UK, European suppliers consider cutting ties due to Brexit

Dive Brief:

  • In the wake of Brexit, a recent survey of roughly 2,100 supply chain managers revealed that 32% of UK businesses currently aligned with EU suppliers will replace them with British sources, Supply Management reported Monday.
  • The same survey found a third of UK supply chain managers will seek to lower supply costs, as they fear Brexit may make operations no longer viable. Similarly, 29% of respondents said they had to renegotiate contracts due to the pound's weakening after the Brexit vote.
  • At the same time a full 46% of EU businesses will seek to use fewer UK suppliers, and over 25% will fully reshore their chains away from the UK.

Dive Insight:

The tremendous degree of uncertainty currently impacting the UK and Europe as they work toward economic separation is having an impact on the supply chain, and not a positive one. In fact, a recent risk index equated current global supply chain conditions with those of 2013, in the midst of the European recession.

Part of what's driving current risk is potential relocation. European industries based in the UK could leave the country depending on the economic terms ultimately established. And while maintaining its financial stability is obviously high on the list of U.K. terms, Europe seems little inclined to negotiate widely, given the chaos the Brexit vote has inspired. 

Ultimately, relocations and renegotiations will be hammered out to the best ability of both parties. But while negotiations could extend until 2019, businesses with operations on both sides of the English Channel are already taking action.

The news shows trade threats, while often distant, can present such significant risk to supply chains that companies will choose the path of least risk. And when uncertainty prevails, as it does regarding Brexit negotiations, risk levels surge.

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Filed Under: Procurement Risk/Resilience