American Shipper

EU firms fear Brexit standstill will wreak havoc on U.K. supply chains

Nearly two-thirds of businesses in the European Union expect to move some portion of their supply chain operations out of the United Kingdom as a result of Brexit, according to a survey from the Chartered Institute of Procurement & Supply (CIPS).

   Over 60 percent of European Union (EU) businesses expect to move some of their supply chain out of the United Kingdom as a result of Brexit, up from 44 percent in May, according to a new survey from the Chartered Institute of Procurement & Supply (CIPS).
   The survey found that more than 40 percent of U.K. businesses with EU suppliers have begun the search for domestic suppliers to replace their EU partners, up from 31 percent in May. However, 26 percent are taking the opposite approach and investing more time to strengthen their relationship with valued suppliers in the EU.
   Brexit negotiations have come to a near standstill in recent weeks, causing many U.K. businesses to lose confidence in a “free and frictionless trade” agreement with the EU following the United Kingdom’s formal withdrawal from the union.
   Approximately 35 percent of U.K. businesses feel unable to prepare for post-Brexit supply chain operations due to the lack of progress on a future trade relationship, the survey showed. Consequently, one-in-five U.K. businesses with EU suppliers have found it difficult to secure contracts that run after March 2019, the tentative deadline for withdrawal.
   Nearly one-in-ten U.K. businesses said their organization has already lost contracts as a result of Brexit proceedings, with 14 percent believing part or all of their organization’s operations will no longer be viable, CIPS found. Supply chain managers told CIPS that it is clear that their governments should focus on keeping tariffs and quotas between the U.K. and Europe to a minimum.
   “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,” said CIPS CEO Gerry Walsh.
   “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,” he added. “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.”
   CIPS is an international body that represents the purchasing and supply management sector. The association’s latest survey, conducted during September and October, included 1,118 supply chain managers globally who were asked on their views and reactions towards Brexit.