According to the Institute of Directors, over a third of UK importers feel impacted by geopolitcal pressures, particularly in relation to China, and are subsequently examining their supply chains.
In a survey of over 1,000 directors conducted in May 2023, the IoD found that a fifth had already moved at least part of their supply away from China.
Our expert advisors have previously highlighted the importance of developing a supply chain strategy by segmenting elements of the supply chain by their influence on profitability and risk. Ethics should also play a key role in this process, as we explored in a previous blog on the subject.
China itself has reported a deeper-than-expected drop in exports in recent months. Exports to the US – where tensions are highest – fell by nearly a quarter year-on-year to July.
Although China was identified as the number one risk, survey respondents also had concerns over supply chains connected to Russia, India, North Korea, Brazil and Middle Eastern nations. Nearly a third (31 per cent) of the SME importers surveyed said they were ‘responding’ to these pressures.
Emma Rowland, Trade Policy Advisor at the IoD, explained:
“It is clear businesses are sensing geopolitical shaped clouds on the horizon, particularly whilst China’s standing with the US, Russia and Taiwan remains uncertain.
“Ultimately, firms are pursuing long-term stability in their supply chains, so they can provide certainty to their own end customers. They want to know they can rely on their international business partners long-term and not be hampered by sudden disruptions. Many businesses also feel uncomfortable trading with regimes that do not conform to western democratic ideals.
“Whilst it is broadly felt that a complete decoupling from China is economically impractical, at least for now, the fact that a significant number of businesses are willing to take on extra costs to secure their global operations shows attitudes to global trade are shifting.”
Of those considering diversifying their supply chain, many told the IoD they would expect to see a 10-20 per cent increase in costs, leaving them with the dilemma of finding a good balance between cost and quality of supply.
Following COVID-19 and EU Exit, the Hub’s specialist Manufacturing Service re-focused much of its support over the last three years to helping businesses with supply chain management.