more for goods and are planning to transfer these costs to consumers this Christmas, according to a survey.

A combination of Covid-19 and Brexit uncertainty is set to disrupt the UK’s supply chains in the run up to the festive season, and shoppers are likely to face higher prices.

A survey of 557 UK supply chain managers by CIPS found that nearly a quarter (22%) were paying more for goods this Christmas and were planning to transfer these costs to consumers. Meanwhile, 16% of UK businesses expected stock to run low this winter as a direct result of Covid-19.

Earlier this week, the British Poultry Council (BPC) warned British households were facing a shortage of Christmas turkeys and higher prices unless the government granted exemptions from quarantine restrictions to seasonal foreign workers.

Almost half of those questioned in the CIPS survey said their business was also now less prepared for Brexit compared to last year because of the impact of the pandemic.

According to the survey, 45% of UK businesses with EU suppliers think their goods will be delayed by a week or more at the border if there is no deal.

The Christmas disruption is a result of the widespread remapping of supply chains in the wake of Covid-19 lockdowns.

Around 30% of UK businesses with an international supply chain said they had moved at least one supplier back to the UK as a result of the pandemic. Over a third (39%) also stated had lost at least one of their suppliers through bankruptcy or failure to reopen after lockdown.

Dr John Glen, CIPS economist, said it was no surprise that prices could be higher this Christmas.

“The UK’s supply chains have undergone a remarkable shake up as a result of Brexit and the pandemic,” he said. “Businesses have battled staff shortages, had to replace critical suppliers at short notice and find safer, socially-distanced ways to manufacture goods, and some of these costs will make their way to consumers.”

However, the survey found disruption was likely to have further reaching impacts than just Christmas.

Nearly half (46%) of UK supply chain managers said their business was less prepared for Brexit compared to last year, as a result of the pandemic.

Although 44% said they planned to hold extra stock ahead of the end of the transition period on 31 December, 20% who work with EU suppliers said they had used up their Brexit stockpiles in response to Covid-19.

Almost a third (29%) also believed the financial impact of lockdown had made their supply chain more vulnerable to Brexit disruption.

The survey found 17% did not have the people or resources to adequately prepare for Brexit because of the knock-on effects of the pandemic.

“The transition period was designed to provide businesses with more time to prepare for Brexit, but the Covid-19 pandemic has undone much of that hard work,” Glen said. 

“After months of coronavirus disruption, businesses have neither the cash nor the manpower to prepare for a no-deal Brexit. Deal or no deal, time is running out.”

UK supply chain managers are expecting delays at the border after January 1 whether or not a deal is eventually agreed with the EU.

Around 45% of UK businesses with EU suppliers believed their goods would be delayed by a week or more at the border if there is a no-deal outcome. This falls to 19% if a deal is agreed.

However, half (50%) of supply chain managers with EU suppliers believed further lockdown restrictions were a greater threat to their supply chains than a no-deal Brexit.

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