Yahoo Finance Half of EU businesses already looking to ditch UK suppliers over Brexit fears
Almost half of European businesses are looking to sever ties with British suppliers and replace them with rivals from within the EU, a new survey shows.
Mounting concerns over higher tariffs following Brexit have hastened plans to relocate supply chains to the other side of the Channel.
And the situation is being mirrored by companies based in the UK, with a third of those who use EU suppliers looking for British replacements.
A similar proportion is also looking to respond to Brexit by beating down supplier prices – potentially putting a big squeeze on UK companies to slash costs in order to retain contracts.
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The findings were revealed by a survey of more than 2,000 global supply chain managers by the Chartered Institute of Procurement and Supply.
Managers highlighted the UK’s “weak negotiating position” as the major hurdle to Theresa May’s Brexit team in securing her much heralded aim of the “best deal for Britain”.
“Diplomats either side of the table have barely decided on their negotiating principles and already supply chain managers are deep into their preparations for Brexit,” said Gerry Walsh, Group CEO at the Cips.
How are UK supply chain mangers preparing for Brexit? | ||
Already mapping the potential costs of new tariffs | 28% | |
Strengthening our 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% | |
We have not done any work to prepare | 23% | |
Source: Cips
“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.”
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The survey revealed that one in four British companies had yet to start making any plans for Brexit.
However, businesses within the EU more advanced in their preparations. Almost half (45%) of EU businesses who work with UK suppliers are in the process of finding local replacements.
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And, almost half (46%) of European supply chain managers expect a greater proportion of their supply chain to be removed from the UK, with just over a quarter (28%) intending to re-shore all or part of their supply chains to Europe.
With exit negotiations in their early stages, the most pressing supply chain challenge for UK businesses thus far has been currency fluctuation.
Almost two thirds (65%) of UK businesses have seen their supply chains become more expensive as a result of weaker sterling, with nearly a third (29%) re-negotiating some contracts as a result.
“Fluctuations in the exchange rate or the introductions of new tariffs can dramatically change where British companies do business,” added Walsh.
“The separation of the UK from Europe is already well underway even before formal negotiations have begun.”
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The devaluation of sterling has already seen firms reduce the size their products, as Mondelez did with Toblerone, or try to raise prices, as Unilever did with Marmite.
When asked about the major challenges facing UK negotiators in the trade talks, 39% said the UK has a weak negotiating position and 36% believe there is a lack of time, but 33% believe there is a dearth of supply chain expertise and knowledge in the UK to draw upon.
“The reshoring of British supply chains in advance of Brexit could provide an excellent opportunity for small businesses looking to win new contracts, but it also comes with significant challenges,” said Walsh.
“Brexit is likely to bring considerable costs for businesses in the UK and Europe; these costs are then going to be passed on to small suppliers and eventually consumers.”
