It seems that the dynamic between UK and European firms will change significantly in the aftermath of the British departure from the European Union. That much has been indicated by a new report suggesting that plans are already being drawn up by organisations on both sides of the Channel to sever supply chains so that they can avoid hefty tariffs once the Brexit process is concluded.
Similar sentiments on both sides of the Channel
The Chartered Institute of Procurement & Supply (CIPS) found from a survey of more than 2,100 supply chain managers that almost a third (32%) of UK firms using EU suppliers are seeking British replacements. Nearly half (46%) of European businesses expressed similar sentiments, stating that they expected to lessen their use of UK suppliers.
CIPS group CEO Gerry Walsh commented:
“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. 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.”
Currency fluctuations among the big issues for British firms
The weakened pound following last year’s Brexit vote has been a major challenge for UK firms, with two-thirds of them having to deal with a more expensive supply chain as a result. Nearly a third (29%) have renegotiated some contracts in relation to this. More than a third of UK supply chain managers signalled that they would respond to the country’s exit from the EU by lowering supply chain costs, while 11% went as far as saying that part of their operations may cease to be viable.
Two-thirds of respondents worldwide also expressed a view that long-term planning was being made difficult by the current uncertainty surrounding international trade agreements. On the subject of trade talks, 39% of UK respondents regarded Britain as being in a weak negotiating position, and 36% felt there was a lack of time. 36% said they didn’t think there was sufficient supply chain expertise and knowledge in the UK to support post-Brexit requirements.
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