UK Supply Chain Managers are preparing for Brexit

Business Insights

UK supply chain managers are considering all eventualities as they polish their crystal balls is an attempt to predict and minimise any potential disruption caused by the various possible Brexit outcomes.

Figures from a survey by The CIPS (Chartered Institute of Procurement and Supply) of 1,118 supply chain managers in the UK and Europe found that two fifths (40%) of UK businesses with EU suppliers have begun the search for domestic suppliers to replace their EU partners, up from 31% in May. Just over a quarter (26%), however, are taking the opposite approach and investing more time to strengthen their relationship with valuable suppliers on the Continent.

A quarter of UK businesses with more than 250 employees have already spent at least £100,000 preparing their supply chain for the split. The costs incurred in making these preparations come in addition to the daily impact of currency fluctuation with 64% of UK businesses saying this has made their supply chains more expensive to manage.

Nearly two-thirds (63%) of EU businesses who work with UK suppliers expect to move some of their supply chain out of the UK as a result of Brexit according to the CIPS survey. This is a dramatic shift from May, when just 44% of EU businesses were expecting to move out of the UK.

The shift comes as the Brexit negotiations appear to be deadlocked with half of UK businesses saying they are becoming less confident that the UK and EU will secure a deal which continues to offer ‘free and frictionless trade’, while 35% of UK businesses feel unable to prepare due to the lack of progress on a future trade relationship.

Gerry Walsh, Group CEO, CIPS, urged the Brexit negotiators to get their act together saying:

“The Brexit negotiating teams promise that progress will be made soon, but it is already too late for scores of businesses who look like they will be deserted by their European partners. British businesses simply cannot put their suppliers and customers on hold while the negotiators get their act together.”

This uncertainty has meant that one in five (20%) UK businesses with EU suppliers have found it difficult to secure contracts that run after March 2019. Indeed, despite a formal separation still being some time away, nearly one in ten (8%) of UK businesses said their organisation has already lost contracts as a result of Brexit with 14% believing part or all of their organisation’s operations will no longer be viable.

It is among the many businesses that are still not doing enough to prepare that the most negative results are likely to be felt. Worryingly, only 14% of UK businesses with EU suppliers feel as though they are sufficiently prepared for Brexit. The general uncertainty surrounding the process is probably to blame, but those businesses that are proactively looking at alternatives sources of supply will be the ones ahead of the curve.

UK businesses are leaner, meaner and more competitive than ever and with UK manufacturing and engineering currently on an upward curve, Brexit could prove a great opportunity to make beneficial adjustments to supply chains, while supporting homegrown industries.

Supply chain managers are clear where the Government’s focus should be as the next phase of the negotiations begins with 73% saying keeping tariffs and quotas between the UK and Europe to a minimum should be the main priority for the negotiations.

Gerry Walsh, Group CEO, CIPS, commented:

“While the TV cameras are fixed on Brussels, the deals which will determine the future prosperity of Britain and Europe are being struck behind closed doors in businesses large and small. The lack of clarity coming from both sides is already shaping the British economy of the future – and it does not fill businesses with confidence.

“The success of the negotiations should not be measured on the final deal only but on how quickly both sides can provide certainty. The clock is ticking.”