Firms in the UK and Europe are preparing new supply chains and seeking new suppliers ahead of Brexit, CIPS survey finds
European supply chains will change profoundly after Brexit, according to a survey by the Chartered Institute of Procurement and Supply CIPS.
The survey of over 2,000 supply chain managers found that 32% of UK businesses are looking to replace EU suppliers with British replacements, while even more European firms, 46%, are in the process of finding local replacements to their UK suppliers.
Gerry Walsh, group CEO, CIPS, said: “Both European and British businesses will be ready to reroute their supply chains in 2019 if trade negotiations fail, and are not wasting time to see what happens.”
With exit negotiations yet to begin in earnest the most pressing UK challenge has been the fall in Sterling, with 65% of UK businesses seeing supply chain costs rise, leading 29% to re-negotiate contracts as a result.
While respondents to the survey agreed that the number one priority for negotiations should be keeping tariffs and quotas to a minimum, they believe negotiators face serious hurdles. 39% said the UK has a weak negotiating position, 36% believe there is a lack of time and 33% believe there is a scarcity of supply chain expertise in the UK to draw upon.
Pessimism is also apparent when it comes to managing the financial costs of Brexit, with 36% of UK business planning to push supplier costs down, while 11% admit that part of their operations may no longer be viable.
How UK supply chain managers are preparing for Brexit
- Already mapping the potential costs of new tariffs – 28%
- Strengthening relationship with existing European suppliers – 23%
- Performing a risk analysis exercise – 44%
- Looking for alternative suppliers outside of the EU – 21%
- Looking for alternative suppliers inside the UK – 32%
- Pre-emptively increasing costs – 12%
- Have not done any work to prepare – 23%
Worldwide 67% of respondents felt that the uncertainty surrounding international trade agreements were making long-term planning difficult.
CIPS chief executive Gerry Walsh said: “The separation of the UK from Europe is already well underway even before formal negotiations have begun.”
He pointed out that there had already been high profile disputes between British importers and their suppliers as a result of sterling’s fall, and while reshoring may provide an excellent opportunity for UK businesses, Brexit is likely to bring considerable costs which are going to be passed on to suppliers and eventually consumers.